Legal Entities

A legal entity is an entity identified and given rights and responsibilities under commercial law, through registration with the territory's appropriate authority.

A legal entity can legally:

• Own property

• Trade

• Repay debt

• Account for themselves to company regulators, taxation authorities, and owners according to rules specified in the relevant legislation through balance sheets, income statements, specified reports, and so on.

The judicial framework may enforce their rights and responsibilities.

For your enterprise, a legal entity may help you with:

• Facilitating local compliance

• Minimizing the enterprise's tax liability

• Preparing for acquisitions or disposals of parts of the enterprise

• Isolating one area of the business from risks in another area

  For example, your enterprise develops property and also leases properties. You could operate these two businesses separately.

There are no predefined legal entities. Create all legal entities that apply to the enterprise you're setting up. Use the Manage Legal Entity HCM Information task in the Setup and Maintenance work area.

There are several things you need to consider when you define your legal entities.

• What roles will they play

• What types of legal entities do you need

• What registrations will they require

• What additional reporting information do you need

Roles of Legal Entities

In configuring your enterprise structure, the contracting party on any transaction is always the legal entity. Individual legal entities:

• Own the assets of the enterprise

• Record sales and pay taxes on those sales

• Make purchases and incur expenses

• Perform other transactions

Legal entities must comply with the regulations of jurisdictions, in which they register.

For example, Canadian companies can register in one province and do business in other provinces.

To support local reporting requirements, you create and register legal reporting units (LRUs) within a legal entity.

You are required to publish specific and periodic disclosures of your legal entities' operations based on the different jurisdictions' requirements. Certain annual or more frequent accounting reports are referred to as statutory or external reporting. These reports must be filed with specified national and regulatory authorities.

For example, you define the Provincial Medical Liability information at the legal entity level for the provinces of Manitoba, Ontario, Quebec, and Newfoundland and Labrador. Each province has different rules for processing the provincial medical liability. Provincial medical coverage for the four provinces are funded by the employer. Capture the account and rate details at the legal entity level.

All employers covered by the Employment Equity Act must submit the Employment Equity Report to the Minister of Labour on or before June 1st of each year. You define the NACIS code for the legal entity for reporting employee equity information.

A legal entity can represent all or part of your enterprise's management framework.

Types of Legal Entities

There are two types of legal entities.

This kind	Does this
Legal employer	A legal entity that employs workers.
Payroll statutory unit (PSU)	A legal entity responsible for paying workers, including the payment of payroll tax and social insurance. A PSU can pay and report on payroll tax and social insurance on behalf of one or many legal entities. That choice depends on the structure of your enterprise.

When defining a legal entity, consider the context in which it's used:

• If the entity is to be used in an HCM context, designate it as a legal employer. In an HCM implementation, it's mandatory to define legal employers.

• If the entity is to be used in a payroll context, designate it as a PSU for payroll processing and tax reporting.

• You can define a legal entity that's both a legal employer and a PSU.

• If multiple legal employers must be grouped together for tax reporting purposes, you can associate them all with a single PSU. If legal employers don't report together, they must be segregated by PSU.

Registrations

When you create a legal entity, the entity automatically establishes a registration with the identifying jurisdiction. Specify the Employer Account Number assigned by the Canada Revenue Agency in both the Legal Entity Registration Number field and the Employer Account Number field. If the legal entity interacts with other legal authorities, create additional registrations as appropriate. Tax registrations are done at the LRU, or PSU level.

Note: Capture the registration details using the Manage Legal Reporting Unit Registrations task. This task is located in the Setup and Maintenance work area.

Additional Reporting Information

When defining a legal entity, use the Manage Legal Entity HCM Information task in the Setup and Maintenance work area. Provide additional information required for HR and payroll reporting.

Use this task to provide the required information for Canadian statutory processing and reporting as shown in this table.

Report Name	Comments
Employment Equity Interface	Select the NAICS Code from the list of values for this legal entity.
Workers' Compensation	Define the Workers' Compensation information for each province in which the legal entity operates.
Provincial Medical	Define the provincial medical account information in the Provincial Medical Account Details section. Provincial medical is applicable only to these provinces where it's an employer liability, Ontario, Manitoba, Newfoundland and Labrador, and Quebec.

If the legal entity is also a PSU, specify:

• Fiscal Year Start date, and select the associated Legislative Data Group.

  Note: Associate the legislative data group at the PSU level .