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Sole proprietor
Also called sole proprietorship, DBA, unincorporated business.
An unincorporated business owned by one individual, where there is no legal separation between the owner and the business and therefore no liability shield.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
There is no entity. Business debts are the owner's personal debts, business assets are the owner's personal assets, and income is reported on the owner's personal return. A trade name or DBA registration changes what the business is called, not what it is.
For funding this has direct consequences. The contracting party is the individual, so a separate personal guarantee adds little — the owner is already liable. Underwriting leans harder on personal credit because there is often no meaningful business credit file. A judgment against the business is a judgment against the owner, reachable against personal bank accounts and, subject to state exemptions, other personal property.
Many funders will still fund sole proprietors, particularly on bank-statement products. Some require incorporation first, partly for the cleaner contracting party and partly because entity formation creates a checkable formation date.
Where this one catches people
The dangerous assumption is that business-purpose funding to a sole proprietor picks up consumer credit protections because the borrower is a natural person. Federal consumer credit rules generally turn on the purpose of the credit, not the legal form of the borrower — credit extended for business purposes is outside them even where the borrower is an individual. Signing personally does not make it consumer credit.
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Sole proprietor — common questions
What does sole proprietor mean?
An unincorporated business owned by one individual, where there is no legal separation between the owner and the business and therefore no liability shield.
Where does sole proprietor catch people out?
The dangerous assumption is that business-purpose funding to a sole proprietor picks up consumer credit protections because the borrower is a natural person. Federal consumer credit rules generally turn on the purpose of the credit, not the legal form of the borrower — credit extended for business purposes is outside them even where the borrower is an individual. Signing personally does not make it consumer credit.
Is sole proprietor the same as an interest rate?
Sole proprietor is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does sole proprietor apply to?
It is not specific to one product — it appears across the market.
Is there a worked example of sole proprietor?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside sole proprietor?
FICO score, Personal guarantee, Time in business, Truth in Lending Act, Writ of execution.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.