comparison

	Sole Trader	Partnerships	Private Limited Companies
*Formation*	A sole trader can commence business after paying a registration fee.	~A partnership is created by an agreement between the partners. The agreement need not be in writing, although, in practice, many partnerships will have written articles which are adopted by all the partners. ~No fees are payable other than those which must be paid by all business under Business Registration Ordinance.	A company is formed by registration under Companies Ordinance and must therefore comply with a number of formalities, including the preparation of a written memorandum and articles of association and the payment of a registration fee.
*Legal status*	No separate legal identity, it is treated as mere an extension of the proprietor.	A partnership is merely an extension of its partners and does not have a separate legal identity. ~All property belongs to the partners ~Every partner is jointly and severally liable on the firm's debts and contracts. ~The continuation of the firm will depend on the terms of the partnership agreement but, if no agreement to the contrary is made, the partnership will be dissolved on the death or bankruptcy of a partner. ~While the firm's name can be used in any legal action, the partners will be jointly and severally liable. ~A partner cannot contract with the firm	A company has a separate legal identity and is therefore independent of its owners. This has the following effects: ~All property belongs to and is vested in the company. ~A company can make contracts and incur debts on its own behalf. ~Unless the company is wound up, it has perpetual succession. ~A company can sue and be sued in its own name. ~A company can contract with its members and can sue and be sued on such contracts.
*Transfer of ownership*	The ownership of a sole trader cannot be changed. It is treated the same as the proprietor himself.	New partners cannot be introduced unless all the partners agree to the change. A partnership is therefore necessarily more static.	Shares in public company can be freely transferred and the ownership of the company can change hand easily. Private companies are more restricted since they must impose certain limitations on share transfers in their articles, but ownership can nevertheless change comparatively easily.
*Size*	1 person	2 - 20 persons	2 - 50 persons (excluding members)
*Management*	A sole trader is run by the proprietor solely.	A partnership is run by the partners on democratic lines, subject to the terms of the partnership agreement. Usually all partners will be fully involved in the management process.	Members of a company have no automatic right to be involved in the management of the company unless they are elected directors, although they do have the right to vote on certain resolutions, including the appointment of the board. In practice, the owners of a small private company will often be the managers of the business as well.
*Liability*	The proprietor has unlimited liability. If the company becomes bankrupt, the proprietor must be liable for the debts.	Partners are jointly and severally liable for the debts of the firm, although it is possible for the liability of one or more partners to be limited. In such circumstances, however, the liability of at least one of the partners must remain unlimited.	The liability of the members of a company is limited to the amount (if any) unpaid on their shares.
*Agency*	The company is same as the proprietor.	A partner is an agent of the firm and may bind the partnership by his acts.	A member of a company is not an agent of the company unless he has a separate agency agreement.
*Borrowing powers*	A sole trader cannot borrow on debenture, nor can it create a floating charge.	A partnership cannot borrow on debenture, nor can it create a floating charge.	A company has greater facilities for borrowing since it can borrow on debenture. It can also create floating charges to secure its loans, thus making it a more attractive prospect to a potential lender.
*Formalities*	A sole trader is not bound by formalities as long as it carries business lawfully.	A partnership is not bound by formalities other than those which are self-imposed through a partnership agreement. In particular, it does not have to have an annual audit and its account is not required to be open for public inspection.	A company is subject to a number of formalities, including the requirement for an audit and the need to submit an annual return.
*Tax*	A sole trader is subject to profits tax at lower rate and the proprietor may apply for personal assessment.	A partnership is subject to profits tax at lower rate and each partner may apply for personal assessment.	A company is subject to profits tax and there is no right to personal assessment.
*Powers*	Not applicable	The partners specify the partnership's powers and these can be changed at will if all agree.	A company's powers are laid down in its memorandum and cannot be changed easily.
*Share capital*	Not applicable	A partnership is not governed by any regulations on the raising or maintenance of capital	A limited company is subject to provisions in the Companies Ordinance governing the raising and maintenance of its share capital.
*Arrangements with creditors*	A sole trader can make any arrangement with its creditors which the proprietor thinks fit.	A partnership can make any arrangement with its creditors which the partners think fit.	A company may make only those arrangements with its creditors which are authorized by the Companies Ordinance.
*Termination*	A sole trader can be dissolved by its proprietor.	A partnership can be dissolved by only one member.	A company cannot be wound up by only one member unless it can be proved by the court that it is just and equitable to do so.

P.35