Difference Between Sole Proprietorship and Company

Introduction 

When starting a new business it is important to choose the most appropriate structure for their venture. Two popular structures include Company and Sole Proprietorship where Companies are considered as a separate legal entity and the sole proprietor & the business considered as a single entity. Each business structure has its own specific advantages and unique features. This blog will provide you a detailed comparison of the two structures - Company vs Sole Proprietorship 

What is a Company? 

A Company is a legal entity formed by one or more individuals to engage in and operate a business. A company is majorly divided into two parts such as a Private Limited Company and a Public Limited Company. 

A private limited company is a business company established by private stakeholders. A private limited Company Registration comes under Companies Act, 2013 and the objective of the company is defined under memorandum of association. In India, a private limited company is the most popular type of business structure due to its various advantages, including limited liability protection, ease of formation and maintenance, and separate legal entity status.

What is a Sole Proprietorship? 

A sole proprietor business includes only one person who exercises complete control over its functioning and could exist as long as its sole owner exists. Sole Proprietorship Firm Registration in India is one of the most common forms of business which is adopted by many business owners who run retail shops, traders, wholesalers, MSME manufacturers, etc. Sole proprietorship is the most affordable and less compliance-intensive compared to other forms of business registrations.

Difference Between Company and Sole Proprietorship 

Following is the detailed table of difference between company and Sole Proprietorship: 

Conclusion 

There is a lot of difference between a company and sole proprietorship so it is advised to carefully understand the difference between company and sole proprietorship. Where companies have a lot of compliances, sole proprietorship is limited to personal funds. On the other hand companies are perpetual and can be continued even after the death of the owner, sole proprietorships are flexible to start or end. In simple words both the structures have some pros and cons.

Frequently Asked Questions (FAQs)

1) What is the difference between Company and sole proprietorship on the basis of Ownership?

The company is owned by its shareholders whereas sole proprietorship is owned by a single individual. 

2) Can a Sole proprietorship continue if the owner dies? 

No, if the owner of sole proprietorship dies, it will come to an end while the company can continue if the owner dies.

3) Is a company a Sole Proprietorship? 

No, a company is not a sole proprietorship. A company is owned by its shareholders while a sole proprietorship is owned by the owner only.

4) What is the difference in profit distribution in a Company or Sole Proprietorship?

The profit is distributed among the shareholders in a company while the proprietor solemnly enjoys the profit in sole proprietorship.