Difference Between Corporation and Company

Introduction

Corporations and companies are distinct forms of business organizations, each possessing a unique legal entity status that is independent of its owners and functions as an artificial legal entity.

Both corporations and companies are established through proper legal procedures and can hold assets in their names, including real estate. However, the key disparity lies in the taxation aspect. While individuals' tax returns might include a company's revenues or losses, businesses often pay double taxation on their income.

Corporation

A corporation is an abstract, document-based organization that relies on agents, such as directors or officials, to function. It cannot operate on its own, and while it can be dissolved, it never ceases to exist.

Corporations differ from other types of businesses in that they have a separate legal existence from their owners, resulting in separate liability. In corporations, liability is limited to the shares held by the shareholders.

One significant contrast between a corporation and a company lies in shareholding, where each shareholder holds a fractional ownership of the overall corporate entity.

Types of Corporations

Different types of corporations include

1. C- Corporation
   The C Corporation is the most widely used business formation, encompassing all its essential characteristics. Although the corporation itself is subject to business taxes, the individual owners who receive earnings are taxed separately. The shareholders and owners have the flexibility to manage the C corporation in various ways. At first, corporate tax is applied to the corporation's earnings.
2. S- Corporation
   S Corporations are structured similarly to C Corporations, but they come with distinct limitations for owners and tax consequences. Unlike C Corporations, S Corporations can only have a maximum of 100 shareholders and are not subject to separate taxation. Rather, the shareholders must report the company's revenues and losses on their individual income tax filings.

Company

Any organization that does business is referred to as a company. The term "company" is a general term that does not have any official recognition, restrictions, or authorization. While not all businesses are considered corporations, a corporation is typically classified as a company.

Organizations can take many distinct forms. For instance, your company may operate as a corporation, partnership, or single proprietorship.

The ownership of a business can vary depending on its type. It might be owned by one person or by several people. In most business structures, the owners are accountable for any liabilities, which can be either limited or unlimited.

Types of Company

There are various categories of companies, such as

1. Sole Proprietorship
   A sole proprietorship is a popular business structure that is ideal for small businesses, particularly during the initial phases of growth. A sole proprietorship is a kind of company structure where one person bears all the liabilities and receives all the benefits. The proprietor, who is the sole owner, manager, and controller of the business, is referred to as the "proprietor," while the term "sole" signifies that there is only one owner.
2. General Partnership
   Each partner's liability in a general partnership is unlimited unless specified otherwise in the deed. They also have an equal share unless stated otherwise. If the firm's assets are not enough to cover its debts, the partners' personal property can be seized. Each partner, however, has the right to actively engage in the management of the company, barring agreement from the other partners.
3. Limited Liability Company (LLC)
   An LLC offers company owners the liability protection of a corporation combined with the tax advantages of a partnership or sole proprietorship.

Difference Between Corporation and Company

Here are the key distinctions between a corporation and a company.

• The main distinction between a corporation and a company lies in the fact that a corporation is a legal entity established under state law. Conversely, any organized business endeavor can be classified as a company.
• The idea of shareholding is yet another important distinction between a corporation and a company.
• In a corporation, each shareholder possesses a small portion of the overall corporate framework.
• While companies may have numerous shareholders, most businesses are typically overseen by an individual or a small group.
• A company, whether it be a manufacturing or investment firm, is a collective of individuals united for a specific goal.
• On the contrary, a corporation is a legally recognized artificial entity that allows one or more individuals to invest in a venture without assuming legal liability for the entity's actions.

Corporation Vs. Company

1. Process of Management
   Companies and corporations have distinct managerial structures. By making their stocks and shares available to the public, corporations, as opposed to companies, give priority to the interests of their internal and external stakeholders. In contrast, companies such as sole proprietorships and partnerships typically have a limited number of internal stakeholders and do not offer shares to the general public.
2. Filing Taxes
   Corporations and companies differ in terms of taxes. Companies usually pay taxes on their earnings or allow owners to report and file earnings as personal income. On the other hand, corporations are required by the government to register and pay taxes as business entities rather than individual income taxes.
3. Legal Requirements
   Compared to numerous other companies, corporations are bound by significantly more stringent legal limitations. Other business structures are subjected to fewer regulations, albeit they often need more autonomy as separate legal entities from their proprietors.

Distinguishing Between a Corporation and a Company

The following table lists the main differences between a company and a corporation.

Conclusion

A corporation and a company are primarily distinguished by their ownership structure, taxation, and legal status. A corporation may be subject to double taxation as it is a distinct legal entity with shareholders. At the same time, a company is a general term for any business entity and may have different ownership structures. Corporations have more legal obligations and documentation requirements compared to companies.