1. Legal Status and Formation

Sole Proprietorship

• An unincorporated business owned and operated by one individual
  
• Not a separate legal entity from the owner
  
• Requires minimal setup, often without formal registration
  
• Operates under the owner’s name or a trade name
  

Corporation

• A separate legal entity incorporated under corporate law
  
• Legally distinct from its owners (shareholders)
  
• Requires formal registration and incorporation with the government
  
• Has perpetual existence regardless of changes in ownership
  

2. Ownership and Control

Sole Proprietorship

• Owned and controlled by a single person
  
• The owner makes all decisions independently
  
• Ownership is not transferable without dissolving the business
  

Corporation

• Owned by shareholders, who may be individuals or other entities
  
• Managed by a board of directors and officers (CEO, CFO, etc.)
  
• Ownership is divided into shares, which can be sold or transferred
  
• Shareholders have indirect control through voting rights
  

3. Liability

Sole Proprietorship

• The owner has unlimited personal liability
  
• Personal assets can be used to satisfy business debts or legal claims
  
• There is no legal protection between the business and the individual
  

Corporation

• Offers limited liability protection to its shareholders
  
• Owners are generally liable only up to their investment in shares
  
• Personal assets are protected from business obligations and lawsuits
  

4. Taxation

Sole Proprietorship

• Profits are taxed as personal income of the owner
  
• The business does not pay taxes separately
  
• Owner reports income on an individual tax return
  

Corporation

• A corporation is taxed separately on its profits (corporate tax)
  
• Shareholders may also pay tax on dividends, leading to potential double taxation
  
• Some jurisdictions allow pass-through taxation for small corporations (e.g., S corporations in the U.S.)
  

5. Compliance and Recordkeeping

Sole Proprietorship

• Fewer regulatory requirements
  
• No mandatory audits, board meetings, or formal records unless specified by turnover
  
• Simple and low-cost to maintain
  

Corporation

• Subject to strict legal and regulatory compliance
  
• Must maintain statutory registers, conduct board meetings, file annual returns and financial statements
  

Requires the services of legal and accounting professionals