Legal Definitions - proprietorship

A proprietorship is a type of business organization where one person owns all the assets and is responsible for all the debts of the business. It is also known as a sole proprietorship or individual proprietorship. The owner of the proprietorship is called the sole proprietor or proprietor.

For example, if John starts a small business selling handmade crafts and he is the only owner, he is running a proprietorship. He is responsible for all the debts and liabilities of the business, but he also gets to keep all the profits.

Proprietorship is the simplest form of business structure and does not require any formalities to be established. The status of proprietorship automatically comes from the proprietor's business activity. There is no distinction between the business and the proprietor, and the proprietor has complete control over the business.

However, the proprietor is also subject to unlimited liability, which means that they are personally responsible for all the losses, debts, and other liabilities of the business. This means that if the business fails and owes money, the proprietor's personal assets may be used to pay off the debts.

There is no separate income tax to be paid for the proprietorship, and all profits and losses are reported on the proprietor's personal tax return.