What Is Legal Personality? [Physical And Juridical Person]

"what is legal personality? [physical and juridical person]

When you start a business, you choose a legal structure. Some legal structures are legal entities. That is, they have legal personality. 

Legal personality determines, for example, whether you are liable with your private assets or not and also, which taxes you have to pay. 

In this article, you are about to find out what legal personality is:

Who is a Legal Person In Law?

Before we find out the meaning of legal personally as it is used to describe businesses, let first understand who or what a legal person is.

A legal person is any human or non-human entity( in other words, any human being, firm or government agency) that is recognize as having legal rights and obligations such as; having the ability to enter into contracts, to sue and be sued.

To have legal personality implies to be able to exercise legal rights and duties under a particular legal system, such as entering into contracts, suing and being sued.

In international law, consequently legal personality is a pre-requisite for an international organization to be able to sign international treaties in its own name.

What Are The Types of Legal Personality? (differences between a Natural Person and A Juridical person)

There are two main types of legal persons which can be referred to as having legal personality. These are;

Natural persons (Physical person):

Natural person is a type of legal personality, referring to human beings having legal rights and obligations such as closing agreements, owning property, getting marry, inherit, be in debt, or draw up a will and earn money by working. 

Businesses such as a hairdresser, photographer, or accountant, are form of business without legal personality. Until this business are registered under the legal system of the country where it is operating before it can be call a legal entity.

A natural person is the sole owner of a sole proprietorship. There is no distinction between personal and commercial assets.

Juridical persons:

Another type of legal personality is a judicial person. Also called artificial or fictitious persons: These are group of persons treated by law as human beings. A fictitious person has certain rights, protection, privileges, responsibilities and liabilities under the law similar to those to poses by natural persons.

Types of Juridical Persons:

After looking at legal personality and its meaning in business, it is also important to know the forms of businesses considered by law as legal persons;  

  • Public limited company 
  • Private limited company 
  • Foundation
  • Association
  • Cooperative
  • Mutual insurance company
  • Religious communities
  • Statutory bodies (national government, municipalities, Regional Water Authority etc.)
  • Organizations that perform government tasks
  • Limited Liability Partnership (LLP)

How to Acquire Legal Personality

Natural persons acquire legal personality when they are born while a fictitious persons do so when they are incorporated in to a legal system. That is, registered according to the law.

The registration of a business requires certain documents and is best on the type of business structure. For example; a cooperation business requires the following documents; a certificate of incorporation, stockholders agreements, issuance of stock, organizational actions of the incorporator and first meeting of the board of directors and the by laws.

What are Rights and Obligations of a Legal Person?

Your company has legal ability if it is a legal entity. This means that your company can make decisions, have debts, and enter into agreements. Your company may also possess assets including real estate. 

For example, company assets such as machines, a cars, and equipment. But also debts and money in your company bank account, employment of new workers and payment of salaries. A legal entity is almost the same as a natural person in the perspective of the law.

What are Benefits of Having A Legal Status? 

A business with legal personality has the following advantages:

  • It can not be arrested or compared to remain present in court during criminal procedures. This is because it does not have a mind and so does not have the intension to commit a crime.
  • The debts of an incorporated body are not liable to the properties of its individuals.
  • It is easy for the business to borrow money from financial institutions such as banks and credit unions.

What are the Disadvantages of  A Legal Entity?

  • legal entities like a cooperation cannot married ,vote or hold public offices
  • If an owner provides primary services for a business and commits an act of negligence, the company and the owner can be held liable. An owner can also be personally held accountable for a company's debts if he gives a personal guarantee for business debts.
  • Legal entities like a cooperation are not easily switch from one line of business to another.

You may also want to read:

  1. What Are Different Types Of Banker- Customer's Relationships?
  2. Basic Strategies Use By Entrepreneurs To Grow In Business
  3. What Is Liquidation Of A Company And Under What Conditions Can Liquidation Occurs?

Final Thought of Legal Personality

According to this written articles, legal personality  is advantageous, reasons being that the wealth of individuals are not liable to the debts of the business. 

In addition to the above reason, it is also very easy to borrow money from financial institutions as a legal entity.

A firm/company that  has legal personality can not be imprison or compared to remain present in court during criminal procedure.