Sole proprietorship pros and cons briefly. Financing and profit

The activities of an individual entrepreneur involve any legal type of work that makes a profit from the process of selling, manufacturing products or providing services. Today, a large number of citizens seek to open their own business. And this is absolutely logical, since the government is constantly developing programs to support small businesses. However, the issue of starting your own business must be approached with all seriousness, because often, novice entrepreneurs create a company, and, having not coped with a large number of problems, solve the problem: either sell the existing business or try to restore it.

It’s just that you won’t get profit for entrepreneurial activity - in the first period of time you will need to work harder and harder than ever. And only in this case the return on activity will increase more and more every day.

Before proceeding to entrepreneurial activity, you need to pass obligatory state registration. This form of activity makes it possible to implement almost any business idea, hire employees, conclude the necessary contracts with suppliers.

The advantages of individual entrepreneurship include the following indicators:

1. Extremely simple registration process.
2. Simplified taxation procedure.
3. No property tax.
4. Independent bookkeeping.
5. Lack of frequent audits by the tax authorities.
6. An easy liquidation process.
7. The ability to make independent decisions regarding the work of the company.
8. Significantly lower tax rates.
9. Lack of established requirements for start-up capital.
10. Minimum registration costs.
11. Sole distribution of income.

Features of the legal status of IP suggest the presence of not only many advantages, but also a sufficient number of disadvantages:

• Inability to attract additional founders.
• Full responsibility for all existing property.
• Low interest of large investors.
• Impossibility of re-registration or sale of the company.
• The need to make fixed tax contributions.
• Impossibility of registration as legal entity.
• Limited legal activities.
• Higher banking fees.
• Lending programs are not always profitable.
• Weak legal protection during the period of temporary disability.
• Inability to hire more than three people.

Entrepreneurial risks

Any company bears the risks that are associated with the type of its activity, any entrepreneur is also responsible for the results of decisions made. The risk indicator forces a businessman to save his own resources, increase the effectiveness of business projects and trading operations. This is especially noticeable in times of economic instability, accompanied by inflation, overly expensive credit loans.

A firm with problems paying bills enters a state of "total" insolvency, which can be seen as a ruin, which subsequently entails the process of liquidation. The reason for such a "deplorable" result may be the use of inefficient methods of company management, the misuse of existing assets.

IP liquidation

Termination of activity, as well as its initiation, has a number of distinctive features which must be taken into account. A businessman has the opportunity at any time to stop the implementation of the selected activity. For this purpose, he should fill out an application of the established form and pay the state duty.

The main reasons for the liquidation of an individual entrepreneur include: an independent decision to terminate activities, the death of an individual entrepreneur, a decision of the judicial authorities to force the termination of activities (bankruptcy, deprivation of the right to engage in commercial activities).

The most popular reason for the suspension of the work of a businessman is his independent decision. However, it must be borne in mind that the closure of the IP is impossible until the moment when the individual has fulfilled all the obligations relating to him labor activity, which may include the issuance of salaries to employees, payments to the budget and other extra-budgetary organizations.

Outcome

Entrepreneurial activity has both a number of advantages and some disadvantages. With proper conduct of business, it is possible to build a prosperous business with any legal form. The main thing is to take into account the requirements imposed by the legislation in the process of work, to know your rights and obligations, because in this case you can avoid a large number of difficulties.

To date, legal institutions in our country are at the stage of intensive development, for this reason, we can count on an equally active formation of conditions for civilized business in the future.

But in any case, it is recommended to consult with experienced specialists, consider your capabilities, and only then dare to take such a responsible event - the registration of individual entrepreneurship. In some cases, a small flaw can cause huge problems, so first you need to weigh all the “pros” and “cons”, and even then register an individual entrepreneurship.

Someone has been hatching plans for a long time to create own business, and some almost spontaneously decide. In any case, this business must be official from a legal point of view, which means that you need to register with the Federal Tax Service. Before that, we will decide what is better to open - an LLC or an individual entrepreneur, what are the pros and cons of such forms of doing business.

