A limited liability company is an economic institution organized by one or more persons, the capital of which is divided by a certain size of the share (according to constituent documents). The number of participants in the company, as well as all its activities, is regulated by federal law.
Can an IP be a director of an LLC? Let's take a closer look at this issue.
Key characteristics of LLC
The founders of the company are not liable for their obligations, however, they may lose money in the process of carrying out the activities of the enterprise within the boundaries of the value of shares owned by them.
The main constituent documents of the company include a collective agreement, which is certified by all participants of the company, and the charter approved by a majority of votes. If the founder is represented in a single person, the contract will also be the charter of the company.
Deposits of participants in a limited liability company make up the initial authorized capital. The volume of this reserve should not be less than the minimum wage multiplied by one hundred.
Functionality of the supreme body LLC
The general meeting of participants in the company is the supreme management body of the LLC. In order to carry out the current management of the LLC, an executive body is formed, which is directly subordinate to the general meeting.
The main competencies of the general meeting include:
- Amending the charter.
- Increase or decrease within the permissible limits of the authorized capital.
- Formation of executive bodies and removal of powers from them.
- Management of the balance sheet and annual reports.
- Distribution of income and losses of LLC.
- Making decisions on the reorganization or complete liquidation of the LLC.
- Creation of an audit committee.
How many founders can there be?
The number of founders of a limited liability company may not exceed the figure of 50 people. If the actual number of participants is higher than this indicator, the company should be transformed into a joint-stock or production cooperative.
The sole member of the LLC may not be another business entity consisting of one member.
Advantages of a limited liability company
The main advantages of LLC are:
- LLC participants risk only funds invested in the authorized capital, while not being liable for the obligations of the company.
- Management of the company and organization of the structure are established by the participants of the LLC on their own.
- The privacy of the LLC, that is, the closeness of the company from other structures and market participants. It is not the responsibility of the company to publish information about its activities.
Cons of a limited liability company
However, there are disadvantages, which include:
- One of the partners, leaving the LLC, withdraws its share from the authorized capital. This may adversely affect the overall condition of the business.
- Significant influence of the personal factor on the activities and organization of the LLC. Decisions regarding any actions are taken taking into account the opinions of all participants.
Small and medium-sized enterprises most often use the form of a limited liability company to organize a business. Quite often, it is also used to pool capital, for example, between members of the same family or loved ones.
Changes to the LLC Law
Since the beginning of 2017, new provisions in the Federal Law “On Limited Liability Companies” began to apply. They relate mainly to transactions with interested parties on a large scale.
Since 2008, amendments to the law on LLCs have been introduced more than 20 times. However, they never related to transactions with an interest in large amounts. However, the number of controversial issues in this particular area is quite significant. The new adjustments made by the Supreme Arbitration Court combined judicial practice in this category of conflicts.
The new edition of the Federal Law "On Limited Liability Companies", in particular article 45, does not use the concept of "affiliate". Moreover, in subsequent articles, as before, it is envisaged to maintain a list of affiliates as one of the obligations of the LLC. This concept in the new edition has been replaced by the following terms:
- Controlling person. It has the right to control more than half of all votes in the company, to appoint more than 50% of the members of the collegial body, including the director.
- Controlled person. It is subject to the indirect or direct influence of the controller.
What to consider?
According to 14 Federal Laws, starting in 2017, the signing of related-party transactions is determined by the following key points:
- Obligatory notification of all unused persons included in the LLC about the signing of a related party transaction. The new version of the law regulates the timing and procedure for issuing a notice.
- Report on related party transactions signed by LLC. It is provided in the process of holding an annual meeting of LLC participants who have the right to participate in it.
- Written consent to conclude a transaction. What is important, the absence of such is not considered the basis for declaring the transaction illegal. However, the obligation to obtain consent can be enshrined in the charter of the company.
Another important point is the obligation of the company to provide at the request of its participants all information and documents on the transaction, even if it was concluded without their consent. If the requested information is not provided, damage to the interests of the LLC is summarized.
Deal innovations
As part of related party transactions, the following new aspects have also been introduced:
- The new law does not mention actions in the interests of third parties and the possession of a stake of more than 20% by a legal entity as a sign of interest.
- Approval of an interested party transaction actually becomes a way of legalizing it. This is especially true for agreements that could potentially lead to disputes.
- Recognition of interested party transactions as invalid under the old rules is canceled. Now this can only be done in accordance with article 174 of the Civil Code.
