We had a site collection in MOSS 2007 where our organisation would share content to external parties for use. So AD groups were created with minimal access and were given.
Now the sites are getting migrated to SharePoint Online version, and the migration process will migrate the users as well for the respective sites.
My opinion is that we keep the process of creating AD groups because
1) it will be consistent with the migrated sites
2) good way of keeping things tidy as the users will be maintained in site specific prefixed groups
There are other options like share functionality where the user can use any chosen Live, Hotmail, outlook.com or any Microsoft based authentications to user.
Could you please let me know advantages and disadvantages or if there are other ways better than the one i have spoken about.
The best practice is to use AAD B2B.
You could start here: https://docs.microsoft.com/en-us/azure/active-directory/active-directory-b2b-what-is-azure-ad-b2b