There are various forms of business organization in which the business entity can be organized, managed and operated. Sole Proprietorship is one of the oldest and easiest forms, which is still prevalent in the world. In this type of business, only one person owns, manages and controls the business activities. The individual who runs the business is known as a sole proprietor or sole trader. Show On the contrary, Partnership is that form of business organization two or more individuals come together and agree to share profit and losses of the business, which is carried on by them. The individuals who run the business are called partners. Many people utter confusion regarding these two business forms. In this article excerpt, you can find all the important differences between sole proprietorship and partnership in tabular form. Content: Sole Proprietorship Vs Partnership
Comparison Chart
Definition of Sole ProprietorshipSole Proprietorship, as its name suggests, is a form of business entity in which the business is owned as well as operated by a single person. The alternate name of this business form is sole tradership. The person uses his capital, knowledge, skills and expertise to run a business solely. In addition to this, he has full control over the activities of the business. As this form of business is not a separate legal entity, therefore the business and its owner are inseparable. All the profits earned by the owner go to his pockets and the losses are also borne by him only. This form of business organisation is backed by some advantages, like the creation of sole proprietorship is very simple, minimal record keeping is sufficient, and it does not require, lots of legal formalities to be complied with. Moreover, the sole proprietor also gets the tax benefit, as the tax on his business income is regarded as the personal income of the owner. Besides the above advantages, we cannot ignore the drawbacks associated with this form of activity, i.e. the liabilities of the business are the liabilities of the owner too, and so if he was not able to pay them from business, he has to pay them from them from his personal assets. Furthermore, the creditors can also sue the proprietor for the debts owed by him. There is always an uncertainty regarding the life of business as if the sole proprietor dies or if he became incompetent, then the business will also come to an end. So, there is no surety that how long the business will survive. Definition of PartnershipThe Partnership is that form of business organisation, in which there are two or more persons engaged together to carry on business by an agreement and decides to share profits & losses in the specified ratio. Members are separately known as partners, but jointly known as firm. The partnership is the unseen legal relationship between the partners of the firm. The firm is the physical form of the partnership, and the name under which the business is carried on is known as Firm name. The major components of the partnership are an agreement between partners, sharing of profit & loss and business to be run by all or any of the partners who will work on behalf of the other partners. In the third component, you might notice that all the partners are the principal as well as the agent of the other partners. Due to this, the mutual agency is regarded as the essence of the partnership and if this clause is not present there will be no partnership. The following are the types of partnership:
There can be various types of partners in a partnership firm like an active partner, sleeping partner, nominal partner, incoming partner, outgoing partner, sub partner, partner for profits only.
The following are the major differences between sole proprietorship and general partnership:
ConclusionWe all know that everything has two aspects, so as with the case sole proprietorship and partnership. The former, is very simple to be established while the latter needs the agreement of the two or more persons but if you put it another way then you will see that there are more hand to work, more capital to invest and more knowledge to apply as well as in the absence of one partner the business will not suffer.
Can you manage enough to make money alone? or you may need somebody’s help to succeed in your business goals, which is which? Are amenable to work alone without the ideas and opinions of somebody else? There are factors to consider in establishing business strategies and its advantages and disadvantages. Definition of Sole Proprietorship It is a type of business in which only one person is the owner of the business. The person uses his capital, knowledge, skills and expertise to run a business solely. Definition of Partnership It is a business form in which two or more persons agree to carry on business and share profits and losses mutually. It is an agreement between partners in sharing of profit and loss. 1. Profit and Loss Sole proprietor is the only handler of all income and profit of the business. Partnership always shared in agreed ratio. 2. Business Privacy Sole Proprietorship acquires all business information will be discreet by the owner itself and Partnership requires business secrets to be opened to every partner. 3. Finance Sole Proprietorship is minimal in raising capital fund because it solely manages the accounts. It would be comparatively high in Partnership. 4. Duration of Business Operation The duration of a sole proprietorship would be uncertain as it depends on the stability of sole owner and operator. While in partnership, it will be based on the desire and capacity of the partners. 5. Decision Making In Sole Proprietorship, people can decide quickly and Partnership, there would always be delay in decision-making because it always depends on the decision and plans of the partners. Source: https://keydifferences.com/difference-between-sole-proprietorship-and-partnership.html |