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Considerations in Selecting Business Entities

5. What are the main characteristics of a particular business entity?

There are numerous characteristics that make a business entity unique. The major characteristics of a business entity are as follows:

•    Creation & Maintenance – The effort associated with forming and maintaining the entity;

•    Continuity – The continuity or stability of the organization upon given occurrences;

•    Ownership & Control – The ownership rights and control of those involved with the business;

•    Personal Liability – The potential for personal liability of those involved with the business;

•    Compensation – The compensation and division of profits among business owners; and

•    Taxation – The taxation of the organization’s earnings and its distributions of profits to the owners.

This list is certainly not exhaustive; however, these primary characteristics provide a great deal of necessary insight for understanding and choosing a business entity.

•    Discussion: Why do you think these are the primary characteristics of a business entity? Can you think of any other characteristics of the business entity that would be important to understand when selecting and forming a business entity.

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