Partnership VS Corporation
When comparing a partnership vs corporation, the main difference is that a corporation is separate from the owners while a partnership and the owners share any benefits and risks of the business.
You also want to look at the advantages and disadvantages of a corporation vs partnership.
A partnership is formed with at least two individuals who want to do business together and share the ownership, profits, and liabilities of the business.
A corporation is owned by shareholders and can be formed for profit or for non-profit. If the business is for profit, the profits are reinvested in the business and then divided among shareholders as dividends.
With a partnership, the owners are at risk should anything go wrong. With a corporation, the owners are generally protected.
A partnership is set up easier and has less paperwork, legal requirements, and tax obligations than a corporation.
Is a Partnership a Corporation?
No, a partnership is not a corporation. Rather it is a business entity type in which two or more people own the company.
How Does a Partnership Differ from a Sole Proprietorship?
A partnership would operate similarly to a sole proprietor, except with 2 owners)
Unlike a company, a sole proprietorship doesn’t offer protection for the owner from the business debts and liabilities.
Additionally, there are no documents or fees required to start a sole proprietorship whereas a corporation requires both articles of incorporation and filing fees.
Corporations offer limited liability for their owners and are considered separate entities. Sole proprietorships don’t offer any protection or separation between the business and the owner.
Sole proprietorships also don’t require any documents, meetings, or records to keep the business going.
Difference Between Partnership and Corporations
Life. A corporation continues until dissolved by law while a partnership has a specified duration or may dissolve due to the death of a partner.
Entity. A corporation is a separate entity while a partnership isn’t separate from the owners.
Liability. General partners are liable for the business’s obligations while limited partners are considered liable up to their own contribution amount. In a corporation, a stockholder isn’t liable but may be if the corporate veil is pierced.
Ownership changes. Stock, or ownership, of a corporation, can be sold or transferred easily. With a partnership, a change in ownership means that a new partnership must be created.
Generating capital. A corporation can raise capital by selling stocks, bonds, or securities. A partnership can only generate capital in the form of a loan or increased member contributions.
Policies. In the corporation, a board of directors makes the policies. In a partnership, the members usually have to agree unanimously about new policies.
Management. A corporation hires managers while a partnership’s owners are the managers.