What is ENTITY THEORY?

Belief-based-practice that a company, being a unique entity, conducts distinct activities for its business. These activities are in contrast to the activities of its owners, or stakeholders, or stockholders. It also maintains that the business entity is accountable for its own liabilities. The entity theory stipulates limited or no liability to owners, depending on the business structures. Owners, stakeholders, stockholders are typically not accountable for liabilities and loans of the company entity.

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