Advantages and disadvantages of Business Entities

This article discusses the advantages and disadvantages of different business entities, including sole proprietorship, partnerships, and corporations. It explores the benefits and drawbacks of each entity type, such as liability, tax benefits, control, capital raising, and legal structure. The article also highlights the importance of understanding the different business entities and their implications for individuals and organizations.

Advantages and
disadvantages of
Business Entities

Table of Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Business entities are defined as organization which are formed by one or more individual.
These entities are formed at state levels for this they have to comply with rules and laws of state
(Chiappinelli, 2018). In many countries, a owner of business is required to fill documents by
particular agency like office of Secretary for legally set up enterprise. There are various type of
business entities which have advantages and disadvantages which are discuss below:
MAIN BODY
 Sole proprietorship: It is a business entity which usually run by an individual for their
benefit. This form is regarded as most basic entity of organization. Proprietors in this are
not separated by their owners. Liabilities of business is considered as part of its owners
and when there is death of individual business leads to termination. Example of sole
proprietor is plumbers, electricians and hairdressers.
Advantages Cheap: It is very inexpensive for individual to run this business entity. This is affordable
model to start and maintain organization. Tax benefits: Individuals in this entity enjoy tax benefits. In this person claim businesses
losses and gains for their own individual tax return.
 Direct control: Owners have direct control over all decision making. They have not
sharing power with a corporate board and partner (Pokrovskiy and Karpova, 2020)).
Disadvantages Liable: Owners of this business entity have liable to their debts. If proprietor fails to pay
debt, owners savings, home and assets to satisfy those debts.
 Capital: Raising capital is difficult in this entity. As owner have not so much for increase
business.
Partnerships: It is defined as business entity in which there is agreement between two or more
individual who join together to run an enterprise. Each partner in this entity contribute capital in
form of labour, skill, money and profits are shared. All partners are liable for debt of their
company.
Advantages:
 When there are more than two persons it creates more profit for business.
1

 There is capacity of borrowing is greater.
 It is easy to change legal structure when there is any circumstances of changes in later.
Disadvantages
 liability in this business entity for partners is unlimited.
 There is also a risk of disagreement and conflicts between management and partners.
 Each partner in this entity is agent and is liable for all actions taken by other partners.
Corporation: It is an entity that works under certain legislations which have limited scope of
performing activity that are included in Articles of Association. In this stakeholders have limited
liability and employees of this entity enjoy tax free benefits (Romanova and et. al., 2019).
Advantages
 This business entity provides more personal asset liabilities for protection to its individual
than any other entities provide.
 There is more flexibility and security in terms of transferring perpetuating and ownership
for long term.
Disadvantages
 There is lengthy application process for corporation of business entity.
 There are many rigid protocols, formalities for forming structures of business entity.
CONCLUSION
There are various business entities in global areas as Sole Proprietorship, Partnership,
Corporation and so on. In addition, they have there benefits and disadvantages with them.
2

REFERENCES
Books and Journals
Chiappinelli, E.A., 2018. Cases and materials on business entities. Wolters Kluwer Law &
Business.
Pokrovskiy, N.V. and Karpova, I.V., 2020. Mechanisms and Tools of the Economic Security
System of Economic Entities. Artificial Intelligence. 1100. p.468.
Romanova, A. and et. al., 2019. Formation of a regional industrial cluster on the basis of
coordination of business entities’ interests. Procedia Computer Science. 149. pp.525-
528.
3