What defines a sole trader in business?

A sole trader is defined as a business owned by a single individual. This structure means that one person is responsible for all aspects of the business, including decision-making, profits, losses, and liabilities. The simplicity of this model appeals to many entrepreneurs, as it allows for complete control over operations and finances.

In this setup, the owner retains all profits but also assumes full liability for any debts incurred by the business, highlighting the personal risk involved. Unlike a partnership or corporation, a sole trader does not involve multiple owners or a separation between the individual and the business entity, which is crucial in distinguishing this business type.

The other choices refer to structures that do not fit the sole trader definition: a business run by multiple partners would describe a partnership, a separate legal entity would typically indicate a corporation, and a non-profit organization focuses on goals beyond making a profit, which is fundamentally different from a sole trader’s objectives.