Difference between Proprietorship and Partnership Firm for Startups

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Difference between Proprietorship and Partnership Firm for Startups: If you are going to start a new business, then you have to be careful that you have a right entity for your business. It is very important to make the right decision while incorporation of your business. You can incorporate your business as a Sole Proprietorship Firm, if there is only one owner of the firm, Sole Proprietorship Firm requires only person for incorporation of business whereas there are requirement of 2 or more partners to incorporate a Partnership Firm. This Article talks about the Sole Proprietorship and Partnership Firm and their differences. Sole Proprietorship Firm Sole Proprietorship Firm is the oldest forms of business where business incorporated by only one person so a Sole Proprietorship Firm can incorporate by only one person. There are no formal laws on Sole Proprietorship Firm and there is no formal registration required for Sole Proprietorship Firm. It is the best form of business for those who is alone owner in their business because he can take all decision of his business by himself. A Sole owner uses his experience, skills, knowledge, capital, and resources to run his business. If you want to register your firm then you can register with Udyog Aadhar, GST, PAN card, Trademark because there is no formal registration required for Sole Proprietorship Firm Registration so you can register your business with GST, Udyog Aadhar and PAN card. Registration with Udyog Aadhar will gives identity to your business and you can take benefits from the government after obtaining Udyog Aadhar. GST is also important registration for any business if their turnover is more than 20 lakh rupees and PAN card is also important for you because without it you cannot pay your taxes. Registration of firm will give you protection under the laws and you can avail your rights so you should register your Sole Proprietorship Firm. Partnership Firm A Partnership firm can be incorporated by two or more person and it is governed by partnership act. According to Partnership Act there is no requirement of minimum contribution from partners during incorporation of Partnership Firm and registration is not mandatory for Partnership Firm, it is optional, if you want to register your firm then you can register it under the Registrar of Firms. Registration will give you protection under the laws and there are many benefits of registration so you should register your partnership firm. Registration process is very simple; you have to follow below given steps

1. Choose your Firm name, and it should not be copied from others
2. Make a Partnership Deed, and this deed should be signed by all partners and it requires notary and stamp on it. This deed contains all the details of firm and partners.
3. Final Step is you have to register your Partnership Deed under Registrar of Firms.

Difference between Partnership Firm and Sole Proprietorship Firm There are many differences between both so here some differences are given below

• First difference is, in a Sole Proprietorship Firm it requires only person for incorporation whereas partnership firm requires 2 or more person for incorporation of Partnership Firm.
• Partnership Firm is governed by Partnership Act whereas there is no formal law on Sole Proprietorship Firm.
• Partnership Firm Registration is not mandatory but it is optional, if you want to register it then you can register your firm under Registrar of Firms whereas there is no formal registration required for Sole Proprietorship Firm.
• The sole proprietorship firm has only one owner, so the entire responsibility is of the owner, while there are two and more than two partners in the partnership firm so it is easy for them to share the responsibility. So in a partnership firm, partners can share the burden of responsibility.
• Decision making is easy in a Sole Partnership whereas it is difficult to take decision as there are 2 or more partners.
• It is easy to bring the resources into the partnership firm because every partner is bringing their skills, capital, and experience whereas it is more difficult to bring resources in Sole Proprietorship Firm as there is only one person in the Firm.
• In a Partnership Firm a partner can limit his risk whereas in a Sole Proprietorship, owner cannot limit his risk.
• In the case of death of Owner, the Sole Proprietorship will be dissolved because it has only one owner, whereas in case of Partnership firm, partners can carry the business.

Conclusion As you can see in above article that there are many differences between the Sole Proprietorship Firm and Partnership Firm so you have to choose wisely for your startup. Registration of both is important because registration will give you protection under Indian Law and in case of failure of registration you may have to face many legal problems.