Company and corporation are commonly used terms in the business world. Many experts believe they mean the same thing and use them interchangeably. However, this is not true: both terms are different.
This article will explain both terms and differentiate between company and corporation.
What is a Company?
A company is an association of individuals to conduct commercial activities and make money. A company can be an LLC, partnership, sole proprietorship, or corporation.
What is a Corporation?
A corporation is a legal entity separate from its owners. It is a business structure that business owners select to operate the business. A corporation is a type of company.
Business owners adopt this structure because of the following reasons:
- It provides them protection against lawsuits
- It increases business credibility
- It provides growth opportunities
Company Vs Corporation
A company is a general reference to a business, while a corporation is a specific type of business. All corporations are companies, but not all companies are corporations.
Some differences between a company and a corporation are given below.
- Structure: A company can have four types of structure – LLC, partnership, sole proprietorship, or corporation. This shows that the corporation is a company.
- Management: A corporation is a big company with a board of directors at the top that occasionally meets to make major decisions. These directors can be employees of the company or shareholders. A company has a specific structure with a CEO at the top.
- Ownership: Corporations are owned by shareholders, while companies can be owned by shareholders, single ownership, or a partnership. Corporations can have unlimited owners, but companies can have unlimited or limited owners.
- Legal Entity: A corporation is a legal entity separate from the owners, while a company may not be, and an individual can be the company’s owner.
- Taxes: Corporations are taxed separately as they are separate entities. Companies may not be taxed separately, and owners can pay their company taxes with their income tax.
- Annual Reports: Corporations follow company bylaws, hold annual shareholder meetings, and show the annual reports to shareholders. A company may not abide by these rules.
- Liability Protection: Corporations provide liability protection to their owners while other types of companies may not.
- Size: Generally, corporations are bigger than any other form of company.
Summary
All corporations are companies, but not all companies are corporations. A company is a more general term, and corporations are a specific form of a company. Corporations are bigger and provide liability protection to their owners, while other forms of companies are smaller and may not provide liability protection.