How are corporations different from partnerships and sole proprietorships?
Partnerships and sole proprietorships do not provide limited personal liability for business debts. Creditors of these businesses can go after the owners’ personal assets to collect business debts. Organizing and operating a partnership or sole proprietorship is much easier than forming a corporation because there is little formal paperwork required. Corporations also differ from other business structures in the way they are taxed. The corporation itself must pay corporate income taxes on profits. Partnerships and sole proprietorships are not taxed on business profits. Instead, the profits “pass through” the business to the owners who then report business income or losses on their personal tax returns. For more information on sole proprietorships, partnerships and corporations, read the free legal tutorial entitled Small Business Legal Structure found in the Lean Law Library.
Related Questions
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- How are corporations different from partnerships, sole proprietorships, and LLCs?
- How are corporations different from partnerships and sole proprietorships?
