What is a sole proprietorship?

A sole proprietorship is defined as a business entity that is owned and operated by a single individual. This structure is the simplest form of business organization, allowing the owner complete control over all decisions and operations. The owner is personally liable for all debts and obligations of the business, which means that not only the business assets but also the owner's personal assets could be at risk if the business incurs debt or legal issues.

In contrast, the other choices describe different forms of business entities. A business owned by two or more people refers to partnerships or other collective ownership arrangements. Non-profit organizations are established for purposes other than making a profit, typically focused on charitable goals. A corporation involves a structure with multiple shareholders, which provides limited liability and is recognized as a separate legal entity from its owners. Understanding these distinctions helps clarify what defines a sole proprietorship and why it operates distinctly from other business forms.