Comparison of Sole Trader, Partnership, and Company

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Title Page
Name of the student
Student ID

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Contents
Part A – Comparison amid Sole trader sip, partnership and company............................................3
Part B...............................................................................................................................................4
I. Contracts between partners and outsiders - Liability of Partners.........................................4
II. Contracts between Individuals in a company with the outsiders - Liability of individuals. 5
Part C...............................................................................................................................................6
I. Duties of the partners in the partnership firm.......................................................................6
II. Duties of the company officers and directors.......................................................................7

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Part A – Comparison amid Sole trader sip, partnership and company.
When a sole person is responsible for the set up, working and administration of a business and is
liable for its profits/losses, then, the business structure is a sole trader sip1. When two or person
carries on business for profit motive then it is a partnership form of business2. And when a
business has a separate legal entity in law then it is a company3.
However, the set up, administration and administrative burden are different.
Set up
One of the easiest business to establish is a sole trader hip. The trader has to first decide the name
of the business and start with its conduct. It is necessary to open a bank account and the fees
depend upon the kind of bank account selected by the sole trader.
In partnership, the partners must first draft a partnership agreement. Normally partnership can be
created by just carrying on the business but it is advisable to formulate an agreement which
defines the scope of the partnership. A bank account must be created in the name of the firm.4
But, in company, a name must be decided, constitution must be framed and the duties of the
office bearers should be decided. The approval of the office bearers must be sought. A registered
office must be set up.
So, the set up of company is most cumbersome.
Administrative cost
The Administrative cost of the sole trader includes payment of salary to himself as an employee.
The trader has to bear own liabilities, pay superannuation contributions and workers'
compensation insurance.
In partnership, the cost is to be borne by the partners for the effective administration and includes
the payment of salary and opening of bank account.
For a company, a bank account must be opened and adequate fees should be paid. For the name
registration cost is to be borne. Salary to be paid to the office bearers and dividend to the
shareholders. Records and reporting requirements are to be complying with.
It is the company which has to bear the highest administrative cost.
Administrative burden
1 Paul Latimer, Australian Business Law (CCH Australia Limited, 2012).
2 The Partnership Act, 1891 (Qld).
3 The Corporation Act, 2001 (Cth).
4Paul Larimer, n1.