Starting a Retail Business: How to Choose the Best Entity

Starting a Retail Business How to Choose the Best Entity

Do you want to start a retail business? Choosing the right entity is a necessary part of the process, and this guide will help you understand your options.

Starting a retail business follows many steps, but the most significant one is choosing the right entity. You should choose one that offers the most benefits and liability protection.

What options do you have? Here are the top three business entities ideal for a retail business.

Sole proprietorships give you 100% ownership but offer no liability protection. They’re usually individually owned and are excellent for starting your retail business before transitioning into a formal entity.


  • Easy to form as there’s no need to register it with the state.
  • Easy to run, no meetings with the board to help in decision-making.  
  • Your business is not taxed, only your personal income.
  • You get all of the profits of the business. 


  • Operating as a single entity means losing your assets if you get into debt or face a lawsuit.
  • Raising capital is difficult.
  1. Limited Liability Company (LLC)

An LLC combines the flexibility of a Sole Proprietorship and the legal protection of a Corporation. 

That’s why LLCs are ideal for most small retail businesses. Let’s take a look at their pros and cons.


  • Protects the owners’ personal assets against the business’s financial liabilities.
  • Can choose to be taxed as a Sole Proprietorship (pass-through taxation) or a Corporation (corporate taxes).
  • Comparatively lesser paperwork and start-up costs than a Corporation.


  • Unlike Corporations, you can’t issue shares to raise funds making it hard to scale  an LLC. 

Though LLCs are easier to form than a Corporation, they still require some paperwork and legal formalities. Utilize the LLC formation services of GovDocFiling to expedite the process and have a hassle-free experience.

  • Corporation

A Corporation is a separate legal entity with strict tax guidelines and many formalities. They’re ideal for starting a large-scale retail business.


  • Provides complete liability protection.
  • You can go public and issue shares to raise funds.
  • Ownership can easily be transferred to ensure financial security. 


  • Complex formation process and high startup costs.
  • Both your business earnings and personal income are taxed.

Ready to Start Your Retail Business?

While all these entities are great, LLC offers the best of both worlds. It offers flexibility and liability protection, is easy to start, and doesn’t require you to pay corporate taxes. 

Still not convinced?

Check out this infographic to learn more about the best entities to form a retail business in the US.

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