Define Sole proprietorship.
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A sole proprietorship is a business structure where a single individual owns and operates the entire business. In this form of business organization, there is no legal distinction between the owner and the business entity. The proprietor is personally responsible for all aspects of the business, including its debts, liabilities, and day-to-day operations.
Key characteristics of a sole proprietorship include simplicity, direct control by the owner, and ease of formation. The owner retains all profits but also bears the full burden of any losses. While the proprietor has autonomy in decision-making, they may face challenges in raising capital or sharing responsibilities.
In a sole proprietorship, the business is an extension of the owner's identity, and the income generated is typically reported on the owner's personal tax return. This business structure is common among small enterprises and individual entrepreneurs due to its straightforward setup and minimal regulatory requirements.