Knowing the pros and cons of leasing for a legal entity, you can correctly approach the design of your business and equipping the production with the necessary technical capacities. As can be seen from extensive practice, in recent years, enterprises of various sizes are increasingly resorting to this opportunity to get expensive property at their disposal. The benefits they receive in doing so vary quite extensively. Consider the situation in more detail.
General view
What are the pros and cons of leasing for an LLC, individual entrepreneur and even a simple individual? The first thing that comes to mind is financial benefits. Not every enterprise (and even more so a private person) has enough funds to acquire ownership of machinery, equipment, machine tools, production facilities, structures and other property objects and complexes. Leasing is also an opportunity to develop, invaluable for start-ups. It is almost impossible to find an investor who is ready to invest large sums in a new company, but it is also impossible to produce a product without equipment. Leasing is the best way out of such a trap.
However, the pros and cons of leasing for a legal entity are not exhausted. By resorting to this logic of cooperation, an enterprise can save significant amounts on taxation. The most significant differences in the payment of duties will be for large enterprises. But IPs are more likely to benefit from the fact that they do not need credit services of banking structures, taking everything necessary for the program, albeit similar to rent, but much more flexible and profitable, accessible even to a novice businessman.
How will it work?
Considering the pros and cons of leasing for private entrepreneurs, it is worth recognizing that an entrepreneur can get real benefits only by concluding a long-term agreement. In fact, this is reflected even in the name, since the literal translation of the term is a long-term lease. However, modern practice is such that the program combines not only the advantages of renting, but also the features of the loan. At the same time, it is also an investment activity.
The pros and cons of leasing (car, machine tool, building) are largely due to the presence of three interested parties to cooperation. Participation is: the seller, the client and the company that buys the goods from the primary supplier and provides it for use to the interested consumer (legal entity, natural person). The agreement immediately indicates the possibility of buying property from an intermediary, if the user considers this to be profitable and acceptable. Incidentally, over time, the value of the property decreases slightly, which makes leasing such an attractive option for mutual work.
All by the rules
In order to correctly assess all the pros and cons of leasing by a legal entity (car, real estate, machine tools and other property), you should familiarize yourself with the regulatory framework governing this kind of mutual work within our country at present. Moreover, the agreement is concluded in a form similar to the rental, but the economic content - lending, associated with a transaction for the sale, purchase of an object.
The most important regulatory document governing this kind of stakeholder engagement is the Civil Code, namely the 665th article.It is in it that it is indicated that leasing (the pros and cons of a car under such a program from this article of the law are especially clearly visible) represents an obligation to buy out the object agreed upon in the agreement from the seller. In this case, the lessee, in cooperation with the lessor, agrees to issue a contract of use, temporary ownership of the said property. It is immediately stipulated how great the financial side of such a transaction will be.
What else to consider?
In order to adequately and fully analyze all the pros and cons of leasing (cars, office - in short, any property), you should carefully read the norms of the 34th article of the Civil Code. Particular attention should be paid to the sixth part. Additional clarity is introduced by the Federal Law adopted in 1998 under the number 164. When concluding an agreement, it must be remembered that the relationship will be governed by the rental rules, which are fair for all transactions where there are signs of such a relationship. They are described in the already mentioned 34th article in the first part.
A specialized law adopted to regulate leasing relations is, in fact, a collection of rules governing both the financial and legal aspects of interaction. With his detailed analysis, all the pros and cons of leasing are visible as a legal form of cooperation with long-term obligations. The implementation of the duties undertaken is accompanied by certain restrictions, and it is necessary to analyze the future of the enterprise in advance so as not to be in a situation of impossibility to fulfill the obligations undertaken. This can cause litigation and significant financial loss.
Everything is official
Among the pros and cons of leasing, it is worth mentioning the documentation of the process. It simultaneously represents both the positive and the negative aspects. Correctly concluded cooperation assumes the existence of agreements signed by three parties, that is, the seller agrees with the leasing company, and this company - with his client. All sales, both mandatory and additional, will have to be issued with special documents in the prescribed form.
Such an approach allows us to declare everything that each of the parties is ready to accept as an obligation. Undoubtedly, this is an important plus of leasing. Minus (for individuals, legal entities) is an abundance of documentation, which means bureaucracy, loss of time and effort. In order to minimize the effort, it is necessary to clearly understand in advance which documents should be signed by who. An obligatory agreement is a contract that registers a purchase and sale transaction; additional securities will be declared raising funds, pledges, guarantees, sureties and others. If you carefully approach the paperwork, you can protect your interests in advance in case of a conflict.
Using all the features
It is necessary to really navigate the laws in order not to run into the disadvantages of leasing. Pluses (for individuals, legal entities) are numerous, but also available only to those who understand the current legislation and are able to follow it, taking into account their own interests. In particular, do not forget about the first paragraph of the eighth article of the previously mentioned Federal Law. It is here that the possibilities of sub-leasing, sub-leasing are declared. The recipient, to whom the lessor, having bought the objects from the seller, provided the property for use, can find another (or several) interested persons who agree to pay for the operation of the car, machine, building. The term of cooperation is also stipulated, the agreement concluded between the primary lessor and his client is necessarily mentioned.
Which are there?
Understanding the pros and cons of leasing, you need to understand: there are several types of agreements, each of which has its own specific features, which means it is more or less suitable for a specific interaction option. One of the most common options is financial. This is such cooperation when the useful life of an object is estimated in advance and the lease agreement is concluded for the same time period. When the contract expires, the residual price approaches zero.This means that the tenant can get it in the property, without incurring additional substantial costs. This method for the lease recipient is the most common version of the targeted financing program. The agreement is concluded on such an object, which the company, all other things being equal, is really interested in acquiring, using for a long time.
