What is the difference between a Corporation and a Sole-proprietorship?
The primary differences between a sole proprietorship and a Corporation is liability protection for the business owners and taxation.
Operating a business as a sole proprietor means that the owner is personally liable for any debts, judgements, or damages awarded as a result of litigation. Operating as a Corporation, however, owner’s personal assets and finances are not vulnerable to liability that may be incurred during the course of doing business. Generally, the owners are not responsible for liability, rather the Corporation itself is responsible for debts and liabilities.
With a corporation, profits are taxed first at the corporate level and again when dividends are paid to shareholders on their personal tax returns. In some instances, however, a business owner may not want profits (or losses) to be reflected on their personal income tax return. Perhaps an owner has personal financial liabilities or legal issues that would make regular distributions undesirable. The C-Corporation can provide for greater separation of the business profit and loss from an owners annual reported personal income without affecting his or her equity in the business.