At the dawn of my entrepreneurial activity, the question arose before me: IP or LLC, which is better to open? And I'm glad I did in my time right choice.
In Russia, it is impossible to just take and engage in entrepreneurial activity. Acting without proper training, you risk falling into the field of view of the ubiquitous "competent authorities".
What happens if you do not comply with the requirements of the state and do not register? At a minimum, you will pay a fine of five hundred to two thousand rubles. But if your business is successful and the total amount of money that has passed through you exceeds one and a half million rubles, then you are threatened with an article of the criminal code for illegal business.
To understand that registering for a business opportunity is not as difficult as it might seem at first, consider the ways of doing business in two ways - by organizing a society with limited liability and become a sole trader.
IP or LLC which is better to open, their main differences
- To allow doing business, the state obliges to go through a simple registration procedure. The citizen has two options:
- become individual entrepreneur(IP), having received a permit for the right to engage in business, which is issued to him as an individual;
- register a legal entity, namely - limited liability company(LLC), that is, a certain “virtual personality”, on behalf of which he will do business. A legal entity has entrepreneurial status by default.
So, the main difference between IP and LLC is their legal status. - this is an individual, a person registered with the tax office as an entrepreneur; LLC is a separate legal entity that has its own property, rights and obligations.
Here we will consider only the main differences between the taxation of LLC and IP.
Insurance premiums
Individual entrepreneurs must transfer funds to off-budget funds (PFR, MHIF), i.e. health insurance contributions and your future pension.
- The amount of these deductions is fixed annually and in 2016 is:
- RUB 19,356.48 in Pension Fund
- and 3,796.85 rubles. to the Compulsory Medical Insurance Fund.
The LLC does not pay these contributions, but makes similar contributions to the same funds for each employee.
taxes
The amount of taxes paid does not depend entirely on the organizational or legal form, but on the chosen tax regime.
- In Russia in 2016 five tax regimes are legally defined:
- general system taxation (DOS);
- simplified taxation system (STS);
- single tax on imputed income (UTII);
- unified agricultural tax (USHT);
- patent system of taxation (PSN).
- Each of these modes has its own characteristics and conditions of use, requiring separate detailed consideration. Let's just focus on the main features:
- the patent system is not available for LLC, it can only be used by individual entrepreneurs;
- on a simplified system, a single agricultural tax and a single tax on imputed income, the rates are the same for all forms;
- when working under the general taxation system, there are differences - income tax for individual entrepreneurs is 13%, and the income tax that replaces it for LLC is 20%.
Payments for employees
Taxes and payments for their employees for individual entrepreneurs and LLCs are completely the same, the legislation of the Russian Federation does not distinguish between these organizational and legal forms.
Registration of IP and LLC, which is easier?
To evaluate which form to choose, consider the main differences between individual entrepreneurs and LLCs at the stage of creation and registration.
Documents required for registration
- As the name itself implies, only one person, the applicant himself, can be an individual entrepreneur. For its registration in tax office Only three documents are submitted:
- application for registration;
- a copy of his passport;
- receipt of payment of 800 rubles of state duty.
- Having come up with an LLC to open, you will have to submit a different set of documents to the tax office:
- application for registration;
- minutes of the meeting of founders, if there were several, or a decision on the creation, if the founder is one person;
- memorandum of association and the charter of the LLC;
- copies of the founders' passports;
- receipt of payment of 4,000 rubles of state duty.
In addition, after registering an LLC within 4 months, you will need to pay authorized capital- not less than 10,000 rubles. The authorized capital for IP is not required.
Legal address
- When registering an LLC, it is necessary to determine its legal address. The future company has several options for obtaining an address:
- rent or purchase of office space;
- use of the apartment, i.e. home address of the founder;
- purchase legal address in the business support center or in a specialized organization.
The choice of one method or another depends both on the financial capabilities of the founders and on the type of activity of the LLC.
If you are going to register an LLC that requires the mandatory availability of premises, for example, you will repair household appliances or provide hairdressing services, it is better to use the first method. However, it should be borne in mind that in the event of a forced change of office, changes will have to be made to the statutory documents.
If you plan to provide advisory services and you do not need a special room, then the second and third options are quite suitable.
An individual entrepreneur is registered only at the place of his residence. If the future individual entrepreneur has been working for a long time and lives in another city, then he will have to apply to the tax office precisely by registration. Such registration does not impose any restrictions on where the IP will work. He, without any additional notifications and permits, can provide his services in any region of Russia, but he will have to submit reports at the place of registration. However, with the help of Internet services, this is now easy to do.
Features of hiring employees for individual entrepreneurs and LLCs
An individual entrepreneur can conduct his activities without employees. If there is a need to hire employees, then it is easier to conclude with them not employment contracts, but work contracts, paying fixed amount and giving them the opportunity to pay all the necessary payments to the tax office. In the case when an individual entrepreneur still needs to recruit staff, then it is enough for him to register with the tax office as an employer.
LLC is registered as an employer immediately upon registration, because. it must have at least one employee - its director. In the future, the obligations of employers for LLCs and individual entrepreneurs are the same.
Property liability of an individual entrepreneur and a member of an LLC
When choosing an LLC as an organizational and legal form, it is necessary to clearly understand that legal entity much more responsibility than the IP. In addition, according to the provisions of the Code of Administrative Offenses, a fine can be imposed not only on the organization, but also on responsible persons organization - chief accountant and director.
