Corporations are a legal entity that is distinct from the individual-owned business or sole proprietorship. They offer advantages to their owners, and they also have certain obligations such as taxes and regulations set by federal, state, and local governments. There are some key differences between corporations and individual-owned businesses which should be understood in order to make informed decisions about which type of business ownership is best for one’s particular situation.

The most significant difference between corporations and individual-owned businesses has to do with liability. Corporations have limited liability protection; this means that shareholders (owners) cannot be held personally responsible for any debts incurred by the corporation beyond the amount of money invested into it through stock purchases. This provides an important level of safety for investors since there is no risk of losing personal assets should the organization fail financially. By contrast, individuals who own their own companies (sole proprietorships) can be held personally liable for all debts incurred by their business operations without any limits on what they owe creditors or how much they must pay out in damages if sued by another party.