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What is Sole Proprietorship: Definition, Types & Advantages

What Is the Definition of a Sole Proprietorship?

How Does a Sole Proprietorship Function?

What Are the Advantages and Disadvantages of a Sole Proprietorship?

What Are the Risks in a Sole Proprietorship?

Should You Form an LLC or Sole Proprietorship?

An LLC and a sole proprietorship are notably different. An LLC is an extension of a sole proprietorship where the number of shareholders in the company is more than one. 

Here is a detailed comparison between an LLC and a sole proprietorship:


Limited Liability Company (LLC)

Sole Proprietorship


Members of that company run an LLC.

A sole proprietorship is owned and run by a single owner.


LLC and its owner are legally separate entities.

The business and its owner are one legal entity in a sole proprietorship.


Members of an LLC need to register themselves according to state regulations.

The owner of a sole proprietorship only need to ensure that there is no other business of the same name in the area.

Investment Responsibility

LLC members are responsible for their investments in the company.

The sole trader is responsible for all business aspects; hence there is no requirement for liability protection.

Paperwork Required

There is paperwork involved.

There is no paperwork involved.

A sole proprietorship is the most inexpensive and simple way to start a business. But it has its own terms and conditions. So before you start your own enterprise, make sure you are completely aware of what you are stepping into. 

FAQs About Sole Proprietorship Business