Question

Distinguish between a partnership and a sole proprietorship.

Answer 1

	Basis of Distinction	Sole Proprietorship	Partnership
1.	Number of owners	It is owned and managed by a single person.	It consists of two or more persons acting as partners.
2.	Agreement	No formal Agreement is required.	Agreement and registration are essential for forming a partnership firm.
3.	Division of profits/loss	All profits belong to the sole proprietor.	Profits and losses are shared among partners in an agreed ratio.
4.	Implied agency	No implied agency exists.	Each partner is an implied agent of the firm, responsible for acts done on behalf of the partnership.
5.	Ownership and control	Not shared.	Shared by partners.
6.	Secrecy	Business affairs are completely secret to the owner.	Some business secrets are shared among partners.
7.	Continuity of business	Business continuity depends on the proprietor’s life.	Partnerships may have greater continuity due to the presence of multiple partners.
8.	Coordination	No problem of coordination due to a single owner.	Coordination between partners is required.