Question

Differentiate between a Partnership firm and a Sole Proprietorship with three points.

Hint:

A \textbf{Sole Proprietorship} has \textbf{one owner}, while a \textbf{Partnership Firm} has \textbf{two or more owners}. In partnerships, profits and responsibilities are shared among partners.

Answer 1

Concept:
A Sole Proprietorship and a Partnership are two common forms of business organization. They differ mainly in terms of ownership, management, and distribution of profits. Understanding these differences helps in selecting the appropriate form of business for different situations.

Difference between Sole Proprietorship and Partnership Firm:

Basis of Difference	Sole Proprietorship	Partnership Firm
Ownership	Owned and controlled by a single individual.	Owned by two or more persons who agree to run the business together.
Management and Decision Making	The owner makes all decisions and manages the business alone.	All partners share responsibility in managing the business and making decisions.
Distribution of Profits and Losses	The entire profit or loss is borne by the single owner.	Profits and losses are shared among partners according to the partnership agreement.

Explanation:

Sole Proprietorship:
A sole proprietorship is the simplest form of business organization where one person owns, manages, and controls the entire business. The owner bears all risks and enjoys all profits.

Partnership Firm:
A partnership firm is formed when two or more individuals agree to carry on a business together. They share capital, responsibilities, risks, and profits according to the partnership agreement.