Difference Between Public Corporation and Sole Proprietorship

Public Corporation vs Sole Proprietorship

For legal sanction and for tax considerations, there are many business structures to choose from. The structure one chooses often depends upon many factors. There are various types of business entities and public corporation and sole proprietorship are just two of them. However, these business structures are very popular. There are differences in styles of functioning, structuring, and how they are taxed. Let us take a closer look.

Sole Proprietorship

A vast majority of businesses start in the form of sole proprietorship as it is one of the easiest of structures and requires least amount of paperwork. It is a type of business that is wholly owned by a single individual and the liabilities of the business are treated as personal liabilities of the owner of the business. The owner not only pockets entire profits from the business but also owns up all the risks associated with the business. It makes no difference to tax authorities if the assets of the business are used for personal purpose or business purpose. The owner has to mention the income and expenses of the business in his personal income tax return.

Public Corporation

Public corporation is also a very popular type of business structure. It is a business entity that is incorporated to perform some governmental function or has direct government control. It is an organization whose shares are traded by a large number of shareholders. It is also known as public limited company for example an airline owned by the government or water works company controlled by the government. A public corporation can enter into contracts on its own, own property in its name, and has to pay income tax on its income just like an individual. The shares of a public corporation are traded through stock exchange. To make a public corporation, it has got to be incorporated first. Once it has been formed, it offers its shares (after approval from SEC) to the general public. Once the corporation has started working, subsequent trading between investors does not involve the corporation.

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