Distinct Business Entity

What Is a Distinct Business Entity?

A distinct business entity is a division or sub-division within a company that operates autonomously and typically focuses on a unique product or service. For accounting purposes, a distinct business entity is considered a separate entity with its own records and transactions. In terms of corporate finance, the entity may have control over how it utilizes its assets, organizes its management, and, to a certain extent, its financing structure.

How a Distinct Business Entity Works

A distinct business entity will most likely be segregated from the rest of the company based on some operational distinction, such as having a separate product line, being geographically segregated, or offering a different service than the rest of the company.

Distinct business entities can be a key element for any firm because these units have the flexibility to make daily and high-level management decisions at the operational level, which frequently yields better decision-making. They can take different structures depending on ownership, such as a corporation, association, or a business trust.

Advantages of a Distinct Business Entity

Examples of Distinct Business Entities

The brand Teavana is another example of a distinct business entity. Teavana is an American tea company that was acquired by the coffee chain behemoth Starbucks (SBUX) in 2012 for $620 million. Their brands are completely separate from each other. While Starbucks is known for its coffee shops, Teavana has shuttered all of its physical locations and now markets itself as a bottled tea company.