What defines a sole proprietorship?

A sole proprietorship is defined as a business owned and managed by one person. This structure is characterized by its simplicity and ease of establishment. The owner has complete control over all decisions and is entitled to all profits generated by the business. Additionally, the owner retains all liabilities, meaning that personal assets can be at risk if the business incurs debts or legal issues. The sole proprietorship is often chosen for its straightforward tax benefits as income is reported directly on the owner's personal tax return, avoiding double taxation that might apply to corporations. This form of business is quite common among small business owners and freelancers due to its flexibility and minimal regulatory requirements.