What is a sole proprietorship?

A sole proprietorship is defined as a business owned and operated by a single individual. This structure is one of the simplest forms of business organization, where the owner has complete control over all aspects of the business and is solely responsible for all profits and losses. The owner and the business entity are legally the same, meaning that personal assets can be at risk if the business incurs debt or legal issues.

This structure is often chosen for its ease of formation, low cost, and simple tax reporting. Income generated by the business is treated as the owner’s personal income, simplifying the tax process. Overall, a sole proprietorship offers straightforward management and decision-making, making it an attractive option for many small business owners.