What is the difference between incorporated&sole proprietorship?

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Corporations and sole proprietorships are two types of business entities. The major differences between these two types are in ownership, costs to form, formation, ownership's liability and the life of the entity.

Owners

In a corporation, the owners are shareholders. Only a single person can own a sole proprietorship.

Formation

Corporations must register with a state, and file bylaws before incorporation. A corporation can register with any state, not just the state in which it's located. Sole proprietorships have no registration requirements.

Costs to Form

Corporations have numerous startup costs to register with a state in order to incorporate. These costs typically involve attorney's fees and registration fees. Sole proprietorships have none of these types of startup costs because an individual does not register as a sole proprietorship.

Liability

When formed, a corporation becomes a separate legal entity and the law treats the corporation as an individual. Being a separate legal entity virtually eliminates the chance that an owner could be personally liable for debts or losses from the business. Sole proprietorships are not separate legal entities; an owner is personally liable for any business losses or debts.

Life of the Entity

After forming a corporation, it operates as if it will exist forever. When the owner of a sole proprietorship dies, so does the sole proprietorship.

Source:

State of California Franchise Tax Board: Corporation

State of California Franchise Tax Board: Sole Proprietorship

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What is the difference between incorporated&sole proprietorship?

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