But on the other hand, an LLC can only be liable for its obligations with its authorized capital and its property, its founders do not risk anything, except for the loss of this particular LLC. But individual entrepreneur always forced to answer with his own property, up to a car and an apartment.
Thus, it is impossible to say unequivocally which is better, an individual entrepreneur or an LLC. Each time the choice is unique, and you will have to choose the best option for yourself, which reflects both the characteristics of the business and the character of the businessman himself. In any case, choosing organizational form only one advice is effective: a novice businessman must decide for himself which form to choose, since only he will have to regularly make responsible decisions.
Denis Konovalov
Denis Konovalov
Oksana Veksheneva
Oksana Veksheneva
Edgar
Edgar
Alexey Litvinenko
Alexey Litvinenko
We have already mentioned that when opening a business, first of all, thoughts begin about which organizational and legal form to choose for the activities of the future business: (IP) or (LLC).
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Each of these organizational and legal forms has both its advantages and disadvantages. To make it easier for you to navigate, let's look at each of these forms. Let's take a closer look at IP and LLC.
Limited Liability Company or Sole Proprietorship?
At a certain period of our lives, each of us thinks about the purpose and prospects of our existence, as well as about what the chosen way of life will ultimately lead to. And in this case, the depth of philosophical reflection is not so important; the main thing is that such thoughts lead to self-development and improvement. So, for example, many eventually become disillusioned with the professions and positions they once chose, and daily work becomes like hard labor given, as if, as a punishment for any sins. This situation is quite common in modern society, but even from it you can find a way out if you really try. It is worth at least looking around yourself, “digging” into your desires and aspirations, identifying the skills given by nature, directing all this in the right direction. One of best options development in this situation - a change in the type of activity, or rather its essence. Perhaps, having stopped working for someone else's "uncle" and starting his own own business, you will be able to "spread your wings", and, as if taking a breath of fresh air after a long confinement, you will find the strength in yourself for a new, promising life!
Where should you start if you want to run your own business?
On the one hand, organizing your own business is, at first glance, a simple, uncomplicated process that requires only banal obedience to generally accepted laws and rules. However, it is worth at least partially immersing yourself in this process on your own, as it immediately becomes clear that it requires considerable endurance, patience, diligence and, of course, skills corresponding to the field of the chosen activity. And this means that the desire to start running your own business, perhaps, will not be enough for this business to be successful as a result.
The most difficult thing in this case is the first step, that is, the final decision to start your own business. Indeed, in this case, one will have to radically change psychology, which implies taking responsibility for own work, a kind of "dispossession" and leaving for "free swimming" (it often happens that it is at this stage that such a lofty and noble idea remains at the stage of idea).
LLC: concept and features
To date, the most popular and, to a certain extent, “universal” way of running your own business is considered. At the same time, it is considered universal both due to the initial registration and due to subsequent work. And it so happened that due to this circumstance, the registration of an LLC today is most popular among novice businessmen. In this context, it is also worth noting that the registration of an LLC, in comparison with the registration of others, is the least expensive, which should also be attributed to its undeniable advantages.
A distinctive feature of a limited liability company is that the participants in such a company are liable for their obligations directly within the authorized capital. In other words, we can say that - this is the sum of the shares of the LLC participants. It must be said that the shares of LLC participants are not any securities, which means that they are not subject to securities legislation, and for this reason, an increase in the authorized capital is much faster and easier than, say, in a closed joint stock company(COMPANY). However, there is a less pleasant difference between an LLC and other organizational and legal forms: the fact is that relations between LLC participants of any nature and transactions relating to their shares in the authorized capital are more closed than in a CJSC. So, for example, the LLC regulations introduce certain prohibitions and restrictions for the entry of new participants into its composition. In addition, according to the charter of an LLC, there may be a certain procedure for distributing profits between its founders. However, despite all these restrictions and specific characteristics, LLC today is one of the most common forms of doing business, and information regarding LLC participants is included in the Unified State List of Legal Entities and is publicly available to everyone.
Speaking in specific legal language, it is worth noting that, in accordance with the law Russian Federation a special registration procedure has been established and is in effect, which is common to all legal entities. Thus, state registration is carried out by a specially authorized federal executive body. Since July 1, 2002, the Ministry of Taxes and Duties has been considered such body. And, as mentioned earlier, in most cases, for a number of objective reasons, novice entrepreneurs in the Russian Federation decide to register an LLC.
How to register an LLC from scratch?
If you decide, then you must certainly and under any circumstances pay attention to several points that are mandatory for consideration: this is the direct preparation of the documents that will be required for registration, and the passage of all instances in the order that is also legally established. If you treat both of these points with due care and responsibility, then registering an LLC will not take you much time and effort.
The first thing that was said is compilation and collection. In principle, this stage should be singled out as a separate and very important one, since the number of days or months you spent on registering a company, as well as the quality of its further activities, will depend on it. The fact is that even seemingly minor errors and blots can lead to the fact that the documents you submitted will be returned in the best possible way with stingy explanations and clerical wording, which will mean an irretrievable loss of time and re-submission of documents. However, this is far from the worst thing that can await you in case of incorrect or inattentive preparation of documents. If any errors or blots were not identified and corrected in a timely manner, they can significantly complicate the activities of the company, and hence your life as a whole in the future. So, as a result, you face a certain number of fines and the loss of the corresponding amount of money, the inability to carry out certain actions in the status of a legal entity, as well as a qualified government agency"gross violation". And all this is possible even due to a couple of seemingly insignificant errors in the process of collecting documents and filling them out!
