Sole Proprietorship Definition

Sole Proprietorship

A business owned by an individual that has not been registered as a limited liability company, a corporation, or any other type of legal tax entity. For IRS purposes, the owner (sole proprietor) and the business are one tax entity, meaning that business profits are reported and taxed on the owner's personal tax return. The main downside of a sole proprietorship is that its owner is personally liable for all business debts.