Business Ownerships – A Sneak Peak At Your Legal Options

When running a retail business – or any business – you need to wear a lot of hats. Among the first hats you will try on regards your business from a legal perspective. It’s up to you to determine which legal form of business your business is -  sole proprietorship, partnership, or corporation.

Sole proprietorship accounts for almost 70 percent of all businesses, while corporations tend to account for the greatest share of profits from business owners in the US. Each offer their own advantages and disadvantages as well as risks and rewards. It is up to you to determine which is best for your business. I suggest thoroughly researching your options before committing to anything since it takes both time and money to form any business .

Below is a snapshot of each business ownership option to help you decide what is best for your retail or wholesale business. Please note that the details below are not meant to inform you entirely on any three of your legal options but rather to offer you a quick peak at what you will need to consider.

Sole Proprietorship

• Single Owner
• Advantages – Ability to keep all profits, simple to form, and easy to terminate
• Disadvantages – Unlimited financial liability, lack of continuity, and limited capital

Partnership

• Ownership with two people
• Advantages – Easy formation, generally greater financial capacity than sole proprietorship, less red tape than corporations
• Disadvantages – Unlimited financial liability, opportunity to for interpersonal conflicts, more challenging to terminate than sole proprietorship

Corporation (Inc.)

• Many owners, numbers will vary
• Advantages - Limited financial liability, greater management opportunities since there are more people, greater opportunity for financial gain based on more people working, easy to transfer ownership
• Disadvantages – Costly to establish and terminate, tax disadvantages, legal restrictions, depersonalization

Make sure to evaluate each type of ownership in a larger scale to make the best decision for your business.

Retailers and wholesalers out there – what type of legal business are you? We’d love to hear so that others can learn from your experiences. Please share in the comment section. Thank you.