IP: concept and features
No less popular today organizational- legal form Sole proprietorship is considered, the main advantage of which is unlimited choice. So, having registered yourself as an individual entrepreneur, you can hire a whole staff of employees, take contracts and much more. For commercial organizations and enterprises that operate in the field of small and medium-sized businesses, this form is optimal today.
First of all, this is an individual engaged in entrepreneurial activity. However, as in the case of an LLC, this individual must register his enterprise in the manner prescribed by law. However, one of the main ones is that, having decided to register an individual entrepreneurship, it is not at all necessary to register it as a legal entity. Moreover, earlier this organizational and legal form did not need to create a legal entity at all and was called an entrepreneur.
The second concept that follows from the concept of an individual entrepreneur is entrepreneurial activity. This concept is understood commercial activity which is aimed at generating income through the use of property, as well as through certain jobs for the provision of relevant services and the sale of goods. The legislation of the Russian Federation clearly regulates entrepreneurial activity.
This article talks about typical ways to resolve legal issues, but each case is individual. If you want to know how to solve your particular problem - contact our consultant for FREE!
It should be noted that a certain responsibility is assumed for violation of the norms of legislation on registration and business activities. So, if an individual did not register his entrepreneurial activity or filed it with any violations, or if the documents submitted during registration contained any false information, then this individual will be obliged to pay a fine in the amount of 5-20 minimum established laws. wages. Thus, the law clearly establishes the procedure for registering individual entrepreneurship.
How to register an individual entrepreneur from scratch?
Registration of individual entrepreneurship, of course, has its own certain advantages. So, an individual entrepreneur receives a simplified procedure for working with cash, work with tax reporting is also simplified, and accounting records are not required at all. Also, unlike an LLC (Limited Liability Company), it is not required to pay certain taxes such as property tax and income tax.
If you want to register an individual business, keep in mind that this happens at the address of the place of permanent registration, and not at the legal address, since this concept is basically absent. The first thing you will need to do when registering is to decide on the principle of taxation. In this case, it means that at the first stage of registration you will have to choose one of the possible types of taxation -, as well as general type. Having decided on the types of taxation, proceed to the selection of types economic activity according to . After paying the state fee and submitting, within five working days you can expect the completion of registration.
Differences between LLC and IP
The listed organizational and legal forms, as mentioned earlier, have their advantages and disadvantages, similarities and differences. For a better understanding of the essence of both forms, consider their main differences. So, the main difference between an LLC and an individual entrepreneur is the level of responsibility to creditors. So, if any LLC is declared bankrupt, and the company's property is not enough to pay off its debts, the founder will be obliged to pay creditors only an amount that will not exceed the authorized capital. An individual entrepreneur, on the contrary, pays off his debts at the expense of all his property. And in this case, it is obvious that LLC is more profitable than IP. However, the administrative responsibility to which an individual entrepreneur is subject is lower than in the case of an LLC, which introduces a certain dissonance in the issue of identifying greater benefits between an LLC and an individual entrepreneur.
The next difference between an LLC and an individual entrepreneur is the taxation system. So, if it is selected during the registration of an LLC, then the amount of money that will have to go to pay taxes will be higher than in the case of an individual entrepreneur, since it will be necessary to maintain accounting records that involve the submission of many reports, which means that the presence of an accountant is vital. However, the situation will change if the LLC chooses during registration. In this case, it will not be necessary to maintain accounting, and the reports submitted to the tax office will be standard, not very different in volume from the reports submitted to the IP. And this means that when choosing an LLC of a simplified taxation system, the disadvantage described above will no longer be relevant.
Also, the difference between the two organizational and legal forms from each other can be found in the case of the sale of the company. So, from the legal point of view, selling a share in an LLC is quite simple, since there is a so-called assignment of a share in the authorized capital by the seller to the buyer. This whole process takes about three weeks (after the transaction is notarized, it will be possible to obtain new documents for the new owner from the tax office). In the case of an individual entrepreneur, everything is not so simple, since selling individual business can only be in the form of property, and this from the legal side causes certain difficulties. Therefore, people who want to sell their business in the future, as a rule, draw up an LLC.
LLC or IP? The ultimate choice for the best
In the process of doing business, problems can arise quite unexpectedly and "break" all current plans (it is worth at least remembering the recently ended global financial crisis). And since no one is immune from them, it is worth thinking about this in advance when choosing the organizational and legal form of activity. So, we recall once again that in the event of problems of any nature, the founder of an LLC will lose only his share in the authorized capital of an LLC, while an individual entrepreneur will be much less lucky, since in the worst case he may lose his property, including a car and even apartments.
However, considering the registration process, one should pay tribute to the IP, since it is both easier and cheaper to register it (you will only need to pay a state fee, and the set of required documents is limited to a passport). In the case of an LLC, you will need to present founding documents society, and this is the charter, as well as the memorandum of association. By the way, the amount of the state fee that will need to be paid during the registration process in the case of an individual entrepreneur will be much less than in the case of an LLC.
Thus, the main similarities and differences between an LLC and an individual entrepreneur are listed above, as well as their characteristics, after analyzing which you can draw conclusions about the advisability of registering these organizational and legal forms. And the decision made as a result will certainly become the basis for your business!
