DEFINITION
A corporation is a legal entity created by individuals, stockholders, or shareholders, with the purpose of operating for profit. It is owned by shareholders who hold shares in the company, while a company is typically owned by individuals or partners.
- Legal Entity: A corporation is considered a separate legal entity from its owners, providing limited liability protection to shareholders. On the other hand, a company is not a separate legal entity, and its owners have unlimited liability.
- Liability: Shareholders of a corporation have limited liability, meaning their personal assets are protected in case of business debts or lawsuits. In a company, owners have unlimited liability, risking personal assets in case of financial obligations.
- Formation: Creating a corporation involves formal registration and compliance with specific corporate laws and regulations. In contrast, a company can be formed without strict formalities, often requiring only a business registration.
- Management: Corporations have a board of directors appointed by shareholders to oversee the company’s operations. In a company, management is usually handled by the owners themselves or a designated person.
- Size: Corporations are typically larger in size, with multiple layers of hierarchy and extensive operations. Companies, on the other hand, can range from small-scale ventures to larger organizations.
- Public Listing: Corporations have the option to become publicly traded entities by listing their shares on stock exchanges. Companies, by default, are not publicly traded and operate privately.
- Governance: Corporations are governed by specific corporate laws and regulations, ensuring compliance and transparency. Companies, on the other hand, are governed by partnership or proprietorship laws, which may be less stringent.
- Taxation: Corporations are subject to corporate taxes, which are often different from individual or partnership tax laws. Companies are typically taxed based on individual or partnership tax laws, depending on their structure.
- Continuity: Corporations have continuity even after the death of shareholders, as the ownership of shares can be transferred. Companies, especially proprietorships or partnerships, may dissolve upon the death of owners, unless specific arrangements are made.