What type of business is owned and operated by one individual?

A sole proprietorship is a type of business that is owned and operated by one individual. This structure is characterized by the simplicity of setup and management, as it does not require formal incorporation or the complexities involved in partnerships or corporations. The owner has complete control over the business and enjoys all profits, but also bears all liabilities and responsibilities. This means that if the business incurs debt or faces legal issues, the owner's personal assets may be at risk. This form of business is often favored by small business owners due to its ease of establishment and straightforward tax treatment, where business income is reported on the owner's personal tax return.

In contrast, a partnership involves two or more individuals who share ownership, a corporation is a more complex legal entity separate from its owners that can limit personal liability, and a franchise is a licensing arrangement rather than an ownership structure. Each of these alternatives has distinct operational characteristics and regulatory requirements.