1. Ownership Structure

Sole Proprietorship

• Owned and managed by a single individual
  
• The owner assumes full control and responsibility
  
• Cannot legally include partners without changing the business structure
  
• Best suited for individuals running small or personal businesses
  

Partnership

• Owned by two or more individuals who agree to share ownership
  
• Partners may contribute money, property, labor, or skills
  
• A partnership agreement usually outlines ownership proportions and roles
  
• Suitable for joint ventures or shared business goals
  

2. Decision-Making and Control

Sole Proprietorship

• The owner makes all business decisions independently
  
• Fast and flexible in operations due to single-person control
  
• No need for consultation or consent from others
  

Partnership

• Decisions are made jointly by the partners
  
• Requires consensus or majority (based on the partnership deed) for major decisions
  
• Disagreements can delay actions or create conflicts
  

3. Liability

Sole Proprietorship

• The owner has unlimited personal liability
  
• Personal assets are at risk for all business debts and obligations
  
• The business and the owner are the same in the eyes of the law
  

Partnership

• Unlimited liability applies to all partners (in general partnerships)
  
• Each partner is jointly and severally liable for business obligations
  
• Actions of one partner can bind the others legally and financially
  

4. Legal Identity and Registration

Sole Proprietorship

• Not a separate legal entity from the owner
  
• Registration is usually not required, though local licenses may apply
  
• Operates under the owner’s name or a trade name
  

Partnership

• Also not a separate legal entity, but considered distinct from partners for some legal matters
  
• Can be registered or unregistered under the Indian Partnership Act, 1932 (or similar local laws)
  
• A partnership deed formalizes the terms, roles, and profit-sharing
  

5. Profit Sharing and Taxation

Sole Proprietorship

• All profits belong to the sole owner
  
• Income is taxed as part of the owner’s personal income
  

Partnership

• Profits are divided among partners as per the agreed ratio
  
• In registered partnerships, the firm is taxed separately, and partners are taxed individually on their share
  
• Allows tax planning through income division among partners