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Why Do Businesses Have to Have a Business Entity?
Published on 2 May 2023
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Why Do Businesses Have to Have a Business Entity?
Business or business is an economic activity carried out by individuals or groups with the aim of making a profit. However, when a business grows and develops, setting up a business entity becomes a very important thing to do. Here are some reasons why businesses should set up a business entity:
Obtain legal protection
By establishing a business entity, the business will have a separate legal identity from its owner. This provides legal protection for the business in the event of a legal issue such as a lawsuit from a third party. If the business does not have a business entity, the business owner may suffer personal impacts such as loss of personal assets or even be subject to criminal penalties.
Facilitate the collection of capital
Setting up a business entity can make it easier to raise capital because the business entity can issue stocks or bonds to raise funding. This allows businesses to raise greater capital than relying solely on capital from their owners.
Get ease in management
With a business entity, a business will have a clear and orderly organizational structure, making it easier to manage the business more efficiently and effectively. In addition, business entities also allow business owners to transfer duties and responsibilities to appointed employees or managers.
Strengthen business image
Business entities such as PT or CV are often more trusted and considered more professional than businesses that do not have business entities. This can strengthen the business image and help the business build trust with clients, investors or business partners.
Also Read: Are You an Entrepreneur? Get to Know these Business Entities in Indonesia
Gain ease in accessing global markets
Business entities also enable businesses to more easily access global markets. This is because business entities have a legal identity that can be recognized internationally, making it easier to process licensing and manage business legality abroad.
Establishing a business entity does require a lot of money and time, but the benefits are far greater and have long-term value. Therefore, businesses that want to grow and develop should consider establishing a business entity in order to optimize business potential and gain greater profits.
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