Let's spend comparative analysis and try to explain the steps of opening these forms from a to z in simple words. To begin with, it is worth knowing exactly how these forms of doing business are defined in the legislation and how they differ from each other. The Civil Code of the Russian Federation states:

IP ( individual entrepreneur) - this is an individual, fixed in the manner prescribed by law in the person of an individual entrepreneur, that is, a company is opened for one person;

LLC (limited liability company) is an association (legal entity) founded by one or more persons with an authorized capital, which is divided into parts. What does this actually mean? By registering as a sole trader, you declare that the entire business is yours alone. If you plan that several people can manage your business, then it is more profitable and more correct to open an LLC, this form makes it possible to protect the interests of each participant.

The main difference between an IP and an LLC is that in case of individual entrepreneurship, control over the business is carried out by one person, and in case of an LLC, the business is usually controlled by a large number of participants (founders), while the number of participants can be up to 50 people and each of them can influence the work of the enterprise.

What documents are required for registration

The difference between these forms of doing business lies in many aspects. First of all, in the list of documents required to open a business, as well as in the amount of the fee (tax upon registration). So, in order to start working as an individual entrepreneur, you need:

• Application form 12001 (registration of business);

To register an LLC, much more documents are required:

• Application form 11001 (registration of business);
• Minutes of the meeting or decision to open an LLC;
• Charter of LLC (2 copies);
• Receipt of payment of state duty;
• Application for USN (if required).

IN individual cases in this package of documents it is necessary to add an agreement on establishment (if there are several founders) and papers related to the legal address (a copy of the certificate of ownership - certified, or a letter of guarantee from the owner). Also, when registering an LLC, the founders are required to contribute to the authorized capital an amount of at least 10,000 rubles before the expiration of four months from the date of registration. This amount will be the authorized capital of the company.

State duty upon registration

During registration various forms businesses significantly differ in the amount of state fees during registration. For example, an individual entrepreneur is subject to a fee of 800 rubles, and registration of an LLC costs much higher - 4 thousand rubles. All this is regulated by articles of the Tax Code of the Russian Federation.

Address of registration of IP and LLC

In this case, an individual entrepreneur also has a slight advantage - he can register at the place of residence, at the place of permanent registration indicated in the passport. There is no additional cost for this item.

An LLC must be registered at the address where the sole executive body is located. In essence, you will have to buy (or rent) a space, which incurs additional costs.

Responsibility for obligations and administrative responsibility

Individual entrepreneurs (IEs) are responsible for all their property, the only exception is that which is not subject to collection under the law. An individual entrepreneur is ordered to satisfy all the requirements presented to him with all the property, whether it is personal or not, was purchased before the start of activity or after. An exception, as already mentioned, is some things that cannot be seized, for example, housing, land, but if there are several apartments owned by the entrepreneur, then they can be encumbered. In this case, LLC has a slight advantage over IP.

And the co-founders of an LLC have only the risk of losses that are associated with the work of the organization, and nothing threatens their personal property only in the amount of their shares of capital in the authorized capital. But even here there are nuances. Responsibility is as follows:

1. The responsibility of the enterprise itself;
2. Responsibility of the participants of the enterprise.

If, in the event of debt obligations, the organization has the opportunity to close the debts with its property, then there are no claims against the founders themselves. And if the organization is bankrupt, then the debts will fall on the founders, and here subsidiary liability already arises, and compensation is collected in court.

Administrative responsibility in these forms of doing business also has differences. If an individual entrepreneur commits any offense, then he is liable as an official (in accordance with the laws of the Code of Administrative Offenses of the Russian Federation). But the penalties that apply to LLCs (fines) are much larger than those that can be used in relation to officials. Therefore, IP suffers less losses when it falls under administrative responsibility.

In the case of criminal liability, the leaders of an LLC face a stricter punishment than for individual entrepreneurs.

Taxation and withdrawal of funds

Of course, in this case, IP is a much more profitable option. At any time you can receive funds in cash, you just need to contact the bank. Here, the restrictions will be limited to only the amount of tax in the amount of 6 or 15 percent (depending on the taxation scheme). Reporting does not require special skills and is quite simple. The income tax rate for individual entrepreneurs is 13%.

