In simple terms, a sole proprietorship refers to a business which is not incorporated and which has only one owner.
(NOTE: A one-person LLC is considered to be a sole proprietorship unless the owner elects to be taxed as a corporation. Remember, the “C” in “LLC” stands for company, not corporation. So, forming an LLC does not mean you’ve “incorporated.”)
Owners of sole proprietorships are called “sole proprietors.”
Sole proprietors report their business activity on a Schedule C attached to their personal Form 1040.
- Does a Sole Proprietorship Need a Balance Sheet?
- Choosing a Business Entity: Sole Proprietorships (this is a good post to read for a general overview of the pros and cons of being a sole proprietor)
- If You’re a Sole Proprietor, There’s No Such Thing As a “Salary” for Tax Purposes (this topic blows a lot of people’s minds)