A sole proprietorship is a type of business owned and operated by one individual. There is no legal distinction between the owner and the business.
Many farms are sole proprietorships. Farms that are sole proprietorships should file Schedule F with their personal Federal Income Tax return to report farming income and expense. Schedule F is an important document in some grant and loan programs, which require it as part of demonstrating a farming track record. Other sole proprietors, such as bookkeepers or computer technicians, file Schedule C.
The advantage of being a sole proprietor is that it is simple.
The disadvantage of a sole proprietorship is that, because there is no legal distinction between the owner and the business, the owner is liable for everything financial and non-financial that the business does.