The scheme for obtaining cash in an LLC looks much more complicated. The withdrawal of funds is quite problematic and requires some justification. One of them is the payment of dividends to one of the co-founders (this amount is necessarily taxed at 9% - personal income tax). And besides this, as for individual entrepreneurs, it is necessary to pay a tax of 6% (under the general taxation system for LLCs) or 15% (for the simplified tax system). You can also get cash by paying wages, using a contract of employment concluded for this or by drawing up an agreement with an individual entrepreneur. Taxation requires constant accounting reports and hiring for this specialist. Income tax rate for LLC is 20%.

Activity restrictions

The advantage of business activities in the form of an LLC is that it is not subject to restrictions on the type of activity, as for individual entrepreneurs. In turn, IP is prohibited from engaging in the following activities:

• Own production of medicines;
• Be a manufacturer alcoholic products(excluding beer);
• Insurance sector;
• Banking;
• Opening of investment funds;
• Provision of pawnshop services;
• Offer travel agency services.

Fixed contributions

Any entrepreneur, no matter what type of taxation applies to him, must transfer money to Pension Fund both for themselves and for their employees. The amount of tax in the PF has no fixed amount and changes every year. Someone considers a fixed payment to be a disadvantage of IP, but in fact, it looks like this:

• The money goes to create a future pension and health insurance;
• Insurance contributions from wages are paid to both individual entrepreneurs and LLCs;
• Unlike an LLC, an individual entrepreneur can reduce the amount of taxes paid by as much as he paid insurance premiums.

Business liquidation

Liquidation of what forms of business is easier and why is it necessary? We will decide that, nevertheless, the liquidation of a business should be divided into two parts: official and unofficial.

It takes about 3-4 months to liquidate an LLC, and there will be a lot of various expenses - about 30-40 thousand rubles. To liquidate an LLC, the following steps are required:

1. To convene a meeting of founders and make a decision on liquidation there, electing a responsible person;
2. Collect a package of documents in accordance with the requirements of the law;
3. Order the publication of an announcement of liquidation in several printed publications;
4. Notify creditors of the liquidation of the enterprise;
5. Pay the state duty, etc.

With IP, liquidation matters are much simpler. The official registration of the closing will take about 2 weeks and will cost no more than 5,000 rubles. To close an individual entrepreneur, you must bring an application for liquidation to the Federal Tax Service and pay a state duty.

If you are going to convert an IP into an LLC, then this is not possible, for this you will have to create a legal entity.

Attracting investments

Another important issue that worries many entrepreneurs is the possibility of attracting investments. What form of business is easier to do?

In practice, it has been proven that it is much more difficult for an individual entrepreneur to find investors for his business, since the lack of authorized capital implies a risk for the investor. Why is it not profitable for investors to work with IP? The entire IP business belongs to one person and the investment of funds cannot be guaranteed by anything.

At this point, with an LLC, everything is much simpler. The minimum guarantee of the investor's interest may be his introduction to the founders of the enterprise, in the event of the redemption of some part in the authorized capital.

Reputation and image

Despite the fact that an individual entrepreneur risks all his property, LLC is still chosen as partners. Returning to the previous point, it can be noted that the guarantee of honesty is the property of the company (firm), the presence of several people at the helm of the company and the fact that the loss of reputation threatens the company with the loss of orders in the future.

Summing up the pros and cons

Differences

What is better to open - LLC or IP? Which form of ownership has more advantages than disadvantages. There are advantages to each of these forms of business. In fact, it all depends on the size and type of business. If your business activity involves a large scale, cooperation with a large number of people, you plan to expand your business so much that it is possible to open branches of the company, representative offices in other cities, then creating an LLC in this regard is more profitable to choose.

If your business is designed for a small market, and you are not ready to invest a lot of money at the beginning of the journey, then choose sole proprietorship. You can register it much easier and cheaper. And for novice businessmen, this type of business will be more convenient.

In order to better imagine the differences, advantages and disadvantages of IP and LLC, we will compose comparison table, where all the characteristics for these types of activities will be visible, let's compare taxes and other nuances.

Question answer

What form of activity for start-up businessmen in Russia is better to register - IP or LLC?

