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Definition
| is owned by a single individualWhen you are planning to do business with a sole proprietorship, bear in mind that since a single individual owns a sole proprietorship, one person makes all the decisions and does not have to contend with a legal department to approve contracts. The owner can only use personal funds, although he may have separate savings and checking accounts for the business. Also, it may be difficult for a sole proprietor to obtain loans so money may be tight. If a sole proprietor were to die, the business would probably end. |
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Sole Proprietorship
Legal Identity |
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Definition
| is not legally differentiated from the owner and is not usually required to register as a businessA sole proprietor is not legally differentiated from the business, regardless of whether the business bears his name or a fictitious name, and does not have to meet many requirements to start a business. Since the business is not considered a legal entity, it is the owner who is sued rather than the business. |
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Sole Proprietorship
Registration |
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| must be registered as a business if it operates under a fictitious nameA sole proprietorship operating under a name other than the name of the owner is considered to be operating under a fictitious name. The kinds of services and supplies that might be provided by a sole proprietorship and require licensure include healthcare services, the provision of food and drink, childcare, and financial services. State statutory law, established by the state legislature, governs sole proprietorships, like partnerships, franchises, and corporations. |
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Sole Proprietorship
Provides Services |
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| must be registered as a business if it provides services or supplies requiring licensureWhen sole proprietorships are involved in the sale of products, these sales are governed by the state Uniform Commercial Code (UCC) when the buyer and seller are within the same state and by the federal UCC when the buyer and seller are in different states. |
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Definition
The following criteria are used to determine partnership status. A partnership:
* is an independent legal entity
* has two or more individual or corporate owners who are partners
* is formed under a verbal or written agreement by the partners
* has partners who share profits or losses
* has partners who share labor or expertise. |
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| As these synonyms imply, partnerships are a combination of the talents of several people. In a partnership, two or more people agree to combine their money, ideas, skills, and efforts and then share the resulting successes or failures. Partnerships are as close to a family as any business formation can be. State statutory law, established by the state legislature, governs partnerships, like sole proprietors, franchises, and corporations. |
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The Criteria That Determine PartnershipsPartnerships involve multiple owners of a business working together toward the success of the company. According to Merriam-Webster's Collegiate Thesaurus, synonyms for partnership are "association, affiliation, alliance, cahoots, combination, conjunction, connection, hookup, tie-up, and togetherness."
As these synonyms imply, partnerships are a combination of the talents of several people. In a partnership, two or more people agree to combine their money, ideas, skills, and efforts and then share the resulting successes or failures. Partnerships are as close to a family as any business formation can be. State statutory law, established by the state legislature, governs partnerships, like sole proprietors, franchises, and corporations.
The following criteria are used to determine partnership status. A partnership:
* is an independent legal entity
* has two or more individual or corporate owners who are partners
* is formed under a verbal or written agreement by the partners
* has partners who share profits or losses
* has partners who share labor or expertise.
A partnership needs to be registered with the Office of the Secretary of State. Partners are responsible for their respective parts of profits and losses, despite the fact that the partnership has its own legal identity. Partners of a partnership may be individuals, acting on their own behalf, or corporations, acting for the benefit of the shareholders who own them. The partnership is based upon a partnership agreement, which may be explicit or implied and sets out how the organization will operate. |
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The agreement includes the percent of the profits or losses that will be applied to each partner and how labor or expertise will be shared.
Partnerships are an amalgam of sole proprietorships (small businesses with single owners) and corporations. The partnership agreement determines how business decisions, whether by majority or unanimous consent, will be made. |
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| Partnerships vs Sole Proprietorships |
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| Partnerships differ from sole proprietorships in that partners share all profits and liabilities based on their distributive share, the share they have agreed to. |
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| Partnerships vs. Corporations |
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| Partnerships differ from corporations in that they usually have multiple owners who share all the profits and losses. |
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| Limited partnerships have general partners who share knowledge and skills, just like all the partners in general partnerships. In limited partnerships, however, limited partners cannot be involved in any management tasks. Limited partners are more like shareholders of a general business corporation in that they only contribute money or make other valuable financial contributions. The percentage of limited partners' losses or gains can never be greater than the value of their contributions. |
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