What type of business ownership involves a single owner taking all profit and responsibility?

A sole proprietorship is a type of business ownership characterized by having a single owner who retains all profits and assumes full responsibility for all obligations and liabilities of the business. This form of ownership is the simplest and most common, especially for small businesses, because it requires minimal regulatory burden and is straightforward in terms of tax reporting.

In a sole proprietorship, the owner directly manages and controls the business operations and is personally liable for any debts or legal actions incurred by the business. This means that the owner’s personal assets are at risk if the business faces financial difficulties. The profits earned by the business are treated as personal income for the owner, which can simplify tax processes.

Understanding the distinctions among the various types of business structures—such as corporations, partnerships, and limited liability companies—helps clarify why the sole proprietorship stands out. Corporations, for example, are separate legal entities that limit personal liability, partnerships involve shared responsibilities among multiple owners, and limited liability companies provide flexibility and protection similar to corporations. However, the defining feature of a sole proprietorship is the singular ownership and the direct correlation of profit and risk to that owner.