Definition
A legal entity is a company or other organisation that the law recognises as separate from its owners, able to sign contracts, own assets, owe debts and be taxed in its own name.
What is a legal entity in an ERP?
In accounting and ERP, each legal entity keeps its own books, registrations and tax filings. A branch registered under the parent’s licence may not be a separate legal entity, while a subsidiary always is. Getting this right decides how many sets of books, tax registrations and document number series you need.
Example: a family group runs a mainland company in Dubai, a free-zone company in Jebel Ali and a company in Riyadh: three legal entities, three sets of books and two currencies.
Brands and trade names aren’t legal entities. A system that holds several of them is multi-entity, and each one keeps its books in its own functional currency.