Sole-properitorship

The example given is not a sole proprietorship but a partnership firm, wherein A had invested his capital and gets 50% share in profit and other two partners i.e. B and C get 25% each in the profit for their efforts in the firm. Why this is not a sole proprietorship becz in sole proprietorship form as you know the profit or loss remains with the sole proprietor only whereas here profit or loss is being shared in a specified ratio. So this is a Partnership Firm but without formal agreement amongst the partners.

If you want to treat it as a sole proprietorship then there cannot obviously be any agreement and B and C can get Salary (equivalent to their total 50% of profit/loss) for working for the sole proprietorship.

Hence,  B&C are the Partners only and can be admitted as such in the Partnership Firm can have specified profit / loss ratio with or without agreement.

Hope this clarifies.

Regards

DS

Thank you Sir, for your reply .