If you want to start a small business - open a hairdresser, a shop, a small cafe, a car wash, a real estate agency, do apartment renovations, trucking, some types of construction, or you have a small farm, then the IP is quite suitable for this. The employer's acceptance of employees, having the form of an individual entrepreneur's activity, is also allowed. If you want to expand and move to another form of ownership, then you need to know that the transition from the form of IP to LLC or merger is not possible, and you will have to open a separate LLC.

Is it possible to have an LLC and an individual entrepreneur at the same time?

Legislation provides for the possibility of the existence of these forms of business at the same time. But an indispensable condition will be that an individual entrepreneur cannot be the head of the company. It is not allowed to conduct a dual business, when income from an LLC is transferred to income in an individual entrepreneur. Interaction is possible, but taking into account all the nuances of tax legislation.

Are there any differences in such forms of activity as LLC, OJSC, CJSC, LLP?

The difference is that an open joint stock company is a more complex organizational and legal form, it requires large material costs, an open joint stock company also has a higher business status and is organized for enterprises with solid investors, like a closed joint stock company. LLP - means a limited liability partnership where contributions (in cash or in kind) are pooled by agreement.

Now we want to open dentistry with relatives. Help me make the right choice - what form of activity is better to register? And who pays more taxes?

If you want to start a new private practice, then you can open an individual entrepreneur (PE - a private enterprise), if it is a clinic, then open an LLC. Pays more taxes than LLC.

I want to open an online store. Which legal form of registration should I choose and which form of taxation should I prefer?

To begin with, it is preferable to open an IP, and you will choose to pay taxes between the OSNO and the simplified tax system (simplified): if your partners need VAT, then choose the general mode, if you sell goods only to individuals, the simplified tax system will be enough.

What does the form of activity of ANO, PUE mean?

ANO is autonomous non-profit organization, which is established by citizens or legal entities for services in the field of sports, science, law, etc. PUE is a private unitary enterprise that does not have the right to own property, which is assigned to it by the owner.

Can an individual entrepreneur provide legal services?

It is recommended to learn about the pros and cons of opening an IP at a startup. This information will help to understand in more detail the advantages and disadvantages of such a form of business organization as individual entrepreneurship and make the right decision, since the entrepreneur’s ignorance often becomes the reason for the closure of an individual entrepreneur in the future. To avoid such an outcome and make sure that the IP is exactly the legal form that is best suited for the implementation of your business ideas, the first step is to familiarize yourself with the material presented below.

The article provides information about what gives the registration of an individual entrepreneur, to whom this form of business organization is most suitable and what advantages and disadvantages it has.

Who is an individual entrepreneur, legal requirements and restrictions

Individual entrepreneurship is a form of organization of activity, maximum suitable for representatives small and medium business. As a rule, IP is registered in the event that further activities does not involve large financial turnover and large investments. Unlike an LLC, an individual entrepreneur does not have the status of a legal entity, however, despite this, the functioning of an individual entrepreneur is regulated by the same articles of civil law as a limited liability company.

IP has the right to:

1. engage in commercial activities specified during the registration of the enterprise;
2. sell goods;
3. provide various services;
4. engage in production activities;
5. perform work.

According to the legislation, an individual entrepreneur is subject to state registration, the procedure and conditions of which are regulated by special regulatory legal acts. It should be noted that there are a number of activities that do not require registration, therefore, before registering a business, it is recommended to carefully study the USRIP. This classifier contains an exhaustive list of types of business activities that need to be registered. The authority to carry out this procedure has the tax service.

Who can become an IP:

• a capable citizen of the Russian Federation who has reached the age of majority at the time of opening a business;
• an adult foreigner residing on the territory of Russia on legal grounds and having an appropriate work permit;
• a stateless person who meets the established requirements.

Note! The main requirement for individual entrepreneurs is that the latter has full legal capacity, however, the law provides for the possibility of registering individual entrepreneurship by a person under the age of 18. You can become an individual entrepreneur from the age of 16 in such cases:

• marriage. In this case, the basis for acquiring full legal capacity and, accordingly, registering a business is a Marriage Certificate;
• acquisition of full legal capacity on the basis of a court decision;
• the presence of permission of the parents of a minor to conduct entrepreneurial activities.
• the presence of a permit issued by the guardianship and guardianship authority.

