This article will help you to learn about the difference between partnership and sole tradership.
Difference between Partnership and Sole Tradership
Partnership
1. Act:
Partnership is formed under Indian Partnership Act, 1932.
2. Number of Members:
ADVERTISEMENTS:
In partnership, minimum number of members is two and maximum is 20 and 10 for banking business.
3. Secrecy:
In partnership, all the partners share the secrets of the business and there is a possibility of their leakage to the outsiders.
4. Capital:
ADVERTISEMENTS:
In partnership, capital is contributed by all the partners.
5. Risk:
In partnership, all the partners join together to bear the risk of the business jointly and severally.
6. Registration:
ADVERTISEMENTS:
The registration of partnership is not compulsory. It may be registered under the Indian Partnership Act, 1932.
7. Distribution of Profit and Loss:
In partnership, profit or loss is distributed among the partners equally.
8. Agreement:
ADVERTISEMENTS:
Partnership is the result of an agreement between the partners.
9. Management:
In partnership, management is vested in all the partners which may be distributed on definite lines.
10. Area of Operation:
ADVERTISEMENTS:
The area of operation of partnership is relatively wide.
Sole Tradership
1. Act:
There is no separate Act for sole tradership. It results from the business decision of an individual.
2. Number of Members:
ADVERTISEMENTS:
The Sole tradership is owned and controlled by an individual.
3. Secrecy:
In Sole tradership, only the proprietor has the secrets of the business and there is no chance of leakage of secrets of the business.
4. Capital:
ADVERTISEMENTS:
In sole tradership, capital is contributed by the owner only.
5. Risk:
In sole tradership, the entire risk of the business is borne by the sole owner.
6. Registration:
There is no provision for the registration of sole tradership.
7. Distribution of Profit and Loss:
ADVERTISEMENTS:
In sole proprietorship, the owner bears all the loss and is the master of all the profits.
8. Agreement:
No agreement is required for sole proprietorship.
9. Management:
A sole proprietary business is controlled and managed by the sole proprietor.
10. Area of Operation:
ADVERTISEMENTS:
The area of operation of sole proprietorship is limited.