What Is a Sole Proprietorship?

By Kristi Waterworth – Updated Nov 23, 2025 at 3:56 PM

Key Points

Sole proprietorships offer easy setup and tax benefits as they lack formal registration requirements.
Personal assets are at risk in a sole proprietorship as there's no legal separation from the business.
LLCs provide legal protection and separation, but require more setup and maintenance than sole proprietorships.

Starting a business means asking yourself a lot of important questions about what your business will be, including how it will be structured. If you're considering a sole proprietorship, this article is for you.

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A person working behind the counter of a pet accessories store. — Image source: Getty Images.

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EIN

One of five taxpayer identification numbers that usually consists of a nine-digit sequence and serves as a unique identifier for businesses.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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