Legal Persons: Natural and Legal

Subjects of Law

Law regulates relationships between subjects—those who have rights and bear obligations. Subjects are divided into natural and legal persons.

Natural Person

A natural person is a human being (citizen, foreign national, stateless person). From a legal perspective, every person possesses legal capacity (the ability to have rights and bear obligations) from the moment of birth, and capacity to act (the ability to independently perform legally significant actions) upon reaching 18 years of age (in most jurisdictions).

A natural person may conduct business as a sole proprietor (IP in Russia, sole trader in the United Kingdom, sole proprietor in the USA). The advantage is simplicity of registration and management. The disadvantage is unlimited personal liability for business debts.

Legal Person

A legal person is an organization that by force of law is recognized as an independent subject of law, separate from its founders and participants. This is one of the greatest inventions of law, enabling the concentration of capital and the distribution of risks.

Key characteristics of a legal person:

1. Organizational unity—the presence of a management structure
2. Asset separation—separate balance sheet, bank account
3. Independent property liability for obligations
4. Participation in civil turnover on its own behalf

Corporate Veil—the principle by which founders/shareholders are not liable for the debts of the legal entity. This provides limited liability. However, under certain conditions, a court may "pierce the corporate veil" and hold the founders liable—for example, if the company was used as an instrument of fraud or if personal and corporate assets were mixed.

Main Organizational-Legal Forms

Limited Liability Company (LLC)—the most popular form for small and medium business. Participants bear risk only within the limits of their contribution to the charter capital. Flexible management, does not require public disclosure of information.

Joint-Stock Company (JSC / Corporation)—a form for large business and attracting investment. The charter capital is divided into shares. Public JSCs can be traded on the stock exchange. More complex corporate governance: board of directors, audit, mandatory disclosure of information.

Partnership—common in common law countries for professional firms (legal, audit, consulting). In a general partnership, partners bear unlimited liability. LLP (Limited Liability Partnership) combines the flexibility of a partnership with limited liability.

Company in the UAE: choice between mainland (federal legislation, now 100% foreign ownership allowed) and freezone (special economic zones with benefits: DIFC, ADGM, JAFZA, and more than 40 others). In DIFC, companies such as DIFC Company operate—a hybrid with elements of English law.

Practical Assignment

You are about to launch an investment platform in the UAE. Compare three structure options: (1) mainland LLC, (2) DIFC company, (3) ADGM company. For each, indicate: minimum capital, director requirements, tax regime, ability to work with foreign clients.