Relationship Between Sole Proprietorship & Entrepreneurship

It is common to hear the terms sole proprietorship and entrepreneurship used interchangeably. The terms have similar meanings and are related in many ways, but there are also slight differences. Explore the relationship between these two business-related terms to decide if you should call yourself a sole proprietor, entrepreneur or both.


Entrepreneurship is a mindset for generating an income on your own instead of getting a paycheck from another company. Instead of trading time for income, as is the case when working a job as an employee, the ultimate goal is to establish a business enterprise that generates residual income. An entrepreneur takes significant risks on business ventures, such as investing money and time, in the interest of making profits. Many entrepreneurs work on multiple ventures at the same time as a way to diversify their interests.

Sole Proprietorship

A sole proprietorship is a business where one person owns and manages operations. In a sole proprietorship, the single owner is solely responsible for business liabilities and solely entitled to business profits. It is the most common business structure because the owner becomes a sole proprietor as soon as he begins conducting business -- even if the company is not yet a registered entity.

Read More: An LLC Vs. Sole Proprietorship

Relationship Between the Two

A sole proprietor is an entrepreneur. A sole proprietor takes on major risks in an effort to generate a business profit on his own. However, an entrepreneur is not always classified as a sole proprietor. In some cases, entrepreneurs choose to organize themselves into partnerships, limited liability company, or LLC, members or corporate entities. An entrepreneur might also invest in companies that he does not personally own or participate in, whereas a sole proprietor is actively involved in the company. Entrepreneurs also often have more ambitious goals compared to sole proprietors -- they seek to become wealthy rather than just making a living.

The Bottom Line

If an individual has a business venture in the works or an established business no matter the structure, it is fine to use the term entrepreneur. If the company is established and organized as a sole proprietorship, then the individual can refer to himself as either a sole proprietor or an entrepreneur. When a business person has very ambitious goals to make money, it is usually more appropriate to use the term entrepreneur.

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