How is ownership of a corporation different from that of a sole proprietorship?

Question

How is ownership of a corporation different from that of a sole proprietorship?

Answer 1

Ownership-wise, while a sole proprietorship firm is owned by a single individual (and the proprietorhip firm/ business do not have any legal identity independent of the individual proprietor, a corporation is owned by a large number of shareholders ( called members) with varying percentage of ownership. Beyond a point it is not possible to increase the number of partners because the partners need to communicate and develop understanding and sign partnership agreements and deeds, so multi-owners corporations have developed. In proprietorship and partnerships the owner and partner owners are generally involved in day to day operation of a business, in the case of corporations -, most shareholders are mere investors, they choose a Borad of Directors and Manager to run the business and exercise control over the firm by voting in shareholder/ members meeting.

A corporation is a legal entity (technically, a juristic person) which has a legal personality distinct from those of its members.The defining legal rights and obligations of a corporation consist of the capacities (i) to sue and to be sued, (ii) to have assets, (iii) to employ agents, (iv) to engage in contracts, and (v) to make by-laws governing its internal affairs. Other legal rights and obligations may be assigned to the corporation by governments or courts. These are often controversial.

Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as "a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence."

Currently, the modern business corporation is the dominant type of corporation. In addition to its legal personality, the modern business corporation has at least three other legal characteristics: (i) transferable shares (shareholders can change without affecting its status as a legal entity), (ii) perpetual succession capacity (its possible continued existence despite shareholders' death or withdrawal), (iii) and limited liability (including, but not limited to: the shareholders' limited responsibility for corporate debt, insulation from judgments against the corporation, shareholders' amnesty from criminal actions of the corporation, and, in some jurisdictions, limited liability for corporate officers and directors from criminal acts by the corporation).

The modern business corporation's prevalence often obscures the fact that for years other corporate entities existed before the emergence of the modern business corporation, for example, church, educational and charity corporations. Investors and entrepreneurs often formed joint stock companies and then incorporated them to facilitate conducting business; as this business entity now is prevalent, the term corporation often is used to specifically refer to such business corporations. Corporations may also be formed for local government (municipal corporation), political, religious, and charitable purposes (not-for-profit corporation), or for government programs (government-owned corporation). As a generic legal term, 'corporation' means any group of persons with a legal personality. Historically, the modern business corporation emerged from the blending of the traditional corporation with the joint-stock company. For details visit http://en.wikipedia.org/wiki/Corporation