Question

Distinguish between.

Sole Trading Concern and Partnership Firm.

Answer 1

Points	Sole Trading Concern	Partnership Firm
1. Meaning	A sole proprietorship is owned and controlled by one person.	A partnership firm is owned and controlled by two or more persons called ‘Partners’.
2. Formation	Sole trading concern can be formed easily. It is started as soon as the owner decides.	A partnership firm is formed by an agreement between two or more persons.
3. Number of members	The sole trading concern is owned by a single person.	Minimum 2 members are needed for starting a 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	The liability of a partner is unlimited, joint, and several.
7. Management	The sole trader looks after the management of the business. He is the manager of the business.	All partners take part in the 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 the business.	Partners share the profits of the business as per the ratio given in the agreement.
11. Risk	In this form of business organization, the risk is assumed by the sole trader alone.	In the partnership firms, 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.