• civil servants;
• military;
• citizens who are prohibited from doing business by the court.

IP has a number of advantages, including:

• simple and short registration procedure. To open an IP, you just need to submit a package of documents, namely an application, a copy of your passport and tax number, a receipt for payment of the state fee, and wait for a decision. As a rule, this period does not exceed 5 working days;
• opening an IP does not require large expenses. In the case of self-registration, you will need a maximum of 1500 rubles. If you decide to use the services of intermediaries, it will cost no more than 4 thousand. Compared to the cost of similar services provided by the LLC, these amounts are insignificant;
• no requirement for the presence of authorized capital, seal and current account. In the future, the entrepreneur can open an account and order a seal to promote the business, but this is not his obligation;
• An individual entrepreneur is not taxed on the property used to implement business plans, since it belongs to him, and not to the enterprise. Moreover, an individual entrepreneur should not at all notify the regulatory authorities about the presence of such property, whether it be equipment necessary to achieve production goals, or real estate;
• the ability to pay tax under a simplified system. To do this, an appropriate application should be attached to the application with a request to use the simplified tax system in the future;
• independent management of profits. The individual entrepreneur can use the earned funds at his own discretion and at any time;
• small fines, in comparison with LLC;
• opening additional points does not require registration with the tax service.

Along with the advantages, IP also has a number of disadvantages. The disadvantages include:

• in case of non-fulfillment of obligations to creditors, an individual entrepreneur may lose his personal property;
• it is not possible to take into account losses incurred in previous years when calculating the tax base;
• requirement for mandatory monthly payments to the PF. This does not take into account the presence of employees and income. The payment is fixed;
• you can not sell alcohol;
• there is no possibility of officially attracting investors;
• less chance of cooperating with large companies. As a rule, serious businessmen prefer to work with LLC;
• the name of the individual entrepreneur must consist of the last name and first name of the person who registered it;
• To represent an individual entrepreneur, you must have a power of attorney certified by a notary.

After reviewing the above pros and cons of IP, you can make a choice and make a decision that is best suited for the implementation of your business ideas.

The state duty for registering an LLC is 5 times more - 4000 rubles, and the list required documents much wider. In addition, you need to pay authorized capital RUB 10,000

Withdrawal of money

All money earned by the IP is his personal money. He can at any time transfer them to his card or withdraw from the bank.

The money earned by the LLC belongs to the LLC. To receive them, you need to pay dividends no more than once a quarter. 13% personal income tax is withheld from dividends.

The director of the LLC needs to be paid monthly. The salary is additionally subject to insurance premiums of about 30% and personal income tax of 13%.

Accounting

Sole proprietors do not need to keep accounting records. For all LLCs, accounting is mandatory, and it is most likely impossible to do without the help of an accountant.

Additional reporting

If the entrepreneur does not have employees, then he submits only a declaration on the simplified tax system once a year.

From the very beginning, an LLC has an employee - a director, therefore, an LLC additionally submits monthly, quarterly and annual reports to the PFR, FSS and tax.

Termination of IP activity

To terminate activities as an individual entrepreneur, you need to pay a state duty and submit an application. Within a week, IP will be excluded from the register.

The liquidation of an LLC is more complicated and takes from 3 to 6 months. To do this, you need to create a liquidation commission, notify creditors of the liquidation, reduce employees, pay them severance pay, hand over the interim and liquidation balance sheet.

A few more advantages of IP

• The money on the IP account is insured by the state in the amount of 1.4 million rubles. ( if the bank loses its license). There are no such guarantees for an LLC.
• An individual entrepreneur can switch to a patent taxation system.
• An individual entrepreneur is not required to issue cash documents ( cash book, receipt and expenditure cash orders).
• An individual entrepreneur can operate in any region, regardless of the place of registration.

Cons of IP

Insurance premiums

The main disadvantage of IP is insurance premiums that must be paid even in the absence of activity. The fixed amount of contributions in 2019 is RUB 36,238. But if an individual entrepreneur does not have employees, he can completely reduce the tax on the simplified tax system on paid insurance premiums.