Corporate Finance : Differences between Corporation & Partnership

Corporate Finance : Differences between Corporation & Partnership

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downloadLiability :  

Corporation and the shareholders have limited liability. Shareholders have no obligation towards the actions of the corporation.

Partnership – the partners have unlimited liability. Limited partners however may have limited liability.

Taxation : 

Corporation face double taxation from the aspect of the income of the company as well as the shareholders get taxed on the dividend which is distributed.

Partners are taxed on the lines of personal income only.

Transfer of Ownership (Liquidity and Marketability) :

In a corporation, ownership is by the means of stock and hence ownership can be transferred easily.

Transfer of ownership is complicated in terms of partnership. There is no established trading market for partnership units.

Perpetual Life

Corporation, due to the ownership distribution across the shareholders can continue perpetually and does not depend on individuals.

Partnerships hinge of the life of the partners and an exit or demise could be disastrous for a partnership.

Reinvestment and Dividend Payout

Corporations have a broader vision on dividend payout decisions.

Partnerships are generally prohibited from reinvesting partnership profits. All profits are distributed to the partners.

Voting Rights

General Partners have exclusive control and management of operations.

Voting rights in corporations are held by all shareholders.

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