Difference between a Sole Proprietorship

and a Corporation
What is the difference between a sole proprietorship and a corporation? When
starting a business, it is a common dilemma for aspiring businesspeople and
entrepreneurs to choose what type or form of a business they will start.
Although a company or business organization can also be formed as a
partnership, cooperative and other forms of businesses, single proprietorships
and corporations are among the most common types of a business. To give
you an idea of how the two differ from each other, the following is a list of the
differences of a sole proprietorship and a corporation:
1. A sole proprietorship is owned by one natural person called proprietor or
proprietress, while a corporation is owned by several persons (can be natural
or juridical persons) called shareholders or stockholders. Take note that
juridical persons are entities that are created by law and recognized as a legal
entity – for example, the corporation, itself, is a juridical person or entity which
can also be a shareholder of another corporation.
2. The proprietor and his or her proprietorship business are one and the same
entity, while the corporation and its owners are separate and distinct legal
entities. In the Philippines, the proprietor and his or her proprietorship
business share one and the same TIN (Taxpayer’s identification Number),
whereas the corporation has a separate and unique TIN from its shareholders.
In other words, a proprietorship and its owner are considered the same
taxpayer, while a corporation and its owners are considered separate
taxpayers.
3. In the Philippines, the income tax rate of a sole proprietorship is based on a
graduated tax rate, whereas a corporation is generally taxed using a fixed
rate.
4. A sole proprietorship is easier and less costly to establish as a legal
business than a corporation in terms of documentation and registration. In the
Philippines, a corporation is required to be registered with the SEC (Securities
and Exchange Commission), while a sole proprietorship business is not
required to register with the commission.
5. A sole proprietorship is also easier to comply with the reportorial and other
regulatory requirements compare with a corporation. Corporations are
governed and regulated by the SEC and required to comply with their
reportorial and other regulatory requirements, such as good corporate
governance and corporate social responsibility. Corporations in the
Philippines are governed by the Corporation Code of the Philippines.
6. The death of the proprietor or the owner of the proprietorship will terminate
the business, while the death of a shareholder will not necessarily terminate
the corporation. The shares of ownership or stock of a corporation can be
assigned or transferred from one owner to another. A corporation can
continue to exist until the shareholders decide to dissolve it or merge it with
another corporation.
7. The proprietor is indebted up to his or her personal assets, whereas the
owners or shareholders of a corporation can enjoy limited liability, that is, they
are only indebted to the extent of their interest in the corporation. In other
words, the creditors of a proprietorship can run after the personal assets of
the proprietor, while the creditors of a corporation can only run after the
corporate assets and not on the personal assets of the shareholders.
8. A corporation may attract more investors than a proprietorship since the
former is more regulated, has a continuing or perpetual existence, its shares
of ownership is transferable, and it has a limited liability feature