The difference between Sole proprietorship and Partnership is related to the members and the formation. In Sole proprietorship, only one owner is needed to start the business. On the other side, a partnership requires at least two members to start or commence the business.
Meaning Sole Proprietorship?
The business which is owned and managed by a single person is called as a sole proprietorship. In other words, it is a one-man army because the owner of this business is having overall control over all the activities. This type of business is having very less legal formalities as compared to other types of businesses (partnership, joint-stock companies) etc.
Definitions of Sole Proprietorship :
Sole trader business is a type of business unit one where one person is solely responsible for providing the capital, for bearing the risk and for the management of the business.
The sole proprietorship is the supreme judge of all matters pertaining to his business subject only to general laws of the land and to such special legislation as may affect his particular line of business.
-Kimball and Kimball
Meaning of Partnership?
The meaning of partnership is an association of two or more persons who are jointly run the business with the aim to earn a profit. In partnership, partners agree to share the profit as well as loss in the business. This type of business removes the problem of a sole proprietorship. The partnership firm of business is governed by the Indian Partnership Act 1932.
Definition of partnership:
The partnership is the relation between two or more persons who have agreed to share the profits of the business carried on by all or any of them acting for all.
-The Indian Partnership Act, 1932
The Chart of difference between Sole Proprietorship and Partnership:
Points of differences
|Meaning||The business which is owned and managed by a single person is called as a sole proprietorship.||The meaning of partnership is an association of two or more persons who are jointly run the business with the aim to earn a profit|
|Formation||The sole proprietorship is very easy to form and having very less legal formalities.||The partnership is formed by the agreement between all the partners.|
|Liability||The liability is unlimited under the sole proprietorship and owner is a person who manages and pays all the debts alone.||The liability of partners is unlimited under the partnership.|
All the business operations are managed by the owner and the owner takes all major decisions of the business.
|All the business operations are managed by all the partners.|
|Continuity||Sole proprietorship can’t exist without the owner.||A partnership firm is more stable as compared to the sole proprietorship. This type of business can be run by other partners even after the death of any partner.|
|Profit||All the profit is in the hands of the owner of the business.||In a partnership firm, profit is distributed between the partners according to the agreement or partnership deed.|
|Secrecy of the business||In a sole proprietorship, secrets of the business do not disclose to any other person.||In partnership, business secrets are shared among all the partners.|
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Thus, the sole proprietorship business can’t exist without the owner. In this business, all activities are managed by the owner and he takes all major decisions of the business. On the other side, a partnership firm is more stable as compared to the sole proprietorship. This type of business can be run by other partners even after the death of any partner.
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