What is a sole proprietorship?

Skuad PTE Ltd
Employer of Record
Published in
3 min readJan 31


A sole proprietorship is an unincorporated business entity owned and controlled by a single individual. It is a simple business structure in which the business and the owner (also referred to as proprietor) are not legally separated.

A business type like a sole proprietorship can be set up with no formal business structure. Often, sole proprietorship businesses are set up by business people who want total control over their business and its decision-making process. Because of its simplicity, it is the most common form of a business structure and any individual can set it up on their limited budget.

How does sole proprietorship work?

A sole proprietorship business works by the business owner handling all the business activities. Because a single person runs a sole proprietorship, it does not require any paperwork to set it up.

As it is primarily a one-person business, all business losses are personal losses. The owner works on their chosen schedule, with no supervision, and acquiring office space is optional.

What are the types of a sole proprietorship?

There are three main types of sole proprietorship businesses.

  • Self-employed workers
  • Independent contractors and freelancers
  • Franchises

Self-employed workers

These types of sole proprietors are primarily owners of small retail businesses. Usually, it is relatively inexpensive to set up small retail shops; family members are sometimes the workers in the company. While it may not have required huge investments to set up, it is usually the owner’s primary source of income.

Independent contractors and freelancers

Independent contractors are self-employed skilled professionals offering their services to different entities and organizations. They usually provide their services for short-term projects and shorter periods. They file and manage their taxes and other business requirements as a one-person business entity.


A franchise is a business where the owner licenses its operations, including branding, product offerings and knowledge. While the owner receives royalties and other payments as agreed between the two parties, the proprietor manages the franchise establishment and bears the business risk.

How do you start a sole proprietorship?

To start a sole proprietorship business, you must understand the concept and be informed about the company. An excellent place to start is by learning about the advantages and disadvantages of a sole proprietorship.

Also, while you do not require paperwork to launch your business, you need to acquire the necessary licenses to conduct business in that industry. In addition, depending on the country’s employment laws, registering your business entity is crucial. In summary, starting a sole proprietorship requires understanding the business type, getting operational licenses and registering your business.

How do you file taxes as a sole proprietor?

You can file taxes as a sole proprietor based on your country’s tax jurisdiction.


A sole proprietorship business offers its owners freedom like never before, and there are other advantages of running a sole proprietorship. However, like every other business, it can be challenging, especially for new business owners.

How can Skuad help?

Skuad is a global employment and payroll platform that enables organizations to hire full-time employees and contractors in over 160 countries without setting up subsidiaries or legal entities. Skuad’s platform also helps organizations onboard talent, manage payroll, and ensure compliance with country-specific employment laws and tax regulations.

In addition, we handle your entire employment lifecycle so that you can scale your business operations compliantly, with reduced efforts and a top-notch HR administration.

To know more about Skuad, book a demo today.



Skuad PTE Ltd
Employer of Record