There are a few different types of business structures. The main types are companies, sole traders, and partnerships. Sole traders trading under business names work for themselves. They are in effect the same legal entity as their business. However, companies are distinct from their owners. A company is a separate legal entity. They are an entity unto themselves. They can do many of the same things that legal persons can do. This includes owning property, suing, or being sued. It is important that if registering a company, you are aware of its traits. Corporations are basically a type of company, as they also have their own separate legal status. However, there is a difference between a corporation and a company. We will discuss a few of the main differences in this article.
Suitability and size
Corporations are likely to be larger. Whilst there is no clear and cut rule, this is often the case. The corporate structure is applicable when a company is listed on the open market and becomes publicly traded, allowing far greater numbers of shareholders. Companies, whilst sometimes large, tend to be smaller in size. It is also more likely that a corporation would trade abroad or have a registered presence in other parts of the world.
Given the contrast in size, the ownership structure of companies and corporations is different. Whilst companies are owned by shareholders, there are generally fewer fewer of them. Also, the shareholders are likely to be sole or main directors of a company. A corporation is owned by its many more shareholders. Though the principle is the same, on a practical level, this is a point of difference.
The liabilities each bear can vary. This can be to do with many factors including the size, shareholders, secured and unsecured creditors.
Corporations and companies are distinct from one another in the way they are managed. Given the larger size of corporations, they tend to require a different management structure. This may also involve a board of directors, in place of just one sole or two equal directors or majority shareholders of a smaller company.
Along with the management, the hierarchy of a corporation will also vary to that of a company. This is primarily to do with the number of individual persons involved in the organisation.
Names and terms
Whilst these might seem merely cosmetic in contrast, the names and terms applied to certain aspects of corporations compared to that of a company can also vary. It may mean the difference between proprietary limited, incorporated, or public limited company. It has an impact on how they function and trade.
Legal agreements, compliance and administration
Corporations have significant stature in the marketplace and economy. Accordingly, the way in which they are governed can at times be distinct from that of smaller companies. The regulation is more stringent. Corporations face more scrutiny to ensure compliance. Therefore, their administration and bookkeeping must meet certain standards and is likely more complex than that of a company.
Accounts, records and taxation
The accounting process and record keeping can be a vast difference between a corporation and a company. This is also due in large part to the size of the corporations. This follows from the greater focus on compliance. Furthermore, the way in which tax law applies to corporations would also be slightly different. This is due to their profit and revenue, outgoings, and economic status. The Australian Taxation Office website contains guidelines on corporate tax rates.
Transparency, disclosure and public trust
Due to the public trading of large scale corporations, there is a great deal more of the public trust enlisted in their services. Transparency and disclosure is more likely to be a focal point for corporations. Whilst it is still important, smaller private companies would focus on this less so. The duty to disclose prospectus arrangements for shareholders is likely to be more detailed for corporations.
Each company and corporation will vary, albeit only slightly. Therefore, trying to cover all of the vast nuances that distinguish them from another can be hard. There can be many exceptions to the foregoing differences. Accordingly, the main important differences listed above are the major ones to be aware of. It is good practice to have an awareness of business structures. This knowledge goes a long way to helping you in your business affairs, investment, or work. Given your own situation may be unique, it is always wise to consult with a company lawyer should you need advice.