So what to choose? Let's present the similarities and differences of both forms in a table for clarity. The difference between IP and LLC is obvious
IP or LLC: differences and difference
| IP | OOO |
|---|---|
|
|
After you have decided on the legal form of your business, you should pay attention to and, because. an individual entrepreneur has a number of restrictions in certain areas of activity.
Often, when planning to open your own business, the question arises: what is better to register: an individual entrepreneur or an LLC? These forms of business have their advantages and disadvantages. There are many differences between them. Therefore, before deciding what form the business will take, it is worth understanding all this.
What is IP: pros and cons
Sole Proprietor or Sole Proprietor for short. business person. Any citizen of the Russian Federation can become an individual entrepreneur, if there are no restrictions by a court decision. Even minors can become IP. True, there must be the consent of the parents / guardians. But there are categories of people for whom entrepreneurial activity is either prohibited or has restrictions. Such persons include:- civil servants; military; foreigners, in the absence of citizenship; minors without permission.
What is an LLC: advantages and disadvantages
A limited liability company is abbreviated as LLC. This is a legal entity formed by founders - individuals and legal entities. There may be one founder, it is not necessary to have several. The advantages of an LLC include the following:- 1. Liability for debt obligations is related to the contribution that the founder made to the authorized capital. Therefore, the founders do not risk their own property.2. The participant can sell/transfer his/her share in the authorized capital.3. LLC is both sold and bought.4. In LLC, losses of previous years can be covered by profit current year. This will reduce income tax.5. Contributions to the Pension Fund are related to the profit received during the reporting period.6. To represent the interests of an LLC, a power of attorney certified by a notary is not required. A power of attorney from the company will suffice.
- 1. Registration of an LLC takes a longer time.2. There are restrictions on the amount of established capital, it must be at least 10 thousand rubles3. A seal and a current bank account are obligatory for an LLC.4. Profit must be distributed every quarter once. It turns out that it is not possible to use it immediately.5. For LLC accounting and reporting are mandatory.6. The activities of an LLC can be carried out not only on the territory of the Russian Federation, but also abroad. For this, branches and representative offices should be created. The necessary changes must be made in the founding documents.7. Lengthy liquidation process. The time frame can take up to 6 months. Moreover, the liquidation of an LLC is costly in itself. It will be necessary to submit an advertisement in a special edition, pay off debts to creditors, provide employees with severance pay, calculate the interim and liquidation balance.8. For an LLC, it is necessary to come up with a name.9. The patent system of taxation is not available.
What is the difference between sole proprietorship and LLC (table of differences)
There are many differences between an LLC and a sole proprietorship. They are shown in the table below.| IP | OOO |
|---|---|
| There is no potential for further development as such | There is potential for the future development of the company |
| If there are debts, the individual entrepreneur is responsible for them with his own property | Less property risk in the presence of debts. If there are debts, only the authorized capital of the founder is taken into account |
| One owner | There may be multiple owners |
| Not equity participation in business | Shares in the business will be distributed among partners in proportion to their participation in the authorized capital |
| No stamp or bank account required | A seal and a current account are a prerequisite for an LLC |
| Activities are carried out only in Russia | LLC can conduct its activities both in Russia and abroad |
| No authorized capital, charter | Authorized capital is required - at least 10 thousand rubles. A statute is also necessary |
| No establishment agreement required | Establishment agreement required |
| Fixed tax to the Pension Fund, regardless of whether there was a profit or not | Tax to the Pension Fund is calculated from existing profits |
| No need to keep tax records | Need to keep tax records |
| If there are administrative violations, the amount of the fine is not large | Large fine for administrative violations |
| No workers needed | Must have staff |
| When calculating personal income tax, losses of previous years are not taken into account | To reduce income tax, you can cover the losses of previous years with this year's profit |
| Restrictions in areas of activity | No restrictions in areas of activity |
| You can withdraw revenue without reporting at any time | You can not use the profits at any time at will |
| Sole Proprietor runs the business independently | An LLC can appoint a director |
| Closing speed | Long closure |
| No distribution of dividends | Distribution of dividends quarterly. There is also a 9% tax. |
| No opportunity to sell IP | You can sell a share |
| IP is a less solid organization | LLC implies greater solidity |
| No need to follow the order of conducting cash transactions. Can work with cash | LLC must adhere to the procedure for conducting cash transactions. That is, the proceeds in excess of the established cash limit must be transferred to the bank to the current account |
| No need to pay property tax, which will be applied in the conduct of business | Tax on property used in the conduct of business must be paid |
| Registration in a short time | Registration duration |
| Low registration cost | High cost of registration |
| No need to legalize equipment | The equipment involved in production must be legalized |
| Can't attract investors | Can attract investors |
| Fewer taxes, reduced tax rates | More taxes. Higher rates |
| IP registration takes place at the place of residence indicated in the passport | Registration takes place at the legal address |
| An individual entrepreneur can be an employer and employ staff. But he cannot employ himself, formalize work book | LLC is an employer that hires staff. Moreover, the founders themselves can be employees in their own LLC |
What is easier to open, what you need to register LLC and IP
It is much easier to open a sole proprietorship than an LLC. The fact is that to open an IP you need a lot fewer documents than when opening an LLC. The timing also differs. The following documents are required for registration of IP:- passport: original and notarized copy; application for registration certified by a notary; payment of the state fee (receipt of this); certificate of registration with the tax authorities.
- the legal address of the LLC; the number of founders and their passport data; the size of the authorized capital; the distribution of shares between the participants.
