A legal entity is an artificial person having separate legal standing in the eyes of law. A Legal entity represents a legal company for which you prepare fiscal or tax reports. A legal entity is any company or organization that has legal rights and responsibilities, including tax filings.
One of the most frequently used terms in the world of compliance and governance is that of the legal entity. But what is the meaning of a legal entity, and why is it so important for finance, compliance, legal and operational professional?
As explained before, A business is entitled enter into commercial transactions due to its charter in the legal system. Commercial groups exist through corporate law. Units in the legal structure of a group are individual companies that share common ownership and control. In a public group, a company is owned by the public through shares sold on a stock market. In a private group, they are held by a privately held holding company. In other organizations, the legal entities are partnerships, funds, or government agencies. A legally recognized entity can own and trade assets and employ people; while an entity without legal recognition cannot. When granted these privileges, legal entities are also assigned responsibilities to account for themselves to the public (statutory reporting and external reporting), comply with legislation and regulations, and pay income or transaction taxes.
A legal entity is an artificial person having separate legal standing in the eyes of law. A Legal entity represents a legal company for which you prepare fiscal or tax reports. A legal entity is any company or organization that has legal rights and responsibilities, including tax filings. It is a business that can enter into contracts either as a vendor or a supplier and can sue or be sued in a court of law. A legal entity can enter into contracts and assume the obligations of those contracts, can borrow and pay debts, can file suits and be named by other parties in suits, and can be held to account for the results of those lawsuits.
Legal entities are structured in a way that allows for a greater degree of protection for strictly personal assets from lawsuits and regulatory penalties. Each type of entity provides a different set of protections and tax burdens. Legal entity codes are not standardized, despite the globalized economic world in which we live, due to the laws and regulations that govern legal entities fluctuate drastically across jurisdictions.
Divisional Organizational Structures
The divisional structure or product structure consists of self-contained divisions. A division is a collection of functions which produce a product. It also utilizes a plan to compete and operate as a separate business or profit center. Divisional structure is based on external or internal parameters like product /customer segment/ geographical location etc.
Global Business Services (GBS) Model
Global business services (GBS) is an integrated, scalable, and mature version of the shared services model. Global Business Services Model is a result of shared services maturing and evolving on a global scale. It is represented by the growth and maturity of the Shared services to better service the global corporations they support.
In most of the automated financial systems, you can define more than 12 accounting periods in a financial year. This article will explain the concept of the adjustment period and the benefits of having adjustment periods. Adjustment periods have their inherent challenges for the users of financial statements and there is a workaround for those who don’t want to use adjustment periods.
Team-Based Organizational Structure
Team-based structure is a relatively new structure that opposes the traditional hierarchical structure and it slowly gaining acceptance in the corporate world. In such a structure, employees come together as team in order to fulfill their tasks that serve a common goal.
Concept of Representative Office
A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature.
Matrix Organizational Structures
In recent times the two types of organization structures which have evolved are the matrix organization and the network organization. Rigid departmentalization is being complemented by the use of teams that cross over traditional departmental lines.
There are two commonly used methods of accounting - Cash Basis and the Accruals Basis. Understand the difference between accruals and reversals. Recap the earlier discussion we had on accruals and reversals and see the comparison between these two different but related accounting concepts. Understand how the action of accruing results in reversals subsequently in the accounting cycle.
This article explains the process of entering and importing general ledger journals in automated accounting systems. Learn about the basic validations that must happen before the accounting data can be imported from any internal or external sub-system to the general ledger. Finally, understand what we mean by importing in detail or in summary.
GL - Different Type of Journals
Two basic types of journals exist: general and special. In this article, the learner will understand the meaning of journalizing and the steps required to create a journal entry. This article will also discuss the types of journals and will help you understand general journals & special journals. In the end, we will explain the impact of automated ERPs on the Journalizing Process.
Learn the typical accounting cycle that takes place in an automated accounting system. We will understand the perquisites for commencing the accounting cycle and the series of steps required to record transactions and convert them into financial reports. This accounting cycle is the standard repetitive process that is undertaken to record and report accounting.
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