How is a corporation different from a sole proprietorship?
A sole proprietorship is easy and inexpensive to set up, and tax filing is handled on an individual's return with only the addition of a few extra forms. On the other hand, a corporation provides liability protection and some tax advantages. The lack of liability protection is one of the main disadvantages of a sole proprietorship. Also, business earnings are subjected to self-employment tax. In a corporation, only salaries (not profits) are subjected to this tax.
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