What is a key characteristic of a sole proprietorship?

A key characteristic of a sole proprietorship is independent ownership by one person, which defines its structure and operation. This type of business entity is solely owned and operated by a single individual, who has full control and decision-making authority. The owner benefits from the simplicity and ease of establishing the business, as it does not require incorporation or formal structuring like corporations or partnerships do.

In a sole proprietorship, the owner retains all profits generated, but they also bear all responsibilities and liabilities. This characteristic makes it distinct from other business forms, such as partnerships or corporations, where ownership and control may be shared among multiple individuals or governed by a board of directors.

In contrast, ownership by a board of directors applies to corporations, which involve multiple stakeholders. Similarly, limited liability is a feature of corporations and limited liability companies (LLCs), not sole proprietorships, where the owner is personally liable for the business's debts. Automatic profit sharing does not accurately describe sole proprietorships, as profits are directly attributed to the sole owner rather than shared among various owners.