What are the differences between a sole proprietorship, partnership and corporation?

A sole proprietorship is owned and operated by one person, who has complete control but also unlimited personal liability. This means the owner is personally responsible for any business debts, potentially risking personal assets like their home. Taxes are simpler as business income is taxed at the individual level, avoiding double taxation.

A partnership involves two or more people sharing the business’s risks and liabilities. Like sole proprietorships, partners have unlimited personal liability, but the burden of debt is shared among them.

A corporation is a separate legal entity, typically starting as a private company and potentially becoming public later. Private companies have fewer regulations and flexible governance, while public companies face strict regulations, including disclosures to regulatory bodies. Corporations can have various liability types, though limited liability is the most common. They can be limited by shares or by guarantees, allowing for more structured ownership and the ability to raise capital through public share offerings.