In the corporate form of business, the corporation is a referred to as a different entity to the shareholders. The main advantage of the corporate form of business is the reduced liability. In this case, the shareholders of the business organization are not considered as liable to any contracts of the corporation. They could not be sued personally for the negligence and debts of the business organization although they could lose their stocks or their investment within the corporation. Corporations could also have proper long-term plans which are separate from the plans of the shareholders. Since the corporation is a different entity, investors should not be worried about the negligence and debt of the shareholders. Lastly, in corporations, the ownership could easily be transferred. In this case, the business could run even if the original shareholders are gone. In general, the interests of the corporation are not centered on the owner.
Sole Proprietorship
In sole proprietorship, a certain owner is liable and responsible for the interests and liabilities of the business or business organization. The main advantage of this type of business organization is that the decision-making process is simple and fast since decisions should only be done by the sole proprietor or owner. The owner of the company or business organization also has the authority for selling or transferring the ownership. Another main advantage of the sole proprietor ship is the absence of corporate tax. In this type of business, the owner of the company will have to pay the income tax. Lastly, there are less legal requirements for establishing a sole proprietorship than a corporate form of business.
