Legal Definitions - Sole proprietor

A sole proprietor is an individual who personally owns and operates an unincorporated business. In this business structure, there is no legal distinction between the owner and the business itself. This means the owner is directly and personally responsible for all business debts, liabilities, and legal obligations.

Here are some examples to illustrate the concept of a sole proprietor:

• Maria, a freelance photographer: Maria runs her photography business, "Maria's Moments," entirely on her own. She handles all client bookings, photo shoots, editing, and invoicing. She uses her personal Social Security number for tax purposes related to her business, and if a client were to sue her for breach of contract, Maria herself, not a separate legal entity, would be the defendant.
  This illustrates a sole proprietor because Maria is the business; there's no legal separation between her personal finances and assets and those of "Maria's Moments." She bears all the risk and reward directly.
• Ben, who owns a local landscaping service: Ben started "Ben's Green Thumb Landscaping" by himself. He purchases all the equipment, manages client schedules, performs the landscaping work, and handles all the billing. He might hire a helper occasionally, but Ben remains the sole owner and decision-maker.
  Ben is a sole proprietor because he is personally accountable for all aspects of his landscaping business. If his business takes on debt for new equipment or faces a lawsuit from a dissatisfied client, Ben's personal assets (like his home or savings) could be at risk to cover those liabilities.
• Sarah, an online craft seller: Sarah creates handmade jewelry and sells it through an online marketplace under the name "Sarah's Sparkle Gems." She manages her inventory, processes orders, handles customer service, and promotes her products, all as an individual.
  Sarah operates as a sole proprietor because her business is not registered as a separate legal entity like a corporation or LLC. All income and expenses from "Sarah's Sparkle Gems" are reported on her personal tax return, and she is personally responsible for any product defects or customer disputes.