What best describes a sole proprietorship?

A sole proprietorship is best described as a business organization where one person is entitled to all profits and bears all losses. This structure is characterized by a single owner who manages the business and is fully responsible for its operations. Since there is no legal distinction between the owner and the business entity, the owner retains complete control over decision-making and receives all income generated. However, this also means that the owner is personally liable for any debts and obligations incurred by the business, which adds a significant risk element.

In contrast, a corporation involves multiple shareholders and operates as a separate legal entity, thereby limiting individual liability. A partnership comprises two or more individuals who share ownership and responsibility for the business, while a non-profit organization is created to serve a public purpose and does not distribute profits to its members. Thus, the unique characteristics of a sole proprietorship, including the single ownership model and full liability responsibility, clearly set it apart from these other business structures.