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  • Writer's pictureMichael Chan - Bida & Co.

Comparison between sole proprietorships and partnerships

A sole proprietorship is a type of business owned and operated by a single person. The owner of a sole proprietorship is responsible for all aspects of the business and is entitled to all of its profits. Sole proprietorships are typically smaller and can make decisions more quickly, with lower operating costs.

A partnership is a business owned and operated by two or more partners. In a partnership, partners typically share the risks, responsibilities, and profits of the business. Partnerships are typically larger and can access more resources and funding, but decision-making requires collaboration between partners.

Here are some comparisons between sole proprietorships and partnerships:

Responsibility: The owner of a sole proprietorship is responsible for the business, while partners in a partnership share responsibility.

Funding: Sole proprietorships typically rely solely on the owner's funds, while partnerships can pool resources from multiple partners.

Taxes: Sole proprietors are only responsible for personal income tax, while partnerships must report income and distribute profits to partners.

Management: Sole proprietorships can make decisions more quickly, while partnerships require collaboration between partners.

Lifespan: Sole proprietorships are limited to the owner's lifetime, while partnerships can transfer ownership and continue to exist.

Overall, sole proprietorships are suitable for small businesses and individual entrepreneurs, while partnerships are suitable for businesses that require a larger amount of resources and funding.

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