Sole proprietorship vs Partnership

Sole proprietorship vs Partnership

It won’t be an easy decision to start a business without proper planning. Basically small business owners face a lot of problems when they start thinking of business. What they bring to mind first is the way to start the work with help in their venture. This ultimately lands on whether they want to pursue a sole proprietorship or a partnership. Looking forward to some common differences stands on.

  • Sole proprietorship is an unincorporated entity which doesn’t exist apart from its sole owner. The partnership is two or more people agreeing to operate business for the purpose of profit.
  • With partnership firm governed by the partnership act and a sole proprietorship is not governed by any of the specific statutory body.

When it comes to sole proprietorship, the owner is entitled to all profits of the business but it also personally liable for all kinds of obligations. But if you talk about partnership each partner is jointly and severally liable for all the obligations of the partnership.

Defining sole proprietorship and partnership

Sole Proprietorship is defined as a type of business in which one person serves as an owner and operator. But partnership bears two or more people who conduct business operations and shares in the losses and profits. The sole proprietor must hold on business liabilities alone while in a partnership liability is shared. When it comes to the raising capital, the scope is limited with sole proprietorship and is relatively high with partnerships. All about the partnership are also more regulated than sole proprietorships. The Indian partnership act of the 1932 lays out specific regulations for partnerships, where there is no statute for sole proprietors. Speaking of requirements, registration for a sole proprietorship isn’t necessary and is up to the partners in a partnership.

A sole proprietor is also known as a sole trader and is a person who owns as well as runs the business. This is even called a sole trade ship. The fewer people you have running a business, typically the easier it is to run. It is by far the simplest and quite convenient form of business. Best part above all is there is no requirement of legal documents when you are setting up sole proprietorship. This just starts up automatically with the first business transaction.


Discovering more about partnership is a kind of business legal structure formed by the agreement between two or more individuals to carry on a business. Every partner is a co-owner and each has invested in the business. A partnership is different from a corporation is not completely separate as an entity from the individual owners. In the sense it’s more similar to a sole proprietorship because in both the businesses it’s not separate from the owners, for liability purposes. Also there are many types of structures under the rule of partnership. In partnership one don’t need to pay taxes on any profits earner and the owner are not separately taxed for being self employed.

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