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Difference Between a Corporation and a Sole Proprietorship

A business is defined in the Merriam Webster’s Collegiate Dictionary Tenth Addition as: “a firm or department of production designed to generate revenue”. A business, therefore, is defined as a commercial entity or organization, normally conducted for profit; concentrating on production rather than sales. A business is further described in Wikipedia as “A company or organisation that engages in a market sector (a market segment), where the principal resources of the enterprise are not fixed assets (monetary instruments) but labour and technology.” A business may be privately held or publicly listed under an initial public offering (IPO). In Australia, businesses are generally required to file an annual return and annual report to the Australian Securities and Investments Commission (ASIC).


The basic structure of a business consists of the principal owner(s) or shareholders, the business or corporations, the financial resources (liabilities) and the intermediaries. A business can be classified in several different ways. First, a sole proprietorship is considered to be the most traditional form of business. Under this type, there is only one owner, who is generally called the founder. Other types of business structures include partnership, general partnership, limited partnership, trust, landlord/tenant, share ownership and corporations.

Limited liability partnerships (LLPs), also known as limited liability companies (LLCs), are formed through a partnership agreement between two or more members. Under this type of agreement, one member is responsible for the liabilities of all the other members. This means that although one partner may have personal liability for the liabilities of other partners, he or she is not responsible for the liabilities of the entity as a whole. An example of a limited liability partnership is a partnership that owns and shares the property.

A corporation is a form of business that is considered to be a separate legal entity. Unlike a partnership, there is no need for two or more partners in order to hold a corporation legally. Instead, a corporation is created by writing a document known as a charter.

Some business entities are considered to be corporations even if they are only one person. For example, a sole proprietor is not really a corporation because it is only one person. Many countries have laws that limit the number of share holders a single person can have. In the United States, there are several corporations without any unlimited number of share holders.

Other differences between a corporation and sole proprietorship include the type of election of officers and the powers that they have. The shareholders will have no control over the election of officers and they will not have any vote or authority when making a decision about the company’s business structure. The powers that the officers have are not the same as a shareholder.