What are the defining characteristics of a sole trader business structure?

The defining characteristics of a sole trader business structure include unlimited liability, full control, and taxation on personal income.

In a sole trader setup, the owner has unlimited liability, which means they are personally responsible for all debts and obligations of the business. This characteristic exposes the owner's personal assets to risk in the event of business failure. Furthermore, the sole trader has complete control over the business decisions, allowing for quick decision-making without the need for consensus or input from partners or shareholders. Lastly, the income generated by the business is taxed as personal income, meaning the profits are declared on the owner's personal tax return, and they pay tax at their individual tax rate rather than facing separate corporate taxation.

This structure is distinct from alternatives such as corporations, which have limited liability and corporate taxation, and partnerships or limited partnerships, which involve multiple owners and shared profits. Thus, the elements of unlimited liability, full control, and personal income taxation accurately depict the sole trader business model.