What defines a sole proprietorship?

A sole proprietorship is defined as a business that is owned and managed by a single individual. This means the owner has full control over all aspects of the business, including decision-making, profit retention, and overall management. In this structure, the owner and the business are legally considered the same entity, meaning the owner is personally liable for all debts and obligations incurred by the business.

The nature of a sole proprietorship allows for simplicity in setup and operation, as there are fewer regulatory requirements compared to corporations or partnerships. Additionally, tax implications are straightforward, as the owner reports business income on their personal tax returns. This structure is particularly appealing for individuals starting small businesses due to its ease of formation and flexibility in management.