Business entity convention

This refers to the legal and commercial principle that states that a business organisation is distinct in law from the individuals who own or operate it.

The business entity convention emphasises that the owner of the business and the business itself are completely separate and provides continuity for the business beyond the involvement of any individual. In consequence, the personal finances and affairs of the owners of a business must not be included in the company’s financial records.

The business entity convention is a term normally found in financial accounting.

Explore our learning zone to discover more