Company vs. Corporation: What’s the Difference?
The main difference between a company and a corporation is that a corporation is a legal entity separate from its owners, providing limited liability, while a company may refer to any form of business organization.
Before we move to more differences, let’s first understand Company and Corporation:
- Company: A company is a generic term used to describe any business organization or association formed for the purpose of carrying out commercial or industrial activities.
- Corporation: A corporation, also known as a “limited company” or “incorporated company,” is a specific legal structure that grants the company a separate legal personality from its owners or shareholders.
Now, let’s get to Company vs Corporation:
Major differences between Company and Corporation
| Company | Corporation |
|---|---|
| Companies can be privately owned by individuals or a group of individuals who manage and control the business. | Corporations issue shares of stock, allowing ownership to be divided among multiple shareholders, who elect a board of directors to oversee the company’s operations. |
| Companies are often considered an extension of their owners and are not separate legal entities. | Corporations are separate legal entities distinct from their shareholders, granting them legal rights and responsibilities. |
| In most cases, the owners of a company have unlimited liability, meaning they are personally responsible for the company’s debts and obligations. | Shareholders in a corporation have limited liability, meaning their personal assets are protected, and they are only liable for the amount they have invested in the company. |
| The owners or managers of a company are responsible for decision-making, and the structure can be more flexible and less bureaucratic. | Corporations operate under a strict governance structure, where a board of directors is elected to make major decisions and oversee the company’s management. |
| The income generated by a company is generally taxed at the individual level, depending on the legal structure (partnership, sole proprietorship, etc.). | Corporations are subject to corporate tax rates, and shareholders may also face taxes on dividends received. |
So, these are the main differences between the entities.
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