Legal Entity vs Operating Units


Legal Entity

A legal entity is an organization, and or a company which is registered under the laws of a country having a legal structure. Legal entities can enter into legal contracts and legal entities are required to prepare statements that report on their performance.

To create or modify a legal entity:

  1. Click Organization administration -> Setup -> Organization -> Legal entities.

  2. To create a new legal entity, click New. The New legal entity form is displayed. Enter the required information for a legal entity. Enter information in the Name, Company, Country/region fields and then click OK.

 

In Ax 2012 companies are the only legal entities that can be created with a company ID. Company ID is a unique identifier for the data that is associated with the legal entity. A company can be associated with only one legal entity, and a legal entity can be associated with only one company.

 

  • Operating Units

An operating unit is an organization type which is used to divide the control of economic resources and operational processes in a business. Typically, people in an operating unit try to maximize the use of scarce resources, improve processes, and account for their performance.

In Microsoft Dynamics AX, the types of operating units include cost centres, business units, value streams, and departments.

  • Defining Operating Units
    1. Cost centre: Is an operating unit in which the managers are accountable for budgeted and actual expenditures. In other words Cost Centres are used for the management and operational control of business processes that span legal entities.
    2. Business Unit: Is a semi-autonomous operating unit that is created to meet strategic business objectives. Business units are used for financial reporting that is based on industries or product lines that the organization serves independently of legal entities
    3. Value stream: Is an operating unit that controls one or more production flows. Generally used in lean manufacturing to control the activities and the flows required to supply a product or service to Consumers.
    4. Department:  An operating unit that represents a category or a functional part of an organization that performs a specific task, such as sales or accounting. Department is also used to report on functional areas. A department might have profit and loss responsibility, and might consist of a group of cost centres
    5. Retail Channel: Is an operating unit that represents a retail store that is used to configure and manage stores. Retail channel can be used to create and configure retail stores, set the default company, warehouse, sales taxes and customer.

  • Creating Operating Units

 

    1. Create Cost Centre:
      1. Click Organization administration -> Setup -> Organization -> Operating units.
      2. Click New. Select Cost Centre as the operating unit type. Click OK.
      3. Define additional values to complete the setup.
    2. Create Business Unit:
      1. Click Organization administration -> Setup -> Organization -> Operating units.
      2. Click New. Select Business Unit as the operating unit type. Click OK.
      3. Define additional values to complete the setup.
    3. Create Value Stream:
      1. Click Organization administration -> Setup -> Organization -> Operating units.
      2. Click New. Select Value Stream as the operating unit type. Click OK.
      3. Define additional values to complete the setup.
    4. Create Department:
      1. Click Organization administration -> Setup -> Organization -> Operating units.
      2. Click New. Select Department as the operating unit type. Click OK.
      3. Define additional values to complete the setup.
    5. Create Retail Channel
      1. Click Organization administration -> Setup -> Organization -> Operating units, and then click New.
      2. Select Retail Channel as the operating unit type, and then click OK
      3. Define additional values to complete the setup.

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