Business entities are divided into three types of entities-company, sole proprietorship and partnership. The accounting rules are almost same for all the entities but a structure of business determines the way a profit is taxed and small companies can opt for either cash based accounting system or accrual based accounting system. Sole proprietorship entities are the most popular form of business entity it is wholly owned by a sole proprietorship and the taxes are paid based on individual income tax slab rate. Partnership entity has two or more than two owners and the partners share the profits as per the stake in the partnership firm. The third type of entity is corporation better known as company owned by shareholders and the profit is divided among the shareholders in form dividend (Lambert & Davidson 2013).
Sole Proprietorship Business it is very simple and easy to set up. Partnership is also easy to set up but unlike sole proprietorship the risk is shared by all the partners and capital is contributed by more than one person. Company though it has complexity in set up but the owners have limited liability and the owners do not risk losing their personal assets like in sole proprietorship or partnership. A company has perpetual succession and the business of the company does not stops, as it is the case of sole proprietorship business or partnership which ends on the loss or insolvency of the sole proprietor or partners. Therefore, a company has separate legal identity different from the owners. In case of a company double taxation takes place one tax is levied on the profits of the company and the other one is taxed on dividend received by the shareholders. The role of business entities in financial markets of Malaysia is that with the incorporation of new business entities it increases the financial position of the economy. A business entity creates new job opportunities, strengthens the economy and creates employment for unemployed. In addition, of creating employment a business entity develops the surroundings in which it operates and works hence increasing the economic stability of the society. The concept of Corporate Social Responsibility also said as CSR policy has been introduced which states that corporate in addition to business activities has to take initiatives and responsibilities regarding social and environmental development. Hence, a company has to abide by and follow corporate social responsibility policy (Bondy, Moon & Matten 2012). An example of sole proprietorship business entity is Tune Hotels, partnership business is Rahayu Partnership Law firm, Malaysia and of the company is Petronas Assets Sdn Bhd. The present scenario of business is changing day by day the reason being globalization and increased competition therefore; all the decisions should be taken based on the analysis of financial market. The analysis of financial market helps an organization to control the cost, stay competitive in the market and continue the operations efficiently. The recent inclination towards use of information technology requires huge cost therefore; organization has to take financial decisions concerning the use of e-commerce technology. Financial decisions include decisions about arranging funds, project valuation and resources, which could help efficient use of technology. Therefore, from the above discussion it is clear that financial market plays an important role in the economy and it acts as a mediator between persons having surplus funds and persons in need of funds. Financial markets components are primary market, secondary market, capital market and money market. These components help financial markets to dispense money into the economy. Hence, the areas of financial market are broad and difficult to understand so firms have to be cautious in their approach regarding financial decisions. This leads to a challenge for organizations as because financial markets are complex and it changes rapidly therefore making financial management of business more complicated.
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Bondy, K., Moon, J., & Matten, D. (2012). An institution of corporate social responsibility (CSR) in multi-national corporations (MNCs): Form and implications. Journal of Business Ethics, 111(2), 281-299.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage Learning.
Lambert, S. C., & Davidson, R. A. (2013). Applications of the business model in studies of enterprise success, innovation and classification: An analysis of empirical research from 1996 to 2010. European Management Journal, 31(6), 668-681.