The Differences Between Sole Proprietorship and Corporation
A business is defined as any type of entity organized for the purpose of conducting commercial, professional, or organizational activities for the benefit of a business, its owners, partners, employees, and customers. A business can be either for-profit or non-for-profit entities that conduct various activities to meet a social objective or further a socially progressive cause. Businesses exist in all areas of life from retail to entertainment, from large established corporations to small Mom and Pop shops. There are countless types of businesses, but all share common elements such as a product or service, a location, and a method of marketing or sales. There are also many ways to classify businesses, but the most common are as follows:
A main article refers to the company’s financial records. This includes all income and expenses, shareholders’ equity, and ownership structure. All debts and advances are reflected in the financial statements while reserves are funds available to invest for future needs, which often include plant, equipment, and inventory additions. The main article is frequently used to represent the total amount of profits made or revenue collected by a company, the total number of shareholders, and the ownership stake of each individual.
Another type of entity is a general partnership. When a person owns property and has sole or partial control over the property, that person becomes the partnership’s owner. Partnerships can also be categorized as limited liability partnerships (LLCs), general partnerships (GPs), and limited liability companies (LLCs). All of these entities are legally created by incorporating in a state or country that has business law specific to the type of entity being created.
A corporation is a separate legal entity. The shareholders of a corporation have the same rights and responsibilities as other shareholders. A corporation must be registered separately from its owners in order to maintain its charter. However, most small businesses are run as a sole proprietorship or a partnership, so they are not required to register as a corporation. Most businesses use a separate business name rather than a business name when they form a corporation.
Intellectual property is the term used to describe any material, process, idea, or innovation that an individual or group owns. This includes trademarks, design patents, and copyrights. While some businesses own all of this intangible property, most incorporate in their articles of incorporation a main article explaining what is meant by intellectual property and providing for its ownership. This main article of incorporation may vary depending on the particular types of businesses in question.
Limited liability companies are similar to sole proprietorships, but have the advantage of being able to pass their liability and debt responsibilities to another company. An LLC is also commonly known as a ‘pass-through’ business. In general, sole proprietorships and LLCs share the liability and debt characteristics. For these reasons, the majority of entrepreneurs choose to incorporate as a sole proprietorship or a corporation.