15 Key Difference Between Sole Proprietorship and Partnership

Thinking to start business having options of starting own business or getting partners for that? Might be thinking that is partnership better than sole proprietorship or sole tradership is better than partnership. Here are 15 key Difference Between Sole Proprietorship and Partnership to help you to take right decision considering your present conditions.

Both Personal business & Partnership have few similarities as they can be started with and without partnership deed, can be started and closed anytime with consent but differences are other side of coin. Possibly, advantages of partnership are better than sole proprietorship advantages or disadvantages of sole proprietorship are worst comparing to partnership  disadvantages

Difference Between Sole Proprietorship and Partnership

Sole Proprietorship
• Easy Formation
• One Owner
• No Contract Required
• Limited Capital
• Presence Required
• All Profit & Loss by One
• Easily Transferable
• Decision in one Hand
• Stable Business
• Everything is Secret
• Limited Ability
• All Expenses by One
• Easy Dissolution
Partnership Business
• Little Complicated Formation
• More than One Owner
• Legal Contract is Preferred
• More Capital Investment
• Can be away from Business
• Profit Loss Distributed in Partners
• Complex Transfership
• Multiple Heads to Decide
• Risk of Stability
• Secrets are Revealed
• Enhanced Ability
• Expenses are Shared
• Complex Dissolution

Business Formation

  • It is easy to form and simple to run. There is no legal formalities for the commencement of sole proprietorship business. It can be started within minutes
  • Partnership deed and such other legal documents are necessary for the formation of partnership. Every business activity, responsibilities, capital or profit sharing must be mentioned here. There are more than 27 important contents of partnership deed to note down

Number of Partners

  • In sole proprietorship there is no concept of more than one person.  Business is owned by one person only
  • There are at least two person in each type of partnership but no more than twenty in ordinary business and ten in banking. To have more partnership you need to switch to joint stock company


  • There is on concept of any contract due to one man. He/She has all decision powers
  • It is created by contract. Agreement is most important element for partnership. No contract means no partnership, it may be oral or written but recommended is written


  • As one man invests his amount into his business, capital volume remains limited
  • Capital is a contributed by two or more than partners. Therefore capital volume may be increased by admitting new partners

Personal Presence

  • Its management was to be conducted by one man only.  Therefore personal presence is compulsory. It won’t be managed without personally involving in proprietorship
  • This kind of business may be conducted by one or two partners only. Therefore personal presence of each partner is not necessary

Profit & Loss sharing

  • One man enjoys hundred percent profit of the business and if there is loss he has to sustain all the losses
  • Profit and loss are distributed among all the partner of the firm. In case of loss, each partner may not feel heavy burden

Rights Transfer

  • Sole proprietor may easily transfer his business without the consent of another person
  • One partner, cannot dispose off or transfer his business without the consent of all other partners

Power of Decision Making

  • One man is supreme authority of his business. Therefore he may take any action against any matter promptly
  • All the matters are decided by the mutual consultation. Therefore matters may not be disposed off promptly

Business Accountability

  • As all business is owned by one man he has not be obey any order. So there is no fear of being accountable to any one
  • As partners are accountable to one another, they have to keep up-to-date record and correct information in connection with their business

Expansion of Business

  • There are limited chances for the growth of business due to lack of capital and managerial abilities
  • There are more chances to expand the business volume due to large number of partners

Business Stability

  • There is no possibility of distribution due to one man. So this type of business may be run smoothly
  • There is always risk of dissolution due to misunderstanding and friction among the partners

Business Secrecy

  • Secrecy may be maintained in this form of organization on account of on man supervision
  • As every partner knows about the internal affairs of the business so there are great chances of leakage of the secrecy

Abilities to Work

  • One man cannot possess all types   of technical and administrative abilities
  • As there are number of partners so firm may enjoy the combined abilities of several heads

Expenses Distribution

  • There are minimum expenses to organize and operate this form of organization
  • Partners have to pay legal fees, registration fees and other expenses. Therefore it is costly organization comparatively.


  • This kind of business may be dissolved easily without any legal formalities
  • Partnership may not be dissolved without fulfillment of legal obligations

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