The difference between a partnership and a corporation

One of the most fundamental decisions to make when starting a new business in Georgia is what legal structure the business will have. The structure of the business depends upon the objective and goals of the business owner(s).

Essentially, there are three types of business structures: sole proprietorship, corporation and partnership. While a partnership and a corporation may have some superficial similarities, there are some significant differences between the two.

Partnership

When two or more individuals go into business together, they have formed a partnership. According to FindLaw, there are different types of partnerships; some require a great deal of money and paperwork in order to get started, but the simplest form of partnership requires no such formalities. In a partnership, each partner is personally liable for debts relating to the business. In other words, in order to satisfy business debts, creditors may go after the personal assets of each business partner, making a partnership a risky business endeavor to enter into.

Corporation

FindLaw goes on to explain the major difference between a corporation and a partnership; unlike a partnership, the owner(s) of a corporation are not personally liable for financial liability related to the business, which means that creditors cannot go after the personal assets of a corporation's owner(s) in order to satisfy business debts. Incorporation may not be right for every business, as it is the most complicated and expensive business structure to set up, but the protection from personal liability may offset the difficulty involved at the beginning.

There is a step-by-step process involved in founding a corporation, and those who wish to incorporate should make certain they understand the process before undertaking it.

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