Top Differences between the Sole Proprietorship and Partnership Firm.

Abstract

Sole Proprietorship and Partnership Firm 

The main difference lies in ownership and liability. One individual owns a sole proprietorship and has unlimited personal liability, while a partnership involves two or more owners who share liability.

Keywords 

Sole Proprietorship and Partnership Firm, 

Learning Outcomes

After undergoing this article you will be able to understand the difference between the sole proprietorship and partnership firm?

Overview

A sole proprietorship is a business owned and operated by one individual, offering complete control and liability, while a partnership involves two or more individuals who share ownership, profits, losses, and liabilities, requiring collaboration and shared decision-making. Let's understand the most important difference between sole proprietorship and partnership. 

Differences between the sole proprietorship and partnership firm

The differences between the sole proprietorship and partnership firm are as follows 

Sole Proprietorship	Partnership
Definition
It is a business model where an individual is an owner as well as the operator of the business.	It is a business model where two or more persons agree to carry on business and share profits and losses mutually.
Business act
Comes under no specific act	Governed by the Indian Partnership Act, 1932
Owner called as
Sole Proprietor	Individual members known as partners and collectively known as a firm.
Incorporation Required
Not required	Voluntary
Minimum Members
One	Two
Maximum Members
Only One	100
Freedom to operate
Decision-making rests with the proprietor only, hence full freedom to operate.	The decision needs to be mutually acceptable to all partners. A difference of opinion can arise and cause loss of business.
Liability
Rests with the proprietor only	Shared by partners of the firm
Finance
Scope of raising capital is limited.	Scope of raising capital is relatively high.

Conclusions

Business owners have the option of starting a business by themselves, known as a sole proprietorship, or developing a partnership with one or more other people. There are advantages to both options, but there are major differences to consider when choosing between the two.