It has its pros and cons operating type leasing. This option for cooperation is for a period shorter than the assessment of the useful life of the property. Objects that were previously acquired by the leasing company, that is, do not have to cooperate with a third party, often act as an object. When the agreement expires, the recipient of the service may redeem the product. For the transaction reveal the residual price. The leasing rate in this case is usually higher than with the previously described form of cooperation. The economic essence of this interaction is rent.
Concluding the review
The last option, for which it is also worth evaluating the pros and cons of leasing, is repayable. This is a program in which the same legal entity is both the seller and the recipient of the rental program. This system can be compared with lending, where funds and production facilities act as collateral. At the same time, the company gains access to new opportunities to increase economic efficiency. Certain pluses are associated with the taxation policy in this form of organization of activity: you can save quite a lot on deductions.
Do I need this?
The pros and cons of leasing are mainly associated with financial aspects, since the program is somewhat costly. Bureaucratic delays and the need to draw up a huge amount of securities, the risk of bankruptcy of a partner or the termination of a counterparty for another reason create additional complexity. But the benefits, as experts say, are much greater, because it is through such a long-term lease that many enterprises receive the only real chance of development, expansion of capacities, which allows them to more fully cover the market. Leasing, as can be seen from the economic analysis of the market, has long ago become the leading form of property purchase in efficiency, which is needed by individual entrepreneurs, LLC and other forms of legal entities.
If you evaluate the pros and cons of leasing a car, production facilities, real estate, offices, you should first compare with bank offers. Despite the abundance of paper procedures, renting is still easier and faster in processing than a loan. Typically, leasing enterprises require only a small set of basic identification documents from their client. The transaction itself will be able to be completed in less time than consideration, approval of the application by the bank with the subsequent processing of the loan amount.
Attention to detail
When deciding in favor of leasing, the company is given the opportunity to agree on a specific payment schedule if the company providing the property for rent agrees. A special agreement is drawn up, where it is fixed, in what terms what amounts should be paid. The landlord is often ready to make big concessions, which distinguishes him from the banking structure. At the same time, financing under this procedure is complete, but it is not required to return the full amount in a short time. Often, the duration of the agreement extends over decades, and upon its completion the enterprise receives the property in full ownership.
Leasing is most beneficial for companies whose financial plans are already at the initial stage precisely and in detail built with the expectation of large time intervals. The longer the planned, the more important for the implementation of the opportunities obtained through leasing from a leasing company.Such an agreement allows you to leave in the past restrictions associated with a lack of finances at the initial stage. The company, using this logic, gains mobility, can plan an investment policy, draw up an optimal program of financing activities.
Aspects of Collaboration
Choosing leasing for himself as the best option, this way the company not only receives the necessary property, but at the same time solves numerous issues of cooperation, ensuring the economic part of the transaction, acquisition. Buying through leasing is almost the most convenient financing option, lasting the entire period of use of the object. At the same time, the tenant has significantly greater capacities (if he is interested in this) than in the case when he would buy assets taking into account financial opportunities at the time of launch.
The contracts governing the interaction according to the logic of leasing are quite different from each other. The client, wanting to conclude an agreement, can choose the best option for himself from the abundance of enterprises operating on the market, that is, one that more closely matches the capabilities, satisfies all needs. It must be remembered that the program could be a production implementation method. This has become the basis for promoting leasing at the state level: the country's policy is aimed at encouraging such transactions and expanding operations.
Beneficial for everyone
It also happens that an entrepreneur miscalculates, therefore, a business, instead of the expected profit, brings significant losses. When applying for a loan at a bank, this situation is associated with complex bankruptcy procedures. Having made a decision in favor of leasing, at any time you can take advantage of the possibility of return operations, which allows you to access the preferential tax program and reduce burdens. This gives another chance to restore success. If there is no tangible financial result and no, it is through leasing that you can get enough power to start a new project.
Making a lease according to the described logic, you can get the necessary property at your disposal, while the credit component of the balance does not change, borrowed funds among the assets of the enterprise retain their percentage ratio in comparison with their own. An entrepreneur receiving property under a long-term lease program can take additional loans; his chances in this aspect do not diminish, as would happen if an acquisition were made under a credit banking program.
Solving Your Tasks
Depreciation deductions, accounting operations in relation to property transferred under the long-term lease program, are carried out by the company, whose objects are on the balance sheet, that is, the leasing company, and made the purchase from the seller. The user does not need to spend time, effort, human resources, financial reserves on this. The duration of cooperation in most cases corresponds to the depreciation period, although sometimes the contract lasts less. The longer the interaction of enterprises is longer, the lower the residual price, the more opportunities the recipient of the service has to operate the machines, buildings and other facilities in the future. Moreover, all payments are made by money transfers. This is significantly different from the credit program, in which the company receives a checking account for writing off amounts for debt with a set frequency in the automatic mode (that is, without taking into account the will of the person concerned).
Choosing a long-term lease option for himself, the user of the property may not look for a pledge - he simply is not required for such a program. The formation of collateral is required for fixed assets, at least 10% should be accounted for by real estate, which creates considerable problems for start-up enterprises and makes the leasing option much more preferable.It is known that it is precisely the lack of collateral, guarantor that is often the main reason for refusing a loan, but leasing does not have such a dynamics.