What is the key distinguishing factor between a Sole Proprietorship and a Partnership?

The key distinguishing factor between a Sole Proprietorship and a Partnership is indeed the number of owners. A Sole Proprietorship is owned and operated by a single individual, meaning all profits, responsibilities, and liabilities fall on that one person. In contrast, a Partnership involves two or more individuals who come together to operate a business, sharing responsibilities, profits, and liabilities. This difference in ownership structure fundamentally influences how the business is managed, taxed, and how liability is handled.

While other factors like type of business structure, tax implications, and liability protection are also important, the primary distinction concerning the basic nature and formation of these entities lies in the number of owners involved. Understanding this concept helps clarify how businesses are organized and the implications that come with each structure.