A legal entity or rechts persoon is a group of people formed by law as a legal subject that can perform legal actions like humans. They can own property, enter into agreements, and perform actions that can give rise to legal relationships. The wealth of a legal entity is separate from the wealth of its members, so the legal entity can act through its administrators. A legal entity can also have rights and obligations separate from those of its members. It has important importance in the economic field, especially in trade. Thus, a legal entity can be considered as an entity that has assets, rights, and obligations like a private person.

An example of applying for a legal entity can be done with the following steps: first, draw up a notarial deed; second, register the legal entity with the office of the Registrar of the local State Court; third, request the ratification of the Articles of Association (AD) to the Minister of Law and Human Rights or the Minister of Finance for pension fund legal entities; fourth, publish in the State Gazette of the Republic of Indonesia.

There are many opinions on how legal entities can have the nature of legal subjects like humans. Various theories have been developed in academia to explain this. According to Salim HS, the theory of concession is the most influential theory in positive law. This theory states that legal entities cannot have legal personality such as rights, obligations, and property, unless authorised by the law, which in essence is the state itself.

Two types of legal entities are distinguished, namely:

1. Public Law Entity (Publiek Rechts Persoon) 

These are legal entities established for the benefit of the public or society at large. Public legal entities are legal entities established by the government or a management body assigned to it, such as the Republic of Indonesia, Regional Governments of levels I and II, Bank Indonesia, and State Companies.

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This is a legal entity established under civil or civil law that concerns the interests of many people within the legal entity. Private legal entities are private legal entities established by people for specific purposes, such as profit, social, education, science, and others according to legally applicable laws, such as limited liability companies, cooperatives, foundations, charities.

According to J.J. Dormeier, Legal Entities can be explained as follows: 

Legal Entities include human associations that act as one legal entity and foundations, which are assets used for a specific purpose. In addition to humans, Legal Entities in law have rights and perform legal actions like humans, and have their own assets, are represented by administrators, and can be sued or sued before a judge.

Legal entities can be divided into two types, namely public legal entities such as states, provinces, and districts, and civil legal entities such as limited liability companies (PT), foundations, and cooperatives.

From the explanation above, conclusions can be drawn about the definition of a Legal Entity as a legal subject which includes the following matters: 

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  1. groups of people (organisations); 
  2. capable of performing legal acts in legal relations; 
  3. owning their own assets; 
  4. has a caretaker; 
  5. have rights and obligations; 
  6. may be sued or challenged before the court. 

Also Read:  Complete Guide to Derden Verzet in Civil Law

As a legal subject, a Legal Entity must fulfil the requirements set out by law, namely: 

  1. has assets that are separate from those of its members; 
  2. The rights and obligations of the Legal Entity are separate from the rights and obligations of its members. 

There are four theories used as a requirement for Legal Entities to become legal subjects, namely: 

  1. Fictitious Theory which states that Legal Entities are only created by the state; 
  2. The Aimed Wealth Theory that only humans can be the subject of law; 
  3. Ownership Theory which states that the rights and obligations of the Legal Entity are essentially the rights and obligations of the members together; and 
  4. Organ Theory which states that Legal Entities are entities that are truly present in legal life.