A sole proprietorship is the simplest of all business organizations. When a person decides to operate a business without any formal business structure in place, that person operates a sole proprietorship. Quite simply, an individual with goods and services to offer conducts business either under their own name or under another name.
Unlike a registered corporation, a sole proprietorship is not a distinct entity apart from the individual. The sole proprietor owns all the assets of the proprietorship. Income from the business forms part of the personal income of the sole proprietor and is taxed accordingly.
Therefore, an important reality of operating a sole proprietorship is that the owner has unlimited liability for the debts and liabilities of the business. When the sole proprietor dies or retires, the sole proprietorship ends.