Sole Proprietorship

What is the definition of Sole Proprietorship? Learn what you need to know about this term.

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What is a Sole Proprietorship?

A sole proprietorship is a type of business structure in which a single individual owns and operates the business.

The individual, known as the sole proprietor, is personally responsible for all aspects of the business, including its debts and liabilities. The business and the proprietor are considered one and the same in the eyes of the law.

Advantages of a sole proprietorship include:

Easy and inexpensive to set up and maintain
The owner has complete control over the business decisions and operations
Profits are taxed only once as personal income

Disadvantages of a sole proprietorship include:

Unlimited personal liability
Limited ability to raise capital
Limited life span, as it dissolves upon the death or incapacity of the proprietor

It is important to note that, depending on the location, there may be certain types of business activities that are restricted or prohibited for sole proprietorships.

There are several types of legal business entities you can create when starting a business.