Which description defines a sole proprietorship?

• A. A business owned by a single individual who is personally liable and can transact for own use without license but cannot provide brokerage to the public
• B. A corporation with limited liability
• C. A franchise
• D. A business owned by two people

Answer: (A)

A sole proprietorship is a business owned by one person who bears unlimited personal liability for the business’s debts and obligations, with no separate legal entity between owner and business. This means the owner reports profits and losses on their personal tax return and uses personal assets to cover liabilities. In regulated fields like brokerage, the owner can handle personal transactions without a license, but to offer brokerage services to the public, a proper license is required. The description that fits this is a business owned by a single individual who is personally liable, who can transact for own use without license but cannot provide brokerage to the public. This sets it apart from a corporation (limited liability), a franchise (a business model, not ownership form), or a partnership (owned by two or more people).