compare company,sole proprietorship and cooperative society on the basis of liability
Answers
A sole-proprietorship has one owner who has unlimited liability for the business.
A partnership involves two or more people who combine resources for the business and share profits and losses.
A corporation is considered to be a separate legal entity from its shareholders. For tax purposes a corporation is a “Person”.
A trust or estate usually has beneficiaries that benefit from it. A trust can include an inter vivos trust (gifted during one’s lifetime) and a testamentary trust (given because of someone’s death) as explained in ITA 108(1).
The following table outlines some of the similarities and differences of the different tax entities:
Sole proprietorship
Partnership
Corporation
Trust
Ownership
A single owner
Two or more owners
Usually owned by many shareholders
Owner passes the ownership to a trustee
Profit or losses
All profits go to the sole owner
Profits split equally, or by pre-determined terms amongst the owners
Dividends declared and given to shareholders
Beneficiaries of the trust benefit from the profit
Liability
The owner has unlimited liability
Usually split amongst the owners based on the terms
Limited liability – individuals are not usually directly liable for activities within the corporation
The trustee responsible for operating the trust
Decision-making
All decisions for the firm are made by one owner
Owners in the partnership are responsible for the decisions
Board of director and shareholders
The trustee
Tax
Owner is taxed on his personal income/profit from the company
Owners are taxed on their respective incomes
A corporation is taxed as a “person”
A trust is taxed as a “person”