Comparison between Sole Proprietorship and Partnership
Comparison between Sole Proprietorship and Partnership
In the world, today business has become an essential sector of earning a living as it incorporates all the members of the community regardless of the social status and other gender bias issues. It is one of the fields that cannot be ignored as it absorbs an enormous number of people in the society and significantly contributes to the gross domestic product of the nation. It is an arising matter that job opportunities have deprived in the community and the young people are undergoing significant suffering on finding a productive career after completion of their involving courses. However, with maximum utilization of the natural resources and business skills, the problem of career ambiguity among the graduates and other millennials will be curbed not only in the nation but worldwide. Therefore, it is inevitable to learn about different types of business that are essential in career establishment among which sole proprietorship and partnership are familiar and straightforward types in the society. In this paper, partnership and exclusive proprietorship business ventures are compared and contrasted in a profound extent in consideration of their composition as well as functionality.
Why do many people end up jobless and frustrated even after undergoing through the challenging education system? It is right that the career opportunities are limited, but the facts remain that people must be creative and innovative to enhance proper survivability in the competitive universe. In education, people are taught and equipped with the knowledge and skills to be innovative and productive, but they fail to employ them in the real world hence their suffering (Storey 2016). Many graduates have been complaining about career unpreparedness in colleges and other tertiary level institutions. It is right that the education sector can be significantly blamed for not offering their services to the best but the fact about life today does not depend on the already established ideas as they are highly competitive. Studying the society, identifying the gap that requires being filled and coming up with the practical solution to the problem is the critical thing towards entrepreneurship.
First, is looking at the differences between the two types of prominent business ventures. Considering their composition, as the word sole proprietorship depicts it is built up by one individual while partnership comprises two people or more people with a written agreement to run that particular business together. In naming the company, the owner may merely choose his name or any other name of his interest regarding the type of the entity. On the different hand naming of the partnership, the entity must be considerate of all the members’ opinions. With a sole proprietorship, there are minimal requirements as it only requires legal licensing, the social security and other necessary permits (Gitman, et al 2015). With the partnership, apart from the license and legal authorization by the government, the shareholders have to come up with an agreement as well as drafting their components to which will be put in adherence in running the business.
When it comes to a decision making it is comfortable with the sole proprietorship entity as the owner will conclude according to his or her will while the case is different with the partnership as all the stakeholders must be involved. Shareholders are part and parcel of the business when it comes to determining any issues regarding the company, and they must come up to an agreement. In case of conflict or misunderstanding of the stakeholders, decisions cannot be made. The owner of the sole proprietorship caters for everything required in establishing the business regarding capital and labor among many other resources as are necessary for its efficient running. The sole proprietor runs the business in adherence to own rules and principles and is the one to determine the business success. The case is different with the partnership as the partners select the management panel that will be responsible for running the business activities and their proficiency determines the business success in achieving the short-term as well as long-term goals.
The other difference between the two types of business ventures regards capital establishment and profit sharing. With a sole proprietorship, the owner funds the business wholly from its startup stage and is the one responsible for the profits achieved at the end. On the other side, partners share the production and business establishment cost, and at the end, they share the benefits according to members shares in the business. Here the sole proprietor carries all the burden of establishing the company and that becomes the reason behind their simple nature depending on the owner’s capability. Most of this kind of entities are small and do not comply a large number of employees. With proper management, partnership business entities perform remarkably as their capital sources are to an extent firm compared to sole proprietorship ventures (Cooper, et al 2016). The act of a sole proprietor is experiencing difficulties such as illness and other financial constraints; the business can be negatively affected while with partnership personal hardships cannot significantly affect the company to a profound extent.
Furthermore, there exist various similarities between the sole proprietorship business entities and partnership ventures. These similarities include personal liability, formation, business name, and taxation. In consideration of personal accountability, in both the organizations the owners are personally responsible for the business obligations as well as the debts. For instance, they are reliable of the responsibilities brought on by other partners while working for the business and the employees in the production process. While one issued under these two business entities, the personal possessions such as house may be put under the complainant’s claims. In naming the business, both operate under the name of the owners to avoid additional registration. The legal names of the owners as indicated on the tax filings and other paperwork identifies the business entity in both.
In consideration of their formation, both sole proprietorships and partnerships are relatively common business ventures as they have a simple set up and usually, it is not necessary to register with the government business registrar. The sole proprietor starts doing the business as soon as the proprietorship is formed and the case is same with the partnership as it is built with immediate effect after the two individuals start doing business together. Both can start a business without paying the government filing fees that are related to another business type. The other similarity is that both the sole proprietorship and partnership pay only personal income tax and does not pay double taxes like other corporations which significantly include business income tax (Abraham, et al. 2017).
As discussed above, it is true that there exist some differences between a partnership and sole proprietorship, but they are both simple as well as they do not require much in registration and taxation. Therefore, it is recommended for the millennials to venture into such kind of business in the attempt to curb the threat of joblessness but instead creating more opportunities. Business involves identifying a viable opportunity, taking a risk and making maximum utilization of the available resources to fill the gap. Therefore, let us encourage the graduates and other people with entrepreneurship skills to venture into the business field as it will significantly boost the nation’s economy.
Abraham, K. G., Haltiwanger, J., Sandusky, K., & Spletzer, J. R. (2017, March). Measuring the gig economy: current knowledge and open issues. In IZA Labor Statistics Workshop “Changing Structure of Work.
Cooper, M., McClelland, J., Pearce, J., Prisinzano, R., Sullivan, J., Yagan, D., … & Zwick, E. (2016). Business in the United States: Who Owns It, and How Much Tax Do They Pay?. Tax Policy and the Economy, 30(1), 91-128.
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.
Storey, D. J. (2016). Understanding the small business sector. Routledge.