Which of the following best describes a sole proprietorship?

A sole proprietorship is defined as a business owned and operated by a single individual. This structure allows the owner complete control over all business decisions and makes them the sole beneficiary of the profits generated. Sole proprietorships are typically easy and inexpensive to establish, as they require minimal regulatory compliance and are often subject to fewer formalities than other business structures.

In this business model, the owner's personal assets are not legally distinct from the business, meaning they assume unlimited liability for any debts or obligations incurred by the business. This characteristic emphasizes the personal stake of the owner in the overall success and risks associated with the business.

Understanding the nature of a sole proprietorship is crucial for recognizing its advantages, such as simplicity and full control, as well as its challenges, such as personal liability for business debts.