Differences between Sole Trader and Partnership

Sole Trader vs Partnership

The following are some of the differences between a Sole Trader and Partnership.

Sole Trader vs Partnership
Sole Trader vs Partnership

Point of Difference Sole Trader Partnership
1. Legal Formalities No legal formalities have to be followed for starting the business. Few legal formalities to be followed for starting the business.
2. Legislation It is not controlled by any legislation. It is regulated by Partnership Act, 1932.
3. No. of Members It is totally one man's business. There should be atleast two members. Maximum number of members is 20 in case of general business and 10 in case of Banking business.
4. Agreement It does not require any agreement as there is only one member. Agreement or Deed either in writing or oral is necessary.
5. Secrets Business secrets can be maintained. Business secrets cannot be maintained.
6. Capital Supply of capital is limited. More capital can be secured.
7. Decision There is no delay in making decisions. There might be delay in taking decisions due to difference of opinion among partners.
8. Risk Risk to be totally borne by one person. Risk is to be shared among the partners.
9. Management Inefficient management due to limited supply of skills. Collective skill of partners leads to efficient management.
10. Continuation of business Lack of children may lead to discontinuation of agreement. Partnership can be continued by renewal of agreement.
11. Distribution of profit Profit or loss belongs to the single owner. Profit or Loss is divided among the partners.