- application with the applicant's signature on state registration of a legal entity. persons (form No. З11001); protocol/agreement on the decision to create a legal entity. persons; constituent package of documents; payment of state duty (receipt). Its cost is higher than with IP - about 4 thousand rubles.
Does the type of activity matter when choosing an individual entrepreneur or LLC
It has, since there are a number of restrictions. If you plan to create big business, then it is best to register an LLC. Many individual entrepreneurs, planning to reach a new level of conducting their activities and expanding their scale, liquidate their individual entrepreneurs in order to create an LLC. Thanks to an LLC and its full-fledged personnel policy there is an opportunity to attract the necessary specialists, which will affect the entire activity of the company as a whole. When deciding what to choose: an LLC or an individual entrepreneur, you should be aware of the restrictions on types of business. So, individual entrepreneurs cannot be engaged in the production / sale alcoholic beverages, conduct activities of pawnshops, tour operators, engage in insurance and banking activities. The production of medicines, weapons, aircraft and pyrotechnics is also prohibited. If you plan to open a business related to these areas, you will have to register an LLC. So which is better: an individual entrepreneur or an LLC? Everyone should decide this on their own, taking into account the advantages and disadvantages of these forms of business, their features. It is also necessary to take into account what volumes are expected in the future business, the type of its activity and other factors. Only after weighing the pros and cons of one and the other forms of business, it is worth making a final decision: what to open an LLC or an individual entrepreneur in order not to take unnecessary actions.
This question is asked by many businessmen at the beginning of their journey. In this article, we have collected information about the differences between IP and LLC.
You will not find advice here, because each case is individual, but this information will help you navigate and make a choice.
Registration of an individual entrepreneur or LLC
Already at this stage, one can understand how much more bureaucratic the work of legal entities is compared to entrepreneurs.
The registration package for an individual entrepreneur is just one application, a receipt for payment of the state duty and a copy of the passport.
To register a legal entity, in addition to the application and receipt of payment, do you need to provide at least the minutes of the meeting of the founders or the sole decision of the participant? a document on the basis of which a legal address and a charter are assigned.
An organization can be registered in any region where there is a rented premises or property. An individual entrepreneur is always registered at his home address and reports to the tax office at the place of registration, even if the business is conducted on the other side of Russia. The exception is business on UTII and PSN.
But entrepreneurs do not need to open separate subdivision to do business in another region.
Finally, the fee for registering an individual entrepreneur is only 800 rubles against 4,000 for registering an LLC.
Activities
Individual entrepreneurs do not have the right to engage in certain types of activities.
Among them:
Banking, investment funds, pawnshops, private pension funds, mutual funds, etc.;
. production and sale of alcoholic beverages (except beer);
. drug production;
. gambling;
. production, sale, repair, development and testing aviation technology;
. private security activities;
. media activities;
. production, trade military equipment, weapons and their components.
Number of participants and management decisions: pluses of IP and LLC
If the business is organized not by one, but by several people, then only an LLC will allow them to officially fix the right to a share in the business.
The entrepreneur's business belongs only to him alone, and up to 50 people can enter the company, and everyone will be entitled to a part of the profit proportional to his contribution to the authorized capital. At the same time, any important decision will have to be coordinated with the rest of the participants and documented in the minutes of the meetings.
The individual entrepreneur makes all decisions individually and does not have to coordinate them with anyone.
If there is one participant in the LLC, then he also makes decisions alone, but must document the decisions.
Taxation and special tax regimes. Which is more profitable: sole proprietorship or LLC
The difference in tax rates is only in the general taxation regime: organizations pay 20% income tax, and individual entrepreneurs 13% personal income tax. For other taxes, the rates do not differ.
Both individual entrepreneurs and LLCs also have the right to apply special tax regimes. The exception is the patent system, which can only be used by individual entrepreneurs.
The simplified tax system for individual entrepreneurs is different in that entrepreneurs submit a tax return a month later than legal entities - not until March 31, but until April 30. Also, entrepreneurs can switch to the simplified tax system without complying with the income limit for 9 months of the previous year.
Tax reporting
For property, land and transport taxes, entrepreneurs do not submit tax returns. They make payments based on notifications from the IFTS.
Legal entities calculate the payment themselves and are required to submit declarations.
Accounting
In this matter, individual entrepreneurs have an advantage, which for many turns out to be decisive.
Individual entrepreneurs are not required to keep accounting records and submit financial statements.
For legal entities, these are mandatory procedures.
Cash discipline
Individual entrepreneurs are exempted from the obligation to observe cash discipline.
For them, the execution of incoming and outgoing cash orders, maintaining a cash book is a voluntary matter.
Profit withdrawal
Here, too, everything speaks in favor of individual entrepreneurship.
All the proceeds of a businessman belong only to him, it can be disposed of at any time and in any way. At any time, you can withdraw money from your current account and spend it at your discretion for any purpose, both personal and business-related. In this case, the income is taxed only once.
You can't just use LLC's money. The founder can receive them when paying dividends or wages(if it is in the staff of the organization or provides services under the contract). At the same time, the profit of the enterprise is first taxed depending on the taxation system, and then personal income tax is withheld from the part that was paid to the founder.
Replenishment of funds
Just as in the case of the withdrawal of profits, individual entrepreneurs are free to replenish their current account with personal money when necessary. This will not be considered income and will not be taxed.
You can replenish the company's current account with the founders' money only in strictly defined ways:
Additional contribution to the authorized capital;
. financial assistance of the founder;
. founder loan.
