Final answer:
A proprietorship, or sole proprietorship, is an unincorporated business with one owner who has unlimited liability for the business's debts. Incorporation protects personal assets and promotes industry growth by providing limited liability. Private companies can take various forms, including sole proprietorships, partnerships, and corporations without public stock.
Step-by-step explanation:
A proprietorship, commonly known as a sole proprietorship, is an unincorporated business owned and operated by one individual. Unlike a corporation, the owner of a sole proprietorship is not protected by limited liability. This means the owner has unlimited liability for the debts and obligations of the business, potentially risking personal assets if the business incurs losses or legal issues.
In a sole proprietorship, the owner is entitled to all profits but also responsible for acquiring capital, managing the business, and dealing with all the financial risks. The owner’s personal assets are not shielded from business liabilities unless they incorporate the business, which can then provide limited liability protection.
Incorporation offers entrepreneurs the ability to limit their financial and legal obligations, promoting the willingness of investors to participate and contributing to the growth of industries. Nevertheless, many private companies operate as sole proprietorships or partnerships, and they can range from small law firms to large corporations without publicly issued stock.