How does a corporation differ from a sole proprietorship?

Answer 1

A sole proprietorship is a business that is owned AND operated by a single person, may have employees. Often these are single self employed individuals but not necessarily. they may have employees and anything else a business might do. Its not the best form of business because all of the assets of the owner are at "risk" by actions of the business.

A corporation is owned by many people, usually thousands of people through "shares" which is basically a document saying that you own a certain percent of a company. The shareholders hire "Board of directors" to operate the business, these people work as managers and staff. So in a corporation, the people who own the business do not run it, instead they hire officers to do so.

A corporation or limited liability corporation (LLC) establishes the business as a legal entity. An individual may form a corporation or LLC, a corporation may be of any size. Large corporations sell stock, employ thousands of people. It is considered the better business format since the owners assets are generally protected from actions of the corporation. The corporation exists leaglly and can be sued, pays taxes and other functions. Legal liability generally is with the corporation not the owners or managers.