The sole trader
The difference between companies and partnerships
1 Most business enterprises fall under one of three basic categories: the sole proprietorship, the partnership and the company. For accounting purposes they differ principally in the composition of owner(s)' equity and in the distribution of profit.
2 Accounting principles and procedures are relevant to all business activities, regardless of the type of the entity or the form of the enterprise within which the activity is conducted
THE SOLE TRADER
3 The individual wishing to start his own business will not encounter too many obstacles in his path. The sole prerequisite in most cases is simply the acquisition of a licence. Any one wishing to render professional services, must also comply with the conditions of admission set by the professional body concerned.
4 Having obtained the necessary licence, the individual may commence business immediately. He is the sole decision maker, has the right to all profits, and is personally responsible for all the enterprise's obligations. He is moreover the sole owner and possessor of the assets concerned.
5 Regarding owner's equity in the sole proprietorship, it is composed of the capital he has paid in, plus profits earned, and less any losses suffered and any amounts he may have withdrawn from the enterprise.
6 In Zimbabwe a partnership is a legal relationship created in consequence of an agreement between two or more, but not more than 20 persons. According to this agreement, each person contributes to a lawful enterprise, the purpose of which is to make a profit to be divided among the partners. The prerequisites therefore, essential for the creation of a partnership are the following:
There must be a valid agreement,
According to which each partner contributes something,