A corporation is a business or organization formed by a group of people, who are known as shareholders, with the sole purpose of making profits. A corporation is its own legal entity, meaning that it has its own juridical personality. It has many of the some rights and obligations that and individual would have, such as the competency to buy and sell property; enter into leases and contracts; and can sue or be sued, essentially, it can be prosecuted and punished if it violates the law. Each of the share holders benefit from limited liability, however, there are some cases in which they can be held personally liable i. e: fraud.
The principle advantage of a corporation is that given the fact that is has its patrimony, it allows for the corporation to exist even following the death of the business owners, meaning that the rights are transferable seeing as its juridical personality is separate than that of the shareholders. A partnership is a business structure where 2 or more individuals come together in order to conduct business.
There are three types of partnerships, general partnerships, limited partnerships, and undeclared partnerships The partnership is constituted by a partnership agreement, where all the framework such as the contributions, share in profits, intentions, etc. are determined. In a partnership each partner is considered to be an equal co-owner of the entity, unless the partnership agreement states otherwise. Each parter pays share of taxes due in accordance to the value of their ownership, and, in case of failure, equally shares in all of the liabilities of the partnership.
Thus, in a partnership, liabilities are shared but not limited. The benefit of partnerships is that general partners are only taxed once. The partnership itself pays no taxes. A sole proprietorship is brought on by an individual conducting business on their own, in their own name. It has no legal existence, and it ceases to exist once the individual dies, or stops conducting business.
Transfer of ownership is not possible seeing as all contracts are linked to the individual personally. This also means that the individual is always personally liable. In other words you and the business are the same person, so if your company goes bankrupt then so do you. For my business, Peak Fitness, we have decided to startup as a corporation for various reasons. First, to limit personal liability as much as possible. Seeing as a corporation is a separate legal entity, we can protect our personal assets from being affected in the case that we are being sued, or is the company goes bankrupt.
Secondly, funding is much easier with a corporation seeing as the shareholders provide funding, and it allows for the opportunity for the profits to be reinvested in the company making it less likely for the company to be bankrupt. Lastly, it allows for ownership to be transferred, which is important when someone wants to sell their shares in the company, or in the case that one of the shareholders dies.