What defines a sole proprietorship?

A sole proprietorship is defined as a business that is owned and operated by a single individual. This structure allows one person to have full control over the business operations and decision-making processes. The owner receives all profits and is personally responsible for any losses or debts incurred by the business. This type of ownership simplifies tax reporting, as the business income is usually reported on the owner's personal income tax return, making it easier for small business owners to manage their finances.

The distinction of a sole proprietorship lies in its singular ownership, which differentiates it from partnerships or corporations where multiple individuals or entities share ownership and responsibilities.