How is a sole proprietorship defined?

A sole proprietorship is defined as a business that is owned and operated by one individual. This structure allows the owner to have complete control over all decisions and the operation of the business. It is the simplest form of business organization and does not require the formalities associated with corporations or partnerships, such as articles of incorporation or partnership agreements.

In a sole proprietorship, the owner is personally responsible for all debts and liabilities of the business, meaning that personal assets may be at risk if the business incurs debt or faces legal issues. This direct ownership structure enables the owner to keep all profits generated by the business while being subject to personal taxation on the business income. In summary, this structure is defined by the aspect of individual ownership and control, distinguishing it from other business forms such as partnerships, corporations, or legal entities that involve multiple owners or are treated separately from their owners for liability purposes.