Business Fundamentals & Accounting
Business ownership structures
Chapter concept map
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Subtopic 1 / 4
Sole Proprietorship
The simplest structure — one person owns and operates the business with no legal separation between owner and entity. Start-up costs are minimal and all decisions belong to the owner, but there is a major downside.
- Set-up: cheap and fast; usually just a local registration.
- Taxation: pass-through — business income is reported once on the owner's personal tax return.
- Liability: unlimited. Creditors can pursue the owner's personal assets (home, savings, car) to satisfy business debts. This is the critical exam point.
Worked example
Maria registers a food stall as a sole proprietor. The stall owes €8,000 to a supplier. If the stall cannot pay, the supplier can sue Maria personally and claim the full amount from her personal bank account — there is no legal wall between her and the business.
Exam strategy
Accounting identities (Assets = Liabilities + Equity) must hold in every scenario. Sanity-check ratio questions with round numbers.
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