The sole proprietorship is a type of business with a single owner who receives all the profit and bears all the losses and responsibilities personally. As good examples, one could mention freelance writers, tutors, housekeepers, freelance graphic designers, and virtual assistants.


The sole proprietorship is the most common and easiest way to run a small business. In fact, as soon as you start offering your services or goods to someone, you become an individual entrepreneur. There is no legal division between a sole proprietor and his or her business. The individual receives all income from doing business but also meets the debt and possible penalties associated with legal liability.

At the same time, a sole proprietorship does not mean that an entrepreneur necessarily works alone. In order to hire employees or to get a retirement plan, an individual entrepreneur must submit an application to the Internal Revenue Service to receive an Employee Identification Number.

This form of doing business does not require any state registration or declaration for the company. However, special activities that require a license, obligatory local and state permits, or any official certifications will require corresponding procedures to be followed and documents obtained.

The sole proprietorship should be distinguished from various types of partnerships that are not legal entities. Individuals can conduct business together and be either partners or individual proprietors.

For example, doctors working in a partnership do not represent a form of a sole proprietorship, as they collectively make decisions, share the total revenue by agreement and, most importantly, jointly bear responsibility.

However, two freelance writers who work in the same office, sometimes help each other to fulfill orders, may spend money together on necessary items related to work, but did not form partnerships, are individual entrepreneurs. In real life, communication between proprietors can be arranged in different ways, but legally it matters whether they are partners or individual entrepreneurs.

Here are some good examples of possible types of a sole proprietorship. One of the varieties is an individual provision of household services. This could include babysitting, housekeeping, daycare owners, and the like. The characteristic feature of such services is that they do not require special training, knowledge, and skills and can be performed by one person.

Thus, the legal framework of a sole proprietorship is ideal for these activities. The smallest number of formal requirements and a simple formula for profit and debt, as well as legal liability, make it easier for people to start comfortably providing services.

Another type of individual entrepreneurship can be special services that involve personal interaction between two or more people. These include services of tutors, style consultants, personal coaches, fitness trainers. By their nature, these services are of private value to individuals, and often involve one-to-one interactions for maximum effectiveness. In this case, the form of the sole proprietorship may be much better suited than a partnership or any corporate structure.

In the USA, companies often outsource a number of tasks or even entire business processes to independent contractors. Such contractors can perform an extensive range of activities, including the services of accountants and tax preparers, freelance writers, graphic designers, and IT specialists.

In this case, the contractors perform the relevant work not as employees of the company, but on the basis of an agreement with the company. Accordingly, they act as sole independent proprietors who can execute orders from various companies.