Differences between sole proprietor and partnernetship(Accounting Homework)

The business sole proprietorship is the simplest and most common forum of business organization. Legally and for tax purposes the individual owner is the business. The liabilities and profits are personal to the owner. The legal of doing business as a business partnership comes into existence when there’s an association of more than one person. Unlike sole proprietorship, the liabilities and profits are shared among partner. There are more differences between sole proprietorship and partnership I had picked to be discussed here which are controlling, liability, taxes and administration.

In the term of “controlling”, sole proprietor has total control of business and complete share of profits. Meanwhile for partnership, management and profits shared between partners per the terms of the partnership agreement. Back to sole proprietor, the assets and liabilities of him/her will pass to his or her estate, but often the expertise and knowledge of the business usually die with the sole proprietor. Upon the death, business can be arranged to be transferred to a family member or anyone from will written. Meanwhile, for partnership, interest in it cannot be transferred without the consent of the other partner. Death or withdrawal of any partner dissolves the partnership.

Secondly, we talk about “liability”. In sole proprietorship, all of the personal and business assets are at risk. The unlimited liability is the greatest disadvantages of this type business. Conversely, for partnership, partners are generally liable for obligation of General of partnership and tort damages incurred by other partners. In order to limit the liability of a partner, such entities often elect to be treated filing a certificate with the Secretary of State.

In addition, we move towards “taxes”. Tax reported on Sole proprietor’s tax form. As said, this kind of business form is the simplest business for tax purposes. Unlike sole proprietorship, partnerships are passing through entities for tax purposes. The partnership itself does not pay taxes. In other words, each partner is taxed directly upon his or her share of profits.

Administrative are not a requirement for both sole proprietor and partnership. By all mean, sole proprietor obtaining business license and registering trade name but partnership obtaining proper licenses and permits.