Difference between Sole-proprietor, Parnership, and Joint stock company

Share on facebook
Share on twitter
Share on linkedin

Forms of business conducting a business is one of the most basic concepts that business students learn. It is also known as fundamental of business studies. Businesses are formed around their management structures and evolve around them as well. Mosly these forms of businesses are decided at the coception of business by the investors, but changes can always be made. There are three generally used forms of businesses described below.


In sole-proprietorship the owner and manager are one person. The business has no legal identity in most countries. However, owner is fully liable to third parties dealing with the business. The sole owner/ manager is the principle debtor to any such party that may come in contract with him Although this form of business may not be required to be registered by governments in general, but some laws are exception to this rule such as: Copyrights, Trademarks, & Taxation etc.

Features of Sole-proprietorship:

  • Single Ownership and Management.
  • Little legal Requirements.
  • Unlimited Liability.
  • Business and owner are legally bound together.

Partnership Firm

Partnership is the association betweem two or more person who have agreed to carrying on a business together and to share in profits and losses of such business either equally or as me agreeg among the partners. The partners are bound with each other by an agreement calles partnership deed. In many countries partnership deed is required to be registered with legal authorities. Liability of partners is unlimited to third parties, but limited liability partnerships are also in affect now.

Features of Partnership Firm:

  • Two or more persons.
  • Based on legal agreement. (Express or Implied)
  • Liable jointly and also severally.
  • Sharing of profits and losses.

Joint Stock Company.

It is a legal business entity that comes in effect by corporate laws. A company is owned by shareholders who own share capital of a company. Shares are part of capital investment, Shares have nominal value which accumelates total capital of a company. A company is mangaed by Directors who are elected by Shareholders of the company. Liability of shareholders is limited to the amount of investment they have made in the company. A company is a seprate legal person called doctrine of corporate personality, and it continues to exists even after its ownership changes this concept is called perpetual accession.

  • Limited Liability.
  • Seprate legal Personality.
  • Perpetual succession.

You May also Like