Proprietorships

Proprietorships, often called sole proprietorships or sole traders, are a form of business owned and operated by a single individual. There is no legal distinction between the owner and the business; the business does not exist separately from the owner in the eyes of the law.

Key features include single ownership and control, personal liability for debts, simple and inexpensive formation, and pass-through taxation. In most jurisdictions, the owner must register the business name and obtain any necessary licenses or permits, but there is generally no requirement to file formation documents with a central agency, unlike corporations or partnerships.

Advantages include full managerial control, simplicity, and direct receipt of profits. Disadvantages include unlimited personal liability, limited access to capital, reliance on the owner’s skills, and the business ending on the owner's death or retirement unless steps are taken to transfer it.

Liability is unlimited, meaning personal assets may be used to satisfy business obligations. Taxation typically treats business income as the owner’s personal income, avoiding corporate tax, but there is no income-splitting or shareholder protection. Some jurisdictions offer favorable tax treatment for small proprietorships or require estimated tax payments.

Continuity and transferability are limited: the business generally does not continue after the owner ceases operation and ownership can be difficult to transfer. Regulatory environments vary, with some countries using terms like sole trader or individual proprietor and specific licensing requirements for trades, professions, or regulated activities.