The major difference between a sole proprietorship and a partnership is on the basis of the number of the owner of the business. in the sole proprietorship, there is only one owner But In the Partnership, there is a minimum of two persons(owners) are mandatory. So now we have to know the meaning of both terms in brief. So, the meaning of both terms are explained below: –
Meaning of Sole Proprietorship: –
In Sole Proprietorship, there is only one owner, he has all the right of decision-making for the business and has to perform all the management work alone. He will take benefits of all the profit earned by the business and have to bear the amount of loss in any financial year. The owner will have to pay all the liability of the business alone. It is the oldest form of Business and It is very easy to start or meet all the legal requirements as compared with the partnership.
Examples: –
- Raju Grocery Store
- Aman Furniture House.
- Etc.
Meaning of Partnership: –
The Partnership is one of the types of business in which two or more persons/businesses make a formal agreement between them of sharing business ownership, profits/Losses, responsibilities, and duties of the business. They also help each other in all operational activities of the business i.e. Decision making, Forecasting, and increasing the number of partners, etc.
In the Partnerships, the share of ownership will be distributed to the new partner as per the current market valuation of the business. The Market valuation includes a number of factors i.e. the market share of the product, customer loyalty, and many more.
For Examples: –
- Ides and Vodafone
- Reliance Jio and Facebook.
- Red bull and Go Pro
- Maruti Suzuki
To know more in the detail, please check out the following link:
What is Partnership – Meaning and its Types
3. Chart of Differences: –
The difference between a sole proprietorship and a partnership is shown in the following chat.
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Basis of Difference |
Sole Proprietorship |
Partnership |
|
Meaning |
In Sole Proprietorship, there is only one owner, he has all the right of decision-making for the business and has to perform all the management work alone. | The Partnership is one of the types of business in which two or more persons/businesses make a formal agreement between them of sharing business ownership, profits/Losses, responsibilities, and duties of the business. |
|
Minimum Number of Member |
There is only one minimum number of members is required. | There are two minimum numbers of members are required. |
|
Governed by Act |
For this type of business, there is no such act is available. | The Partnership Act 1932 |
|
Managed By |
This type of business is managed by only one person. It means by is the owner. | This type of business can be managed by all the partners. |
|
Registration |
No such requirement. | It depends on partners. If they wanna register their firm then they can. |
|
Share of Profit/Loss |
All profit is enjoyed by the owner only and all loss will bear by the owner. | All profit is distributed as per the partnership agreement (partnership Deed). |
|
Decision Making |
Because in this type of business there is only one owner so he can take all the decisions on his own. | Because in this type of business there is a minimum of two owners(partners) so they have to take all the decision with the clear consent of both. |
|
Fund Raising |
In this type of Business, the owner can only raise funds by taking loans from others. | In this type of Business, the partners can raise funds by adding new partners in the firm for some percentage share of profit. |
Download the chart: –
If you want to download the chart please download the following image and PDF file:-
Chart of Difference between a sole proprietorship and a partnership
The conclusion of Difference: –
The major difference in both terms is on the basis of ownership. In the sole proprietorship, there is only one owner but there is a minimum of two numbers of partners are required in the partnership Firm.
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