The new version 14 of the Federal Law on LLC expands the list of transactions that can be qualified as large, especially in relation to agreements for the alienation of property. Also, large transactions now include agreements whose purpose is to transfer property for use and ownership or transfer of intellectual property.
The main difference from interested-party transactions from a major one is that the court can satisfy the requirement to recognize the latter as invalid, which is prescribed in the law. The new edition prescribes the written consent of all members of the company to complete a major transaction. Challenging transactions is based on 173 articles of the Civil Code.
Can an IP be a director of an LLC? What follows is material that will clarify this issue.
Individual entrepreneur and director of a limited liability company
Let's consider this question in more detail. Founders of enterprises and jobseekers for the position of manager quite often ask themselves if the individual entrepreneur can be a director of an LLC.
It so happens that a person who fits in all respects, but is registered in the Tax Service as an individual entrepreneur, claims to be the director of the LLC. In this regard, reasonable questions arise about how to be in this case, whether the company has the right to accept an individual entrepreneur to the position of director of an LLC and what this threatens for all parties.
An individual must work as a director of an LLC. Therefore, members of the company may not even be interested in whether the applicant for the position has the right to do business. The director of the LLC and the IP in one person may exist. This is due to the fact that an agreement is concluded with the potential director on labor activity, not entrepreneurial activity. And labor legislation does not impose a restriction on combining two types of this activity by the same individual.
Therefore, every citizen who has a legal right to entrepreneurial activity, including an individual entrepreneur, has the opportunity to become the general director of the LLC, as well as to be appointed to any other position provided that records are closed from previous jobs. That is, the post of director will be considered the main place of work, and entrepreneurship is not connected with it in any way.
So, can the CEO of an LLC open an IP? About it further.
Many optimally manage to combine the position of the head of the enterprise and commercial activity. Quite often, these areas of activity do not overlap. At the same time, the organization has the right to purchase any goods and services from an individual entrepreneur, as well as rent the property of the latter. And it doesn’t matter if the IP works at the same enterprise.
In the latter case, it should be borne in mind that tax services are eyeing these transactions with particular care. With the situation of whether the CEO of an LLC can open an IP, it is more or less clear. However, there are always nuances.
Individual entrepreneur as a manager
In the case of an individual entrepreneur, it should be borne in mind that he cannot occupy the position of Director General of LLC. However, the answer to the question of whether an IP can manage an LLC sounds positive. Only in the charter of the company should there be a clause on the possibility of transferring the role of the governing body to another institution or into the hands of an individual entrepreneur.
Giving the management of individual entrepreneurs, members of the company can save on deductions to tax services. This is due to the fact that the work of the manager falls under the category of services, and accordingly, remuneration for it is not subject to tax deductions. And an individual entrepreneur, in turn, himself lists all the necessary taxes.
Please note that only an individual can manage a new LLC. The manager is appointed at an existing company, and changes must be made to the USRLE.
Sometimes the opposite situation occurs when an individual entrepreneur has a profitable business and expresses an intention to expand it to LLC. And this is feasible under current law. However, he can register a company only by acting as an individual. The legislation does not impose restrictions on the number of enterprises registered per person. But the status of an individual entrepreneur in a person can only be in a single copy. So, the IP, the founder and director of the LLC in one person can quite get along.
An important point is the inability to combine the accounting statements of IP and LLC. Separate accounting must be maintained for each organization.
So, if the director of the LLC is an individual entrepreneur, is this legal? With a greater degree of probability we can say that the combination of these two activities takes place.
As the founder of a newly formed enterprise, a person can appoint himself to the post of general director.In this case, the individual becomes the head of the LLC, its founder and individual entrepreneur at the same time.
Many are interested in the question of whether the situation is prohibited by law when a private entrepreneur rendered services to an LLC, where he is a director. An LLC director with IP status can provide services to his organization. The current legislation has no prohibitions on this. However, in such a situation, it is necessary to take into account all the risks, in particular, attention from the tax authorities.
Conclusion
Thus, an individual has the right to obtain the position of General Director of LLC, even being in the status of an individual entrepreneur. IP, however, can be the head of the organization only in the position of manager. Moreover, even if the individual entrepreneur and the founder of the LLC are one person, these are two different businesses that require different conditions to be met. We examined whether an individual entrepreneur can be a director of an LLC. But situations are different, so each requires an individual approach.