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When starting a business, one of the most important decisions you’ll make is choosing the right legal structure. Two of the most common types of business structures are sole proprietorship and partnership. While both have their advantages and disadvantages, there are two main differences that set them apart.

1. Liability

One of the biggest differences between a sole proprietorship and a partnership is liability. In a sole proprietorship, the owner is personally responsible for all debts and legal issues related to the business. This means that if the business is sued or goes bankrupt, the owner’s personal assets are at risk.

On the other hand, in a partnership, the liability is shared among the partners. This means that each partner is responsible for their share of the business’s debts and legal issues. However, it’s important to note that in a general partnership, each partner is also jointly and severally liable for the entire partnership’s debts and legal issues. This means that if one partner can’t pay their share, the other partners may be held responsible.

2. Management and Control

Another key difference between a sole proprietorship and a partnership is management and control. In a sole proprietorship, the owner has complete control over all aspects of the business. They make all the decisions and are responsible for all the day-to-day operations.

In a partnership, the management and control are shared among the partners. This means that each partner has a say in the decision-making process and is responsible for their share of the work. However, it’s important to have a clear partnership agreement in place to avoid any misunderstandings or conflicts.

In conclusion, when deciding between a sole proprietorship and a partnership, it’s important to consider the differences in liability and management and control. While a sole proprietorship may offer more control, it also comes with more personal liability. A partnership may offer shared liability and decision-making, but it’s important to have a clear agreement in place.

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