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Sole Trading Concern |
Partnership Firm |
(1) Meaning |
Sole proprietorship is owned and controlled by one person. |
Partnership firm is owned and controlled by two or more persons called as ‘Partners’. |
(2) Formation |
Sole trading concern can be formed easily. It is started as soon as the owner decides. |
Partnership firm is formed by an agreement between two or more persons. |
(3) Numbers of Members |
Sole trading concern is owned by a single person. |
Minimum 2 members are needed for starting business. The maximum number is 50. |
(4) Registration |
There is no need for registration of sole trading concern |
A partnership firm may or may not be registered. However, it is always desirable for the firm to be registered. It is compulsory in Maharashtra. |
(5) Secrecy |
It is possible to have maximum business secrecy. |
Secrecy is shared among all the partners. |
(6) Liability |
Liability of a sole trader is unlimited |
Liability of a partner is unlimited, joint and several. |
(7) Management |
The sole trader looks after management of business. He is manager of the business. |
All partners take part in management of the firm according to their skills. |
(8) Capital |
The entire capital is contributed by the sole trader, comparatively limited. |
Partners contribute capital to the firm, comparatively more. |
(9) Act/Law |
There is no special Act governing the Sole Trading concern. |
Partnerships are governed by the Indian Partnership Act, 1932. |
(10) Sharing of Profit |
The sole trader alone enjoys all the profits of business. |
Partners share the profits of business as per the ratio given in the agreement. |
(11) Risk |
In this form of business organization, the risk is assumed by sole trader alone. |
In partnership firm, the risk is shared by all the partners. |
(12) Disputes |
There is no room for disputes among owners, as there is only a single owner. |
There can be disputes among partners. |