Corporate

8 Differences Between A Sole Proprietorship, Partnership and Company

 about 8 years ago   fadzel

How many types of businesses are there?


There are three types of business out there:


  1. There's a sole proprietorship...
  2. Then, there's your regular partnerships...
  3. And of course you've heard of companies..


So, what's the difference between these three?


Let's find out together in this simple table.

TYPE

  • SOLE PROPRIETORSHIP

    •
  • PARTNERSHIP
  • COMPANY


    • STRUCTURE

  • An individual doing his own business
  • Two or more people doing business for profit.

  • A legal entity separate from it's members


    • FORMATION

  • No need to be formed in writing

  • Can be formed orally or in writing
  • Must be formed in writing, through a Memorandum and Articles of Association.


    • REGISTRATION

  • Must be registered under the Registration of Business Act 1956
  • Must be registered with the SSM under the Registration of Business Act 1956

  • Must be registered with the SSM under the Companies Act 1956

    • MEMBERSHIP


  • There is only one person.
  • A maximum of 20 partners, unless it is a professional firm
  • No maximum number, unless it is a private company (50 members)


    • MANAGEMENT


  • The sole proprietor owns and manages the business himself


  • Partners are agents of the partnership and are generally entitled to manage the partnership firm


  • Company members are not its managers (directors) or agents


    • BORROWING POWER

  • Unrestricted borrowing powers
  • Unrestricted borrowing powers
  • Limited in borrowing, only for the purpose of its objective as stated in its Memorandum of Association


    • LIABILITY


  • Unlimited liability for the business debts

  • Unlimited liability for the business debts
  • Company members are not liable for the company's debts once they hold fully paid company shares.


    • DISSOLUTION

  • Can be dissolved informally
  • Can be dissolved informally
  • There must be a formal procedure, winding up and liquidation, in dissolving the company

    • I’m curious now...which of these business types you think you want to start?


    This article is for informational purposes only and should not be taken as legal advice. Every situation is unique and dependent on the facts (ie, the circumstances surrounding your individual case) so we recommend that you consult a lawyer before considering any further action. All articles have been scrutinized by a practicing lawyer to ensure accuracy.

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