A prop firm, short for proprietary trading firm, is a company that gives traders capital to trade with after an evaluation. You pay a fee, pass a test with profit targets and loss limits, and then trade an account funded by the firm. Profits are split, usually at 80% to you. The firm keeps the rest and keeps the fee.
The firm's business is the combination of fees and profit share. Most traders who pay a fee never reach a payout, so fees fund the payouts of the minority who do. That is the model, and it is why the evaluation rules are strict: the firm only funds traders it expects to make money.
A prop firm is not a broker and is not regulated like one. You are not opening a brokerage account, you are not depositing your own capital to trade, and you are not employed by the firm. There is no salary, and the only money you receive is your share of funded profits that clear the payout rules.
The common trap is treating a funded account like your own money. It is not: the loss limits, payout schedule, and minimum payout all still apply, and breaching the account ends it. We recommend reading the firm's terms as a contract for rented capital, not as a bank account. Prop trading can cost you every fee you pay.