Which description matches a Sole Proprietorship?

• A. Two or more owners sharing profits and losses.
• B. One owner, no filing, no legal separation, full personal liability.
• C. Managers elected by a board; owners have limited liability.
• D. Filed charter; fiduciary duties among partners.

Answer: (B)

A Sole Proprietorship is a business that is owned and operated by a single person with no separate legal entity created for the business. Because there is no filing to form a separate entity, the owner and the business are not legally distinct, so the owner bears full personal liability for all debts and obligations of the business. Taxes flow through to the owner’s personal return, meaning profits and losses are reported on the owner’s own tax return rather than at the business level. This description matches a Sole Proprietorship because it emphasizes one owner, no formal filing to create a separate entity, and unlimited personal liability. The other descriptions point to other structures: multiple owners imply a partnership; governance by a board with limited liability points to a corporation; a filed charter with fiduciary duties among partners describes a more formal partnership or corporate arrangement.