Explain the Meaning of Entity
A legal entity, otherwise known as a juristic person or juridical person, is a group or organization that is considered an individual for certain purposes. Companies, cooperatives, estates, political parties, churches, ships and vessels, trusts, organizations and small businesses are all considered entities. An entity, like a natural person, is able to enter into contracts, file (or be subject to) lawsuits, hold assets and property, and engage in other legal processes essential to doing business.
Other People Are Reading
-
History
-
One of the most cited precedents for considering entities legal persons was the 1886 U.S. Supreme Court case of Santa Clara County versus Southern Pacific. In this case, a railroad company refused to pay special taxes levied against it by claiming that doing so was discrimination and thus a violation of its constitutional rights, as defined in the 14th Amendment. The judge in this case stated famously, "The court does not wish to hear argument on the question whether the provision in the 14th Amendment applies to these corporations. We are all of the opinion that it does."
Limited Liability
-
One of the most important functions of entities is their ability to sue or be sued. For example, if a company causes injury to an individual, that individual would be able to collect from the corporation as opposed to from the employees or owners of the company. While a court could order the company to pay damages to the individual out of its own assets, the assets of the president of the company would be protected. This is known as limited liability.
-
Other Rights
-
As a juristic person, corporations, estates and other entities have certain protected rights according to U.S. law. For example, the U.S. Constitution stipulates that the government cannot take property away from an individual without providing compensation. This law also applies to companies and corporations. Entities are also guaranteed freedom of speech.
Limitations
-
In spite of being considered a juristic person, the law does not reserve certain rights to entities that are given to individuals. For example, a corporation is not allowed to marry, vote or hold public office.
Piercing the Corporate Veil
-
In spite of the protections from liability that corporations offer individuals, there are instances when a litigant can sue an owner or partner rather than the entity itself. For example, if an individual is grossly negligent, engages in malpractice, or is operating beyond the mission and purpose of the corporation, that person can then be sued directly. There are also corporate structures that deflect liability away from the entity and towards the individual, such as a Professional Corporation or a Professional Limited Liability Corporation. These types of entities are commonly organized by attorneys, doctors and other licensed professionals.
-