Responsibility for obligations
There are disadvantages for both IP and LLC.
The fattest disadvantage of sole proprietorship is that he risks almost all his property in case of failure. "Almost" everyone, because the last housing, land, livestock will not be taken away. More about inviolable property in paragraph 1 of Art. 446 Code of Civil Procedure of the Russian Federation. All other property, even not related to the business, the individual entrepreneur may lose if he cannot pay debts to creditors.
A limited liability company is called so because the founders are liable only to the extent of the property owned by the company.
There is one big "But".
This rule only applies if the firm has become insolvent due to external causes independent of the founders. If it is proved that the insolvency was caused by the actions of the founders, they will bear subsidiary liability. In this case, the personal assets of the company's participants will also be used to pay off debts.
Insurance premiums
Regardless of the amount of income and whether an individual entrepreneur conducts business or not, he must pay fixed insurance premiums for himself. Individual entrepreneurs, in addition to this, pay insurance premiums for employees.
An LLC pays contributions for employees, but if the company has one founder who works without an employment contract, then there will be no contributions.
Attracting hired labor
Both entrepreneurs and organizations can hire as many workers as they need.
At the same time, regardless of the status of the employer, it is necessary to withhold personal income tax from accrued wages, as well as transfer insurance premiums for employees at your own expense.
If there is at least one employee, the employer submits reports on insurance premiums to the IFTS, PFR and FSS. There is no difference between sole proprietorship and LLC.
Attracting investments
This is where organizations win.
An investor can become a member of an LLC and have a share in the profits.
An individual entrepreneur cannot give away a share of his business, so he will have to manage with loans and credits.
Penalties
It’s a shame, but often for the same violations, fines for individual entrepreneurs and LLCs are different.
Sanctions for organizations are stricter, while in addition there may be separate fines for managers and other officials of the enterprise.
Liquidation
Having decided to stop the business, the entrepreneur must only write an application, pay off tax debts, submit reports and pay the state duty.
The liquidation of a company is a long story, which includes, in addition to paying a fee, several events:
Drawing up a decision on liquidation, creation liquidation commission;
. filing an application with the tax office;
. publication in the Bulletin state registration»;
. notice to creditors;
. submission of interim and final liquidation balance sheets.
As soon as you decide what is better to open: an individual entrepreneur or an LLC, you can apply for free registration documents in
09Mar
Hello! In this article we will talk about what is better to open: an individual entrepreneur or an LLC in 2018.
Today you will learn:
- Advantages and disadvantages in opening an individual entrepreneur and LLC;
- What form of ownership is suitable for;
- Is it possible to open an individual entrepreneur if an LLC is already open.
IP or LLC - table of differences
The decision to start a business will lead to the question of what form of ownership to resort to. It is important to make the right choice, because not only what documents need to be prepared, but also the provision of tax reporting depends on it.
IP is a form of ownership in which business is carried out by one person.
OOO - This is a form of ownership in which business is carried out by one or more participants - founders. It can include up to 50 persons, and each of them can influence the management of the enterprise.
However, the differences are not only this. Below is comparison table, which shows how the presented forms of ownership differ.
| № | OOO | IP | Note |
| 1 | The state duty for opening is an average of 4000 rubles | State duty - 800 rubles | Payment of state duty for individual entrepreneurs is 5 times cheaper |
| 2 | A huge list of documents that must be notarized (, minutes, statements, etc.). | Minimum package of documents (receipt, application) | Creating an IP is much easier |
| 3 | Constituent documents are required, for example, the Charter, which should be drawn up by a specialist | Lack of any founding documentation | To create an IP, it is not required to attract qualified specialists, which significantly saves the budget |
| 4 | Business decisions are made at the general meeting | Decisions are made unilaterally | Easier to manage IP |
| 5 | Required to have a seal | No printing required | For individual entrepreneurs, you can do business without printing |
| 6 | enterprises must be. Its amount is not less than 10,000 rubles. | No authorized capital | To create an IP does not require start-up capital |
| 7 | The use of profit is possible after its distribution among the founders | The use of money is carried out individually. | An individual entrepreneur can use the funds at his own discretion |
| 8 | LLC participants are liable for the obligations of the enterprise within the limits of the money they contributed to the fund of the organization | The individual entrepreneur will be liable for obligations with all personal property | The LLC participant is responsible only for the amount of money contributed during the organization of the enterprise |
| 9 | Opportunity to issue a credit line, sell part of the authorized capital | Drawing up a simple consumer loan agreement | LLC has more opportunities to attract investments for business development |
| 10 | No business restrictions | There are activity restrictions. | For example, retail sales alcoholic products IP cannot |
| 11 | The liquidation procedure is complicated, it can take up to 6 months | The closing procedure is simple. Up to 1 month | IP is easier to close |
| 12 | Premises or a lease agreement is required to run a business | No separate room required | IP can. At the same time, his place of residence will be considered his legal address. |
| 13 | Income tax, STS, UTII are paid, and each founder is obliged to pay income tax on dividends received | IP pays income tax, simplified tax system, UTII or | Taxes are calculated for individual entrepreneurs and LLCs according to the standard scheme, the only difference is in the amount of amounts that will need to be paid |
As can be seen from the table, the difference is significant. You need to be thoughtful about how you set up your business. If an individual entrepreneur is easier to open, then an LLC provides an opportunity to develop.
