A sort of business structure owned by shareholders with restricted liability is a corporation. This indicates that the shareholders are only accountable for the money they have contributed to the business. The corporation can continue to exist even if the original stockholders sell their shares or pass away, and it can also issue stocks to raise funds.
A partnership, on the other hand, is a type of corporate organization owned by two or more people who split the company’s profits and losses. The liability of general partners in a partnership is unlimited, whereas limited partners’ responsibility is restricted.
A partnership and a corporation are fundamentally different from one another in four ways. First, partnerships have unlimited liability, which implies that all debts and liabilities of the business are the responsibility of the partners. Corporations, on the other hand, have limited liability, and shareholders are only liable for the money they invested in the business. Second, unlike corporations, which are independent legal entities from their owners, partnerships are not. This indicates that while partnerships cannot file a lawsuit, corporations can. Third, unlike corporations, partnerships are not required to submit yearly reports to the state. The financial accounts, officers, and directors of the corporation should all be included in the reports.
Finally, if a partner passes away, withdraws, or declares bankruptcy, the partnership may be dissolved. Corporations, on the other hand, can live on even if the original stockholders sell their stock or pass away.
A corporation differs from a sole proprietorship or partnership quizlet because it is a distinct legal entity from its owners. A sole proprietorship is a type of business in which the owner is liable for all debts and commitments made by the entity. A partnership is a type of business organization in which two or more people share ownership and responsibility for the company’s earnings and losses.
A corporation has limited liability, which means that shareholders are solely liable for the money they have invested in the company, making it more advantageous than a partnership type of organization. It also possesses eternal existence, which allows it to survive the death or sale of the original stockholders’ shares. Additionally, issuing stocks makes it simpler for businesses to raise funds.
In summary, a corporation’s main legal distinction from other business entities is that it exists independently of its owners. It can more easily raise funds through the issuance of stocks and has limited liability and permanent existence. On the other hand, partnerships do not have owners who are distinct legal entities from the business and have limitless liability.
A corporation’s owners are often a group of people who hold shares in the business and choose a board of directors to manage the corporation’s operations, as opposed to a sole proprietor who owns and runs a business alone. In other words, a corporation has several owners who share ownership through stocks, but a lone proprietor is the only owner of the business.