Which of the following best describes a sole proprietorship?

A sole proprietorship is a business structure that is owned and managed by a single individual. One of its defining characteristics is that there is no legal distinction between the owner's personal assets and the business's assets. This means that if the business incurs debts or legal liabilities, the owner's personal assets could be at risk. This feature underscores the owner's full responsibility for both the financial and operational aspects of the business.

In contrast, the other options describe characteristics that do not apply to a sole proprietorship. For example, a business owned by multiple individuals would be classified as a partnership or a corporation, and these structures have different liability implications. The requirement of formal documentation to establish a business applies to corporations or limited liability companies, which necessitate registration and filing articles of incorporation, whereas a sole proprietorship can often be established simply by starting business activities. Lastly, limited liability is a hallmark of corporations and limited liability companies, where owners are protected from personal liability for business debts, which is not the case for sole proprietorships. Thus, the accurate description of a sole proprietorship focuses on the lack of separation between personal and business assets.