Definition
The simplest business form: one person owns the business, with no separate legal entity, and reports profit on their own tax return.
What it means
A sole proprietorship exists automatically when you do business by yourself without forming a company. You report income and expenses on Schedule C with your Form 1040 and pay income tax and self-employment tax on the net profit. There is no legal separation between you and the business, so you are personally responsible for its debts and lawsuits. Depending on your state and city, you may still need a business license, a trade name filing if you use a name other than your own, and a sales tax permit. Keeping a separate bank account and good records makes taxes easier. Many freelancers and gig workers are sole proprietors. The SBA explains how a sole proprietorship compares with an LLC or corporation.
Example
A freelance translator with $50,000 of income and $8,000 of business expenses reports $42,000 of net profit on Schedule C and owes self-employment tax on 92.35% of it.
Illustrative numbers only. Your situation will differ.