Sole proprietorship is a form of business entity in which one person owns all the assets and assumes all the debts of the business. It is also referred to as proprietorship or an individual proprietorship. The owner of the proprietorship is called the sole proprietor or proprietor.
The sole proprietorship is the simplest entrepreneurial structure and does not require any formalities to be taken to form it. This status will automatically come from the proprietor's business activity. There is no distinction between the business and the proprietor, who enjoys full control over the sole proprietorship and is entitled to all profits, but is subject to unlimited liability for all losses, debts, and liabilities of the business. There is also no separate income tax to be paid for the proprietorship, and all losses and profits are reported on the individual's tax return.
[Last updated in March of 2022 by the Wex Definitions Team]