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How does a partnership differ from a sole proprietorship?

Anyone who has worked as an organization's employee has likely had dreams of being his or her own boss. While most people keep their day jobs, some New Jersey residents take the risk of starting up their own business enterprises. Opening a new business has its challenges, not the least of which is deciding how to structure that business in terms of ownership.

There are several common formats that new businesses can use for their structures, and according to the Small Business Administration, sole proprietorship is the most common format of all. In a sole proprietorship, one person owns the entity. That person is solely responsible for running the business as well as paying the business's debts.

A business may also be owned and operated by multiple individuals in a partnership. Though how a partnership is organized can depend on an individual business, in any partnership the responsibilities of running the entity are shared. A partnership may involve two people or many more. Partnerships and sole proprietorships are subject to different legal obligations, and business attorneys can discuss with interested parties the benefits and drawbacks of each format for their clients' business needs.

There are a variety of other ways that a business may be structured, including but not limited to as a corporation, a cooperative, or as a limited liability company. For every different business type that exists, different legal considerations should be made to determine if the structure is a good fit for the entity. Although readers of this blog may find the information contained in it informative, its content should not be read as specific legal advice. Individual guidance on business formation and planning may be sought out from legal professionals practicing in the readers' geographic areas.

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