A sole-proprietorship has actually one owner who has limitless liability for the business.
You are watching: Which best describes the difference between sole proprietorships and partnerships?
A partnership requires two or more people who combine resources because that the business and share profits and also losses.
A corporation is considered to be a different legal reality from that is shareholders. Because that tax objectives a copy, group is a “Person”.
A trust or legacy usually has actually beneficiaries that benefit from it. A to trust can incorporate an inter vivos trust (gifted during one’s lifetime) and also a testamentary trust (given since of someone’s death) as defined in ITA 108(1).
The complying with table outlines few of the similarities and differences of the various tax entities:
A single owner
Two or much more owners
Usually owned by plenty of shareholders
Owner overcome the ownership to a trustee
Profit or losses
All profits go come the sole owner
Profits split equally, or by pre-determined terms amongst the owners
Dividends declared and also given come shareholders
Beneficiaries that the trust benefit from the profit
The owner has endless liability
Usually split among the owners based on the terms
Limited legal responsibility – people are not usually straight liable for tasks within the corporation
The trustee responsible for operating the trust
All decisions for the firm are made by one owner
Owners in the partnership room responsible for the decisions
Board that director and also shareholders
Owner is taxation on his an individual income/profit indigenous the company
Owners space taxed top top their respective incomes
A coporation, group is taxation as a “person”
A to trust is taxed as a “person”
See ITA – 82(1), 96(1), 104 for an thorough explanation the how varieties of entities room taxed.
Interactive content (Author: Wahaj Awan, in march 2019)
Interactive contents (Author: Simran Sandhu, June 2019)
References and Resources :ITA – 98(5), 248(1), 108(1)Competency map: 6.1.1
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