Company vs. Corporation — What's the Difference?

A company can be any form of business, whether it's a sole proprietorship, partnership, or a more structured organization. It is an umbrella term that includes various types of business entities operating with different structures and rules. On the other hand, a corporation is a specific type of legal entity that is characterized by its legal separation from its owners, offering them limited liability protection.

Companies vary widely in their structure and the liability they impose on their owners. For instance, some companies, like partnerships, offer no liability protection to their owners. On the other hand, corporations always provide limited liability, meaning the personal assets of the shareholders are protected from business debts and claims.

The taxation system for companies depends on their structure. For example, sole proprietorships and partnerships are typically subject to pass-through taxation, meaning the business's profits and losses are passed through to the owners' personal tax returns. Whereas, corporations are taxed as separate legal entities, and may face double taxation—once when the company earns a profit, and again when dividends are paid to shareholders.

When it comes to raising capital, companies have varying abilities depending on their structure. A small company might rely on personal funds or small loans. However, corporations have the advantage of being able to raise capital through the sale of stock, which can attract investors and expand business operations more significantly.

In terms of governance, companies might not have formal structures or guidelines, especially in smaller businesses or sole proprietorships where decision-making can be more informal. Corporations, however, are required to have a formal structure that includes a board of directors, corporate officers, and regular meetings to ensure compliance with corporate laws and regulations.