When people are going to create their own business, the second after choosing the type of activity the question arises in which form it is more profitable to exist: an individual entrepreneur whose authorized capital is zero, or a joint-stock company (in different legal forms) - if several participants are involved in the business. These and other nuances will be considered in more detail in the article.
Individual entrepreneur
In this form of business organization, it is understood that one person does business, often in a simplified form, when the owner of the company acts as the founder, leader, and sometimes the only employee. It would seem that a convenient and affordable form, but it carries a major drawback - if the obligations of an individual entrepreneur are not fulfilled, he risks losing absolutely all his property.
The registration process is simple, usually lasts no more than five business days and costs about 800 rubles. This is due to the fact that for private equity capital, constituent documents and special governing bodies are not needed. When registering, you don’t even need to have a seal and open a current account. Although the latter will still be needed later because of the Central Bank’s prohibition to spend cash from the cash desk (everything that does not concern salary payments, payment for goods, services). In addition, the cash payments of an individual entrepreneur in the amount should not be more than 100,000 rubles. All other contracts are settled only in cashless form.
IP Benefits
Individual entrepreneurship is attractive in terms of simplicity and speed of the paperwork process, which can be carried out at the applicant's place of residence.
In addition, the initial package of documents required for registration is very small and consists of: the original passport and its notarized copy, a standard form statement and a receipt on payment of state duty for the registration of the company. This legal form provides for a simplified taxation system that relieves the entrepreneur of the need to pay personal income tax and property tax (in some cases). This also includes the possibility of non-payment of VAT, but this only applies to the turnover of domestic goods.
A simplified form of accounting in the form of maintaining the book "Income-expenses" also speaks in favor of individual entrepreneurship. And, of course, an important plus is the ability of the entrepreneur to manage the profit at his discretion: for business or personal needs.
Limited liability company
LLC is a form of organization in which one or more founders participate, they are engaged in joint business activities with the creation of a legal entity. The authorized capital of the company consists of shares of each of them.
The process of registering an LLC is quite complicated and lengthy, with the provision of a large amount of documentation to a government agency. In addition, in this form of business is required, in contrast to IP, the authorized capital. Since 2016, its minimum size is 10 thousand rubles. In addition, a bank account and company seal are required, and this leads to additional costs.
There is still a number of “inconveniences” of such an organizational form:
- profit sharing between LLC participants at a certain time interval (1 time per quarter);
- regular financial statements in the relevant state body;
- Larger fines for administrative violations than IE
- very long and complicated process of closing an organization.
What is registered capital?
This, first of all, a certain amount of money - the initial investment of the owner to start the work of his enterprise. In addition, the need for the LLC, in contrast to the IP, the authorized capital, is their main distinguishing feature. Its definition and formation lies on the shoulders of the founders of society. The contents of the authorized capital may include money, tangible assets, trademarks and securities. The charter of an open, closed or public joint-stock company should specify the procedure for making the authorized capital (IP does not apply to this clause) - it can be determined both once and by accrual of equal shares each month.
The formation of the authorized capital is regulated by a number of documents:
- protocol of the meeting of founders - it fixes what is contributed to the authorized capital;
- by credit cash order or bank statement - when forming the authorized capital only in money, in other cases - by the act of transfer of property.
Why is IP capital not needed?
As you know from economic definitions, the authorized capital is necessary so that the joint stock company can pay off its obligations. That is, if it is necessary to pay accounts payable, only assets constituting the authorized capital and supported by the constituent documents of a limited liability company can be taken into account. The co-founders of the latter, depending on the share of the contribution, have a greater or lesser influence in deciding the activities of the organization.
For an individual entrepreneur, the authorized capital is not needed, since he is the sole owner of his business and he decides how to conduct business. As for obligations, today, according to the legislation, an individual entrepreneur risks losing all his property in case of failure. If we assume that a bill will be created requiring it to have an authorized capital, there are two sides to this. On the one hand, a businessman’s degree of material risk decreases only by the amount of funds contributed. But on the other hand, the “accessibility” of the business is reduced, since not everyone has the necessary amount at the start.
Conclusion
When deciding to create a business, entrepreneurs between a joint stock company and individual entrepreneurship often choose the latter. One of the main reasons for this is the zero registered capital of individual entrepreneurs; the staff can consist of only one person. The simplified registration process is another important point, due to which there are more and more individual entrepreneurs in the country.