Definition of Sole Proprietorship

What is the definition of sole proprietorship? In legal dictionary, a sole proprietorship is a business in which an individual is solely liable for its obligations of the business, is entitled to all of its profits and exercises complete managerial control.

A sole proprietorship is the simplest and most common form of business in America. At the end of the 2000 tax year, there were almost 18 million sole proprietorships in the U.S., and the number grows each year.

Some features of sole proprietorship include:

• Personal liability of the owners: Unlimited personal liability for the obligations of the business.
• Taxation: Entity not taxed, as the profits and losses are passed through to the sole proprietor.
• Business formation: No filling requirement and no formal paperwork, unless you do business under a fictitious name. In that case, a DBA (doing business as) filling is required.
• Membership rules: only one member is allowed.
• Management: Sole proprietor has full control of management and operations.