Sole Proprietorship and Law


business license

approval from a local government entity authorizing the operation of a business


money used by a business to pay operating expenses, invest to expand the business, or take advantage of new opportunities for the business

continuity of business

ability of a business to endure in a consistent form

ease of organization

simplicity in meeting the requirements for beginning and operating a business

Employer Identification Number (EIN)

unique number issued by the Internal Revenue Service; used to identify a business that has employees

fictitious name

made-up name under which a business intends to operate


responsibility for wrongdoing or act


result of expense incurred by a business that exceeds the income earned by the business


result of income earned by a business that exceeds the expenses incurred by the business

Schedule C

federal income tax form that reports the business income and expenses of an individual or sole proprietor as well as a limited liability company (LLC)

separate legal entity

business that has a legal existence that is independent of the owners of the business

simplified employee pension (SEP)

tax-deferred pension plan for retirement purposes, available to the self-employed or to unincorporated businesses, allowing them to contribute to individual retirement accounts (IRAs)

sole proprietorship

unincorporated business that is owned by a single individual

tax form

paperwork prescribed by tax laws as the result of specific economic activities, such as paying wages to employees

unincorporated business

business that has not followed the formal requirements of law to legally be recognized as a corporation

unlimited liability

responsibility of a business owner for the debts or obligations of the business that is not limited to the assets of that business