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Business Entities, Their Forms and Characteristics


Businesses are important entities in life as they enhance the provision of vital goods and services that a population requires for survival. There are various forms of business and each type of investor is free to choose one according to his/her abilities. Provision of goods and services are vital for channeling such goods and services to areas of demand, these may be provided in bulk, as seen in wholesale or in small quantities, in the case of final consumers. The paper will explore and relates forms of businesses, their characteristics, and how they apply in real-life situations (Cross & Miller, 2008, p. 13).

Business Entities

Business entities are channels for the provision of goods and services or both to the consumers. The unit provides knowledge on various forms of businesses an individual may start. For instance, an individual with small capital cannot go for corporations, as it requires more capital, instead, this individual can start an enterprise which is in the form of sole proprietorship or even a partnership with a friend to achieve his/her goals. The unit also provides various characteristics of business forms, which are important in helping an individual, evaluate his next course of action regarding starting a business. For example, if one needs protection from business liabilities, then owning a company is the best option. In addition, if one needs to pay less tax, then partnership or sole proprietorship befits him/her (Cross & Miller, 2008, p. 13).

Why Business form is important

The module goes on to impart to learners on importance of understanding various business forms. This is mainly because an understanding of the same is critical to the choice that an individual makes in starting business. These different forms of businesses allow one to choose based on available capital, profit and loss share, decision making, processes involved and compatibility with his/her desired products (The Company Corporation, 2011, p. 1).

The Notion of Limited Liability

Limited liability means that one’s personal properties are separate from the business, and thus in case of a loss or dissolution, the person’s assets cannot be acquired to compensate for the company’s losses or debts. The knowledge of this aspect helps individuals to make informed decisions right before starting a business on whether to be in a limited liability business such as companies or to be part of the business as observed in sole proprietorship and partnerships. When liabilities are unlimited, the owner pays the price in the event of debt or tax default by the business (The Company Corporation, 2011, p. 1).

Corporations and Piercing the Corporate Veil

The government is instrumental in safeguarding how companies conduct their businesses throughout its jurisdiction. It does this through the Business judgment rule which is important in ensuring officers are liable for their duties. The module brings to light the importance of the state in controlling the operation of corporations, while at the same time, providing the board with authority to oversee company management policies and significant decisions (, 2011, p. 1).

Other significant considerations

It is important to note that some of these provisions that govern business entities are inadequate and may still need amendments. They include joint liability of individuals in partnerships, which should work out ways of holding every individual liable for his/her actions. The other one is the double taxation of companies through income and dividends, which requires an amendment to ensure that one is not taxed twice (The Money Alert, 2011, p. 1).


The module was important in imparting basic knowledge of business entities, their forms as well as characteristics that distinguish them. It is through this understanding that one can start a business with the full knowledge of its implications on his/her assets as well as on the state, for instance, when it comes to tax. Knowledge of business forms is also instrumental in providing the basic management techniques as well as business starting processes, which come in handy during the evaluation of capital. The module is therefore quite vital in ensuring that fundamental elements of a business entity are well understood before implementation (Cross & Miller, 2008, p. 13).

Reference List

Cross, F.B., & Miller, R.L. (2008). The legal environment of business: Text and cases – ethical, regulatory, global, and e-commerce issues. (7th ed.). West: Cincinnati. (2011). Business Structures. Web.

The Company Corporation. (2011). Business Entities: Choosing a Business Structure. Web.

The Money Alert. (2011). Business Types of Ownership. Web.

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StudyKraken. (2022) 'Business Entities, Their Forms and Characteristics'. 22 August.

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