how is corporation different from a proprietorship and partnership
Answers
Hello !
A sole proprietorship is where the single owner operates the business. A partnership is similar, however, it is owned by two or more individuals. A corporation is a legal entity separate from the owners of the business.
Sole Proprietorships: Basically, a sole proprietorship is not a legal entity, and refers to a business which is solely owned by one person. This one person is personally liable for the debts and expenses of this type of business. This is the simplest form for a company to use. They are advantageous to owners because they are simple to form, and have nominal costs compared to other types of ownership. However, sole proprietorships are problematic because the owner's personal assets can be reached by creditor's for business matters.
Partnerships: This is a business owned by two or more people, who share equally in profits and losses. Partnerships involve a number of different legal considerations that you should familiarize yourself with. Also, there are different types of partnerships (such as general partnerships, limited partnerships, joint ventures), so you need to have a good understanding of what will work best for your company.
Corporations: These are separate legal entities that are owned by the shareholders. Corporations are much more complex and are typically used by larger businesses. They have more costly administrative fees and more complicated tax and legal requirements. Corporations are afforded the opportunity to sell ownership shares through stock offerings. There are also different classifications of Corporations (such as C-Corps, S-Corps, Closely Held Corps.), so once again, you will need to have a good idea of what your company's best option is.
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