Difference between legal and natural persons in Croatia
The terms fizička osoba (natural person) and pravna osoba (legal person) are often used in Croatian bureaucracy.
We constantly mention these terms in our articles, so you are probably wondering what the difference is between them. We certainly were. As we have well established, we are GIANT bureaucracy nerds. 🙂
The time has come to finally explain the meaning.
In this post, we cover:
- Definition of natural and legal persons
- What is legal capacity
- Rights of natural and legal persons
- Businesses according to the type of person
- Acquisition of rights and obligations
The facts are these…
What is the difference between legal and natural persons in Croatia?
Fizička osoba (natural person) is a human being who is a holder of rights and duties. Every living person is a natural person. A human becomes a natural person and acquires their legal capacity on the day of birth. A natural person ceases to exist on the day of death or after being declared dead as a missing person.
Pravna osoba (legal person) is an association of natural persons or property intended for a specific purpose defined by the law. A legal person is a social creation with a legal capacity, i.e. a corporation or foundation. It acquires legal capacity on the day of launch and loses it on closing day.
Relationship between natural and legal persons
Natural and legal persons are participants in obligatory relationships. Obligatory relationships between them can be created, changed, or terminated by taking certain legal actions. These relationships can also be consequences of other significant legal events.
Legal capacity is called pravna sposobnost in Croatian. Legal capacity is an ability that a natural or legal person must possess to participate in obligatory legal transactions.
Below are some examples of legal capacity:
- Purchase of a property – View a guide here
- Taking a loan from a bank – View a guide here
- Opening a bank account – View a guide here
It is important to know that legal capacity and business capacity are two different things.
Business capacity is the ability of a natural or legal person to acquire rights and obligations by their own will and enter into legal transactions. It requires the existence of legal capacity since only the entity that can acquire rights and obligations can create rights and obligations by its declarations of will.
There are some differences between natural and legal persons regarding business capacity.
Legal persons have no limit to business activity due to their age.
On the other hand, natural persons can have limits due to their age. They can have:
- Full legal capacity – Acquired when a person turns 18 years of age or with the exception of minors if they get married
- Limited legal capacity – In cases when natural persons can perform businesses only under certain assumptions
- Children who are, in certain cases, authorized to make declarations of intent with legal effects before they turn 18, depending on their age, maturity, and ability to reason (for example, to acknowledge motherhood or paternity, make a will).
- People who are unable to take care of their rights, needs, or interests due to mental disorders or other reasons, or if they endanger other people. Guardians perform legal tasks instead of them, but they perform other actions and procedures independently.
- Completely incapable of business – Minors under the age of 18
Natural and legal persons have certain rights as participants in obligatory relationships. They have the right to protection of their personal rights under the assumptions defined by the law.
We list their basic rights below.
Rights of natural persons in Croatia
Natural persons have the right to:
- Physical health
- Mental health
- Privacy of personal life
- Privacy of family life
Rights of legal persons in Croatia
Legal persons have the right to:
- Company name
- Business secret
- Freedom of business
In Croatia, it is possible to launch a business in the form of a natural or legal person.
Natural persons are:
- Trade business (obrt) – view a guide here
- Flat-rate trade business (paušalni obrt) – view a guide here
- Family farm (OPG) – view a guide here
- Self-employment (samostalna djelatnost)
Legal persons are:
- J.d.o.o. – view a guide here
- D.o.o. – view a guide here
- Cooperative (zadruga)
- Non-profit organization (udruga) – view a guide here
Natural and legal persons are liable for obligations with their own property. Their rights are separated, and everyone is responsible for their obligations.
Let’s explain this further with an example.
A d.o.o. is a legal person that is owned by its owners, who are natural persons. A d.o.o. is a completely separate person, and it can acquire rights and take responsibilities independently. It can be an owner of movable and immovable property, and it can sue other entities, but also be sued by other entities.
If you are an owner of a d.o.o., you are not personally liable for the obligations of your d.o.o. Your company and you are two separate entities. Therefore the company is protected from its owners, and owners are not responsible for the obligations of the company. However, if you abuse this right, you will be responsible for the obligations of your company.
An obrt, on the other hand, is not a traditional company. It is connected to a specific person and their personal OIB, and it is considered to be a natural person. Obrt can’t live without his owner, and it lives and dies with them.
The owner of obrt is personally responsible for the liability of obrt and doesn’t have protections like d.o.o. This means that if something goes wrong, the owner will have to take the money from their own pocket to help out their obrt.
View our other legality posts
- Apostille versus full legalization of government documents
- Business trade categories in English and Croatian
- Croatian business buzzwords to know
- How to create a legally binding contract in Croatia
- How to get something notarized
- Types of businesses in Croatia
- What is fiscalization and why does it matter to business owners?
Please note: Information provided by Expat in Croatia is only for the purposes of guidance. It does not constitute legal or financial advice in any form. Croatian laws and bureaucratic rules often change, and each personal case is individual, so different rules may apply. For legal advice, contact us to consult with a licensed Croatian lawyer. For financial advice, contact us to consult with a licensed Croatian tax advisor or accountant.