In order to understand what is more profitable to open an individual entrepreneur or LLC, you need to decide on the purpose of creating a business. If, for example, you want to grow and want to attract investments, then you need to open an LLC. If you do not have enough money, and you are not yet ready to use it for business development, then in this case an individual entrepreneur will be the best option.
The system by which entrepreneurs and organizations are taxed is the same. However, LLCs are required to keep accounting records and cash documents strictly in accordance with the established procedure.
What is the property liability of LLC and IP
In the course of carrying out their activities, entrepreneurs and organizations may incur debts. They will have to answer for debt obligations in accordance with the law.
An individual entrepreneur is obliged to satisfy all legal requirements presented to him, and is liable with his property. In this case, it does not matter at all whether it was purchased before the start of the activity or after.
However, the Code of Civil Procedure of the Russian Federation contains Article No. 446, which states that despite the fact that the property of an entrepreneur is not divided into personal, and that which was used in the work. There is a list of things that cannot be seized. For example, housing, land, etc. If an entrepreneur owns several apartments, then, naturally, encumbrances may be imposed on them.
Members of a legal entity are not liable for the obligations of the company they created. They only risk losing their money, paid on account of the authorized capital.
You should remember that when organizing an LLC, liability arises, which has the following types:
- The first is the responsibility of the enterprise itself;
- The second is the responsibility of the participants.
If an enterprise can pay off its debts with its property, then no requirements will be presented to the founders. If the organization, in the case of, for example, forced, is not able to repay the debt, then the claims for damages will fall on the shoulders of the founders. In this case, subsidiary liability arises, and compensation can be recovered in court.
Differences in the registration of LLC and IP
The differences in the registration procedure are as follows:
- The head and owner of the IP is the only person - this is himself, while the registration of an LLC can be carried out both for one participant and for several. It all depends on the number of founders. Recall that there can be up to 50 people;
- The second difference is the number of documents submitted to the tax authority. For individual entrepreneurs, it is enough to provide an application, a receipt for payment of the state duty, and a copy of an identity document. To register an enterprise, a package of documents is required twice as much, which is supplemented by a charter, decision, etc.;
- As for the payment of state duty, when registering an LLC, it will be about 4,000 rubles, for an individual entrepreneur - 800 rubles;
- The founders of an LLC are required to contribute to the authorized capital of the enterprise an amount of at least 10,000 rubles, no later than 4 months from the date of registration.
The registration period for individual entrepreneurs and LLCs is the same, it is at least 5 working days.
What are the activity restrictions?
Individual entrepreneurs are prohibited by law from engaging in certain types of activities:
- An entrepreneur cannot produce and sell alcoholic products, with the exception of beer;
- Carry out insurance activities;
- Carry out banking activities;
- Open investment funds;
- Provide pawnshop services;
- Produce medicines;
- Be a travel operator.
As for the LLC, these rules do not apply to organizations and they have the right to carry out any type of activity that does not contradict the law.
How IP and LLC use money
The goal of any business is to make a profit. In order to freely dispose of the money due, you should withdraw them correctly.
For individual entrepreneurs, there are no restrictions on the use of monetary amounts. All funds kept at the cash desk or on current accounts are your property, and you can withdraw them without restrictions.
There is no additional tax to be paid. You should remember that in the course of business you should not allow the formation of arrears in payment of insurance premiums or taxes. Otherwise, the tax authorities may send an order to the banks to seize the current account, and you will not be able to withdraw money until the debt is fully repaid. In addition, you will have to pay penalties.
All funds at the disposal of the LLC are the property of the organization. Even if you are the sole founder of the enterprise, you still do not have the right to manage the company's money based on your personal desires.
LLC founders can withdraw money in the following ways:
- Pay dividends to participants;
- Payment of wages;
- By concluding a loan agreement;
- Draw up an agreement with the IP.
Withdrawing money from the company's turnover is an absolutely legal procedure. You should remember that the payment of dividends must be made from profits left after paying taxes. Participants of the enterprise distribute income at their own discretion, unless it is prescribed in the company's charter.
The presence of the legal address of LLC and IP
Any organization cannot exist without a legal address, so when creating an LLC, you should take care of this in advance.
There are three ways to resolve this issue:
- Buy property or draw up a lease agreement. The premises can be both in the form of an office and in the form of a warehouse. This method is the most expensive, so not all entrepreneurs use it;
- Take advantage of the services of companies that provide opening LLC "mass addresses". However, caution must be exercised here. If, during an inspection by the Federal Tax Service, it is revealed that such a company is on the black list, then you will be denied registration.
- Register the address of the organization in the center for entrepreneurship support. This method will save you from all kinds of expenses for the acquisition of premises.
The use of the propiska of the founder in the form of the legal address of the LLC is not prohibited by law, however, the Federal Tax Service authorities do not approve of this fact and may refuse to register the enterprise.
An individual entrepreneur is obliged to register at his place of residence. The specified data will become its legal address.
If, for example, an individual entrepreneur is registered in one city, but lives and works in another, then he should apply for registration with the Federal Tax Service of his city. At the same time, the legislation does not prohibit him from conducting his business throughout Russia without opening branches.
You should also clarify in advance which taxes you need to pay at the place of registration of the IP, and which at the place of business.
Fixed IP contributions
According to the law, entrepreneurs, regardless, are required to transfer amounts to the Pension Fund both for themselves and for their employees. This amount has no specific value, it changes every year. For example, in 2018, insurance premiums amount to 32,385 rubles.
