Distinction between Sole Proprietorship and Partnership

A sole proprietorship differs from a partnership in the following respects.

1. Formation It can be formed at any time when proprietor so decides It can be formed by an agreement between two or more

competent persons

2.Specific regulation There is no specific regulation which governs sole proprietorship It is governed by the Indian partnership act, 1932.
3. Membership Only one member is required Minimum number of members

required is 2 and maximum limit

of is 10 in banking business firm

and 20 in other business firm

4. Extent of financial resources A sole proprietorship has limited financial resources A partnership has more financial resources due to pooling of financial resources of all its partners. This increases the scope for expansion and growth.
5. Extent of managerial skills A sole proprietorship has limited managerial skills A partnership has more managerial skills due to pooling

Skills of managerial skills of all its partners. This increase the scope for efficient management

6. Existence of business depends on The existence of the business depends upon the life of the owner The existence of business depends upon the life, insolvency and retirement of partners.
7. Business secrets Full secrecy is maintained Secrecy is shared by the partners
8. Sharing of profits Profits fully belong to owner and are not shared with any one Profits are shared by partners as per agreement
9. Sharing of risk All risks are assumed by the owner and are not shared with anyone Risks are shared by partners as per agreement.
10. Quickness in decision making Quickness decision are taken since he does not depend on others for decision making Decision making may take time since all partners in some matters & majority of partners in other matter have to participate in decision making.
11. Scope of reckless & hasty decisions There is more scope of reckless & nasty decisions since proprietor along takes the decisions There is less scope for reckless & hasty decisions since all partners or majority of the partners take the decision.