Corporation vs. Company: Corporation Definition and Structure

A corporation is a form of business organization that doubles as a separate legal entity from its owners. All corporations are companies, but not all companies are necessarily corporations.

Those interested in forming this type of company must file articles of incorporation with the state, issue annual reports to their shareholders, and abide by corporate bylaws. This legal status shields corporate owners (or shareholders) from personal liability in a way the different legal statuses of many other private companies do not.

There are two primary different types of corporations: C corporations (wherein owners must pay their own taxes as well as corporate tax) and S corporations (wherein owners can claim some or all of their corporate revenues on their individual tax returns). Both corporate structures must abide by all the general rules and regulations applicable to corporations.

A company is any sole proprietor or group of people who forms a business structure with the intent to sell goods or services. Many different business entity types qualify as companies, including sole proprietorships, general partnerships, nonprofits, limited liability companies (LLCs), and corporations.

Except for corporations, most other companies obligate their owners to pay their own tax rather than a separate corporate tax. Therefore, many private company owners report their revenue on personal tax returns.

There are plenty of important distinctions between corporations and all other types of companies. Here are just seven areas with differences of note:

1. 1. Legal requirements: Corporations are subject to much more stringent legal requirements than many other types of companies. They must submit their company name alongside other legal documents to the Secretary of State in whichever state they hope to do business. They must pass corporate bylaws and keep their shareholders informed about their stocks, as well as hold an annual meeting to elect a board of directors. Other company types face fewer rules, but they also do not operate as separate legal entities from their owners in most cases.
2. 2. Liability protection: Corporations provide personal liability protection to their owners, whereas most other company types do not. Corporations operate as separate legal persons, meaning business debts and revenues are separate from the personal debts and incomes of their owners. Similarly, this legal status makes it impossible for those who might sue the corporation to go after the personal assets of their owners. Certain other company types provide a similar level of protection (like limited liability partnerships or LLPs).
3. 3. Management: Companies—whether they are corporations or not—all have different management structures. Still, it’s more likely for the owners to be directly involved with everyday business decisions for sole proprietorships or partnerships than for corporations. Corporations often hire separate management staff for doing business, as opposed to managing the day-to-day affairs of their companies themselves.
4. 4. Ownership: Corporate owners must have annual meetings to pick a new board of directors, while other types of business owners have no such obligation. The owners of a corporation technically include anyone who owns any stock in the company, meaning the ownership is more dispersed and less hands-on in many cases. For other company types, owners often double as managers.
5. 5. Size: With exceptions, corporations are often larger than sole proprietorships, partnerships, and other types of business operations arrangements. A single entrepreneur can turn their small business into a company as soon as they put their ideas into practice, but it takes at least a few shareholders, employees, and government regulators to turn a company into a corporation.
6. 6. Stock issuance: Corporations can issue shares of stock, whereas most other company types cannot or do not. Corporations also often hold shareholder meetings or release letters and emails informing their stockholders of the company’s performance. Smaller businesses generally do not have to answer to anyone but their own small team of owners.
7. 7. Taxation: A corporate entity must pay corporate tax, but its owners will also pay personal income tax based on what the corporation pays out to them specifically. This sort of “double taxation” is a benefit to some and a negative to others. Other company types still pay taxes to the Internal Revenue Service (IRS), but they generally do so through their owners’ personal income tax forms.

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