Legal personality
In one sentenceA legal status that makes the company an entity independent of its owners, with its own finances, name, and the right to contract and to sue and be sued in its name.
Simply put
Because the company is a legal person, its assets and debts belong to it, not to its owners: it contracts, borrows, and is sued in its own name. This personality usually begins when the company is entered in the commercial register.
This is the basis of the entity concept: the company's books record only its own transactions, and any amount the partner takes or pays is recorded in their current account and not mixed with the company's expenses.
Example
A partner bought a car for his family from the company's bank account. The car is not an asset of the company because the company is a person independent of the partner, so the accountant records the amount in the partner's current account, not under assets.
Don't confuse it with
Sole proprietorshipA sole proprietorship has no legal personality, so its finances are its owner's finances.