Dictionary

Sole proprietorship

“A business owned and run by one person with no legal separation from them, so the owner keeps all profits and is personally liable for all debts. In the UK this is usually called being a sole trader.”

Why sole proprietorship matters to a first-time founder

Your choice of structure decides who pays when something goes wrong. As a sole proprietor you keep all the profit and can start with almost no paperwork, but an unpaid supplier, a customer claim or a broken lease can reach your personal savings and even your home. It also shapes how you are taxed and whether you can take investment, because there are no shares to sell to an investor or co-founder.

Examples of sole proprietorship

You invoice under your own name, pay for hosting from your own account, and file the profit on your own tax return. A customer who claims against the work is claiming against you. There is no company standing between the two.

Common misunderstanding

People think a business name, or a logo, creates a separate legal person. It does not. Until you form a company, you and the business are the same person in law. A partnership, where two or more people share that risk, is a different arrangement.

When to use it

It is a normal way to start when you are testing an offer on your own and the downside is small. Once a co-founder joins, or a claim could cost more than you can personally cover, ask an accountant which structure fits. This page is not that advice.