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Under a sole proprietorship, a business is owned by one person. The owner may employ other people but has sole personal legal obligation for all the activities, or, “unlimited liability.”

The advantage of being a sole proprietor is that such a business is simpler to set up than a corporation. A one-person operation also makes for speedier decision-making, and it is easier to keep financial and technical matters confidential. As well, it is easier to diversify or close the business.

The disadvantages of having a sole proprietorship are that it may prove too limiting a structure as the business grows beyond the abilities of a sole owner or operator, there may be higher tax implications, and it may be difficult to obtain financing. Personal liability also makes such a business a greater risk.