What is the difference between sole proprietorship, partnership and incorporation?
A sole proprietorship is owned by one person, who may also be the employee. The owner receives all the business profits and must also bear all the losses. The sole proprietor is personally liable for any lawsuits or other business problems. A partnership consists of two or more people who share in all the decisions, profits and losses, as well as liabilities of the business. We recommend that the partners of a business meet with a lawyer to draw up a partnership agreement to define the responsibilities of each partner and how profits will be shared. A corporation is a legal entity made up of one or more shareholders united under one common name. A business needs to incorporate when the owner wants to raise money by selling equity or when the owner needs protection from being liable for lawsuits or debt that could incur by the business.
