What is the defining characteristic of a sole proprietorship?

The defining characteristic of a sole proprietorship is that it is operated by one individual who takes on full responsibility for all aspects of the business, including its debts and liabilities. This means that if the business incurs debt or faces legal action, the owner’s personal assets are at risk, as there is no legal distinction between personal and business liabilities.

This characteristic highlights the simplicity and informality of a sole proprietorship compared to other business structures, such as corporations or partnerships, which have different ownership and liability frameworks. In contrast, the idea of being owned by a minimum of two individuals relates more to partnerships or corporations, while a written agreement pertains to formalized business relationships, which are not a requirement for sole proprietorships. Additionally, the concept of limited liability is typically associated with corporations and limited liability companies, not sole proprietorships, where liability is not limited. Therefore, the focus on the sole responsibility of the individual owner uniquely defines a sole proprietorship.