A legal entity in Dynamics 365 for Finance and Operations (D365 F&O) is a separate and distinct business entity that has its own legal identity, financial structure, and tax obligations. In D365 F&O, a legal entity is used to represent a company or a business unit within a company.
Each legal entity in D365 F&O has its own unique financial statements, chart of accounts, and transaction data. It also has its own set of business processes, such as purchase and sales processes, that are specific to the entity.
Using multiple legal entities in D365 F&O enables organizations to keep separate financial records for each entity and allows for consolidated financial reporting across all entities. It also enables organizations to have different tax and legal requirements for each entity, making it easier to comply with local regulations.
In D365 F&O, legal entities can be set up and managed through the Legal entities form, which is located in the Organization administration module. Legal entities can be created, modified, and deactivated as needed to support the changing needs of your organization.
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Creating Legal Entity
In Microsoft Dynamics 365 Finance and Operation to create Legal Entity follow the below steps
Navigation: Module > Organization and Administration > Organizations > Legal entities
After selecting the legal entities option the following window appears which is a list of legal entities available in the system
On the left side of the window, you can see the list of companies/legal entities and on the right side you can see the basic details of the legal entity
To create a new legal entity select the +NEW option
Name: Company name can be alphanumerical
Company: Short identity of your company has a character limit of upto 4
Country/Region: Company physical origin, it is important to select the region of that company location
Select: OK
Fill in the basic details of the company
General is a fast tab and there are related fast tabs for each form
Memo: General description of the company
In hierarchy: this is enabled when the company follows workflow
Use for financial consolidation: this is used when a company has different legal entities/groups of companies that will be used for reporting. When this is activated no transactions will be allowed for this entity
Localized functionality region: based on the region selected, the system enables mandatory organizational requirements for reporting or any other requirements
Time zone: should select the company's physical location time zone
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