Many entrepreneurs believe that a fixed payment is a disadvantage of IP, but in fact it is not:
- First, this money is not a tax. This amount is spent on the formation of a future pension and health insurance;
- Secondly, insurance premiums are paid from the wages of both individual entrepreneurs and LLC participants;
- Thirdly, unlike an LLC, an individual entrepreneur has the right to reduce the amount of paid taxes exactly as much as he paid insurance premiums.
Are there any differences in the taxation of IP and LLC
The amount of taxes paid for both individual entrepreneurs and LLCs depends entirely on the tax regime in which they operate.
There are 5 modes:
- – general system of taxation;
- - a simplified view of the taxation system;
- - tax on imputed income;
- – agricultural tax;
- - the tax is paid according to the patent, it can only be used by individual entrepreneurs.
For many types of these regimes, there are the same rates for individual entrepreneurs and LLCs. The difference may lie in the payment of income tax. For individual entrepreneurs, income tax is 13%, for LLC - 20%.
With regard to taxes for employees, the payments for both forms of ownership will be the same, and are mandatory. Personal income tax and insurance premiums are paid from the income of employees. Income tax is subject to withholding at the time of issuance of wages, and is 13%.
Reporting
The reporting that LLCs and individual entrepreneurs are required to provide to the tax service does not depend on the form of ownership, but on the taxation system under which the enterprise operates.
As for the personnel of the company, LLC and IP provide the same package of documentation for them. Financial statements only required for LLCs. You should take into account the fact that when using cash registers, there are certain rules by which entrepreneurs report. For IP it is much easier.
The possibility of hiring employees
Both individual entrepreneurs and LLCs have the opportunity to attract hired workers. Regardless of where the employee works, for an individual entrepreneur or in an organization, his rights will be the same. According to the law, every employer is obliged to create normal working conditions and take into account the rights of employees.
Employers are still obliged to formalize the employee, by concluding with him and paying the due compensation. You should also remember that you need to pay insurance premiums to the FIU and other funds.
Does reputation depend on the form of doing business?
The opinion that it is more prestigious to work with an LLC is erroneous. In fact, your partner absolutely does not care in what form you conduct business. The most important criterion by which you earn your reputation is the clear fulfillment of contractual obligations.
How IP and LLC are closed
Much easier than LLC. All that an entrepreneur needs is to bring an application to the Federal Tax Service for liquidation and pay the state duty.
For you need:
- convene general meeting members of the organization;
- Make a decision on liquidation;
- Select a responsible person;
- Collect a package of documents for the tax office, and they need to be prepared in strict accordance with the requirements of the law;
- Publish an article about liquidation in print media;
- notify creditors;
- Pay fees and more.
On average, the procedure for closing an LLC takes a period of 4 months, provided that no violations have been identified in the activities of the enterprise.
Liability and fines
Undoubtedly, the responsibility for the violations committed by the organization is much higher than that of the individual entrepreneur. The fines that the company will pay will be 10 times higher than those of the entrepreneur.
However, not only the enterprise itself, but also its founders can be held liable. As for criminal liability, the leaders of the organization can be punished much more severely than individual entrepreneurs. The Criminal Code of the Russian Federation contains many articles on the illegal activities of the management of organizations.
The Tax Code of the Russian Federation provides for both LLC and individual entrepreneurs, if they commit violations, the same penalties.
What form of ownership is convenient for trading
To know what is best for trading as an individual entrepreneur or LLC, you need to decide on the scope of your activity. If the business involves small volumes of trade, then IP is best suited. The creation of an LLC is most acceptable, for example, for opening a pawnshop.
For example, if you want to open a hairdressing salon, then IP is best suited. And if in the future your plans include selling cosmetics or opening a beauty salon, then for services of this kind you will need to open an LLC. You should also not forget that health services, such as a solarium, for example, do not fit the UTII reporting.
Is it possible to open an individual entrepreneur if an LLC is open
Legislation provides for the possibility in which two forms of doing business can exist. At the same time, it is required to comply with the rule according to which an individual entrepreneur cannot be the head of an LLC. In this case, the registration authorities may suspect you of fraud and invalidate the IP registration.
In order not to arouse suspicion among the inspection authorities, an individual entrepreneur can enter into labor contract and act as an employee.
The main mistake of an LLC is that when appointed to leadership position entrepreneur, they try to save money and do not pay taxes on his behalf, referring to the fact that the employee received remuneration in the form of wages. In the future, such disputes are resolved in court. It is important to remember that when creating an IP, tax reporting is mandatory.
Do not also forget that when appointing a director, information about a hired individual entrepreneur must be entered in. Based on this, the tax authorities may conduct additional checks to identify underpayment of taxes.
Another legitimate way of doing business is to conclude various agreements between individual entrepreneurs and LLCs. The main condition is that transactions concluded between them should not arouse suspicion on the part of the tax service. Otherwise, you will need to prepare for constant visits in order to identify violations of the law.
The legislation of the Russian Federation prohibits the conduct of dual business. In which income from LLC is transferred to income in IP.
The founder of an LLC, who has decided, has the right to open an IP. The main thing to consider in such a situation is that the business run by an individual entrepreneur must be transparent, and its income should not overlap with the income of an LLC.
Each of the forms of ownership must exist independently, submit the necessary reports, and pay different taxes.
You should also keep in mind that the responsibilities you will have as sole proprietorship and LLC will be different. Failure to comply with the law may result in criminal liability.
