|Sole proprietors are individuals who run their own business and do not have it set up as a corporation or partnership. The biggest difference between them and a corporation is that a sole proprietor does not have separation between their business and themselves.
This means that when taxes are filed, all costs that are essential to the operation of the business are tax deductible on the individuals tax return. For example, an electrician who operates as a sole proprietor may earn $80,000 a year in income. However, costs such as materials, vehicle expenses, office space, or marketing (to name a few), are subtracted from the gross income- $80,000 in this case.