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The Difference Between a Proprietorship, Partnership, Professional Corporation & Incorporation

When starting a business, it’s important to understand the differences between the various business structures and organizations. Deciding which business structure works best for you will depend on a variety of factors­– and having an experienced attorney to help guide you through the process is essential. In this post, we’ll look at the differences between incorporation, partnership, proprietorship, and professional corporation, and explain why knowing which works best for you is so important.


A proprietorship is the simplest and most common form of business organization. It is a business owned and run by one individual, with no legal distinction between the owner and the business. Proprietorships are relatively easy to set up and require minimal paperwork. The downside is that the owner of a proprietorship is personally liable for all debts of the business.

For this reason, many entrepreneurs opt for a more robust structure like a professional corporation or incorporation if their business will face significant risks, such as entering into contracts or being sued. By forming a professional corporation or incorporation, the entrepreneur can separate their personal assets from those of the business, thus limiting their liability in the event of a lawsuit.


A partnership is a business structure formed when two or more individuals join to conduct business as co-owners. The partners in the venture contribute resources such as capital, property, and labor and share the profits and losses from the venture. Partnerships are relatively easy to set up and there is not a great deal of paperwork involved, but all partners are personally liable for any debts incurred by the business. In some cases, however, partners may limit their liability by forming a professional corporation.

The downside of a partnership is that it does not provide the same level of protection from personal liability as a professional corporation. Additionally, it may be difficult for partners to agree on decisions that could result in disputes. Furthermore, all partners are subject to taxation on their share of profits.

Professional Corporation

A professional corporation (PC) is a type of business structure in which licensed professionals such as lawyers, accountants, and physicians can incorporate their practice. A PC is subject to the same regulations and legal requirements as a regular corporation but with some additional features tailored specifically for professional services.

Professional corporations offer several advantages to those who choose to incorporate their practice. By becoming a professional corporation, you can protect yourself from personal liability and enjoy certain tax benefits. Additionally, PC’s can help to create an aura of professionalism and credibility around your practice, as well as provide you with added flexibility when it comes to how you manage and operate your business.

While professional corporations can be advantageous in many respects, they also come with some disadvantages. Professional corporations are subject to more regulation and paperwork than other business structures, and can be more expensive to set up and maintain. Additionally, due to the complex nature of professional practices, it may be difficult for a single individual to establish a PC without outside assistance.

Professional corporations provide many benefits for those who choose to incorporate their practice. The most important thing to remember is that each state has its own specific regulations regarding professional corporations, so it’s important to speak with an attorney who is familiar with the laws in your state before making any decisions. Furthermore, it’s essential to consider the advantages and disadvantages of a professional corporation carefully before deciding whether this type of business structure is right for you.


 Incorporation is a legal process that establishes a business entity as a separate legal entity from its owners. This business entity is known as a corporation and it has certain rights and responsibilities, distinct from those of its owners. The owners of the business are known as shareholders, and they own shares in the company. The board of directors is responsible for managing the company’s affairs and setting corporate policy.

Advantages of incorporation include limited liability protection, perpetual existence, easy transferability of ownership, tax benefits, and access to capital. When a business is incorporated, the owners are not personally liable for any debts or losses incurred by the corporation. Furthermore, the corporation can exist in perpetuity and its ownership can be transferred easily by selling or transferring shares. Incorporation can also provide tax benefits, such as lower rates for some types of businesses and the ability to use corporate losses to offset income from other sources. Finally, corporations often have easier access to capital, since it can issue stock and sell it on the open market.

Disadvantages of incorporation include complexity and cost. The process of incorporating a business can be time-consuming and expensive since there are many legal documents to prepare and filing fees to pay. Additionally, incorporating a business subjects it to additional regulations and compliance costs, such as filing taxes and annual reports with the state and filing with the Securities and Exchange Commission (SEC).

Weigh Your Options

  • A proprietorship is a business owned and run by one person, where all profits and losses belong to the owner. This structure provides the owner with the simplest way to start and manage a business, but it also offers no legal protection from creditors and business liabilities.
  • A partnership is like a proprietorship in that it is owned and managed by two or more people. The main difference is that each partner has an equal say in business decisions and shares the profits or losses. As with a proprietorship, there is no legal protection from creditors or business liabilities.
  • A professional corporation is a form of business that is specifically designed for professionals such as lawyers, doctors, and other highly trained professionals. This type of corporation gives its owners special protection against personal liability for their business activities.
  • Incorporation is the process of registering a business with the state as a separate legal entity. This gives owners limited liability protection from creditors and any lawsuits against their businesses. Incorporation also makes it easier to raise capital from investors.

Ultimately, choosing the best structure for your business will depend on several factors, such as the size of your business, the complexity of the operations, and the amount of risk you are willing to take on. Your attorney can help you determine which structure is best for you by providing advice and guidance on the different options available.

How Can My Attorney Help Me Choose the Right Business Structure?

When deciding on the right business structure, it’s important to get legal advice from a qualified attorney who is familiar with all business structures and their associated implications. Your attorney can help you evaluate your business objectives, liabilities, and tax obligations to determine which business structure will best suit your needs.

For example, a professional corporation is a great option for individuals who are in the medical or legal field because it provides personal liability protection. Your attorney can also help you understand the requirements and regulations associated with forming a professional corporation, such as having professional directors and filing additional documents. Additionally, they can help you understand any local laws and regulations that may be applicable to you.

Your attorney will also be able to assist you in understanding the legal and financial consequences of each business structure, such as taxes, fees, and other associated costs. They can help you weigh the pros and cons of each option and make sure you’re making an informed decision based on all of the facts.

Ultimately, it’s important to speak to a qualified attorney before making any decisions regarding your business structure. They can provide the guidance and advice necessary to ensure that you’re making the right choice for your business. Call the trusted attorneys at Lowthorp Richards at (805) 981-8555 or fill out our online contact form. We operate primarily in the Tri-Counties area – Ventura, Santa Barbara, and San Luis Obispo.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Cristian R. Arrieta, Lowthorp Richards McMillan Miller & Templeman, A Professional Corporation, 300 E. Esplanade Drive Suite 850, Oxnard, CA 93036