Sole-proprietorship vs corporation

Question 1

S-P definition

Answer 1

A business owned by one person and operating for their benefit.

Question 2

Corp. definition

Answer 2

A legal entity that is separate an distinct from it its owners, designed to conduct business

Question 3

S-P ownership

Answer 3

Owned by one person

Question 4

Corp. ownership

Answer 4

Owned by shareholders

Question 5

S-P legal structure

Answer 5

Business and owner are the same (No separate entity)

Question 6

Corp. ownership

Answer 6

Corporation and owners are distinct (Separate entities)

Question 7

S-P liability

Answer 7

Unlimited liability

Question 8

Corp. liability

Answer 8

Limited liability

Question 9

S-P taxation

Answer 9

Business profits are taxed as personal income

Question 9

Corp taxation

Answer 9

Corporation pays taxes and shareholders pay taxes on dividends

Question 9

S-P management

Answer 9

Managed by the owner

Question 10

Crop management

Answer 10

Managed by board of directors and executives

Question 10

Corp. lifespan

Answer 10

Perpetual existence (Continues even if the owner changes)

Question 10

S-P raising capital

Answer 10

Limited to personal funds and loans

Question 10

S-P lifespan

Answer 10

Business ends when the owner dies or quits

Question 11

Corp. raising capital

Answer 11

Easier to raise capital through stock issuance

Question 12

S-P regulations

Answer 12

Few regulations, simple to set up

Question 13

Corp. regulations

Answer 13

More regulations, formalities and paperwork

Question 14

S-P decision-making

Answer 14

Sole decision-maker

Question 15

Corp. decision-making

Answer 15

Decisions made by board of directors and voting of shareholders

Question 16

S-P benefits

Answer 16

1. No sharing of profits
2. Easier decision-making, no conflict of interest
3. Lower start-up and maintenance cost
4. Single taxation (15%)

Question 17

S-P drawbacks

Answer 17

1. Unlimited liability
2. Hard to raise capital
3. Hard to attract talent
4. Hard to transfer ownership

Question 18

Corp. benefits

Answer 18

1. Easier to raise capital and grow
2. Limited liability
3. Easy to attract talent
4. Easy to transfer ownership

Question 19

Corp. drawbacks

Answer 19

1. More transparent
2. Hard decision-making, conflict of interest
3. Double taxation
4. More difficult to form and maintain