Which is better - IP or LLC for trade?

In order to do business comfortably and legally, it is necessary to register a company. There are two options for this: LLC or IP. In the article we will analyze their main differences and features, find out which is better - IP or LLC.

In fact, the choice is much greater, but due to the complexity of other organizational and legal forms and the limited range of their application of acceptable options under Russian law, there are only two. The difference between these two legal forms is significant, starting from the registration step and ending with the liquidation procedure. Consider all this in stages.

IP Benefits

When answering the question of what is better to choose - LLC or IP, you need, first of all, to weigh the general advantages and disadvantages. So, what are the benefits of IP?

First of all, a significantly simpler accounting. If an individual entrepreneur chooses for himself a simplified taxation system (STS), then in this case there is no legislative obligation to keep records and submit accounting reports to regulatory authorities. If the classical taxation system is chosen, then accounting will still have to.

The procedure for registering IP is cheaper, simpler, requires a small number of documents and takes less time to prepare. Responsibility for offenses in the form of penalties in the case of IP is significantly lower. It is possible to manage the income received at will, there are no legislative restrictions on this. There is no need to open a current account.

Disadvantages of IP

Since there is no separation between the property of an individual and an individual entrepreneur, all property will also have to answer for obligations. There are restrictions on the areas of activity. Not all large companies willingly cooperate with private entrepreneurs, especially if a simplified taxation system is still in place. It just becomes unprofitable for them. If you decide to retire and sell your business, then you will not succeed in doing this, as well as opening a joint business. You cannot invite someone else to the co-founders.

Another drawback is the obligation to pay contributions to the FIU. They will have to be paid even if the activity of the enterprise is unprofitable.

Legal Advantages

Responsibility for obligations is established only in the amount of the contribution to the authorized capital, therefore the founders never risk their personal property, even if the company has serious debts. If you decide to retire or change direction, you can always sell your business. A legal entity may have several founders, and not one. There are no legislative restrictions on the scope of activities.

Disadvantages of a legal entity

The registration procedure is more expensive and more complicated, it takes place in several stages. Revenue can only be managed in the interests of the enterprise, the founder’s income is only dividends that are paid no more than once a year. A mandatory requirement is a current account. A legal entity is required to keep accounting and tax records, to hand over accounting, tax and statistical reporting. For violations, penalties are significantly higher than for similar offenses for entrepreneurs. Therefore, a definite answer to the question of which is better - IP or LLC, cannot be.

Restriction on activities

A number of activities are not available for an individual entrepreneur:

• everything related to alcohol (production, trade), aviation equipment, military equipment and weapons;
• private security activities;
• everything related to investment;
• production of drugs;
• passenger and freight transportation by air.

Hence a simple conclusion. If you think that it is better - LLC or IP for services, then you need to weigh all the pros and cons in general. However, if you want to provide private security services to the population, then for this type of activity only registration of LLC is possible.

So it is with the question of which is better - LLC or IP for trade. If, among other things, you want to sell alcoholic beverages, then for this type of business you will have to register an LLC.

If you are going to engage in production activities and are wondering which is better - LLC or IP for production, then this again depends on the direction of activity. If you want to engage in the production of drugs or alcohol, then the legal form of IP will simply not allow this. And the rest is a matter of taste.

Registration IP

At the first step, you need to determine the type of activity, check whether it is included in the list of prohibited activities for individuals. Each type of activity has its own code - OKVED, you can find it in the OKVED directory. You will need this information to fill out the application. You will also need to determine the form of taxation.

Now you need to fill out an application for registration. This is form P21001. You can download it from the website of the Federal Tax Service. The completed form requires notarization. Then you will need to pay the state registration fee. You submit the following documents to the tax office:

• completed application;
• receipt of payment of duty;
• if USN is selected, then you will need to fill out form 26.2-1;
• copy of the passport.

Five days later, you will receive either a certificate of registration or a refusal. We return to the question of which is better - IP or LLC. If in terms of ease of registration, then IP.

LLC registration

If you don’t want to deal with registration difficulties yourself, you can contact a special company or buy an existing organization.

As in the case of individual entrepreneurs, it is necessary to determine in advance OKVEDy and the form of taxation. Unlike an individual entrepreneur, an LLC must have a legal address. You need to choose it. And it cannot be the apartment in which it is registered founder, this There must be an office. At the same time, it is important that during the check your company is found at this address, otherwise there will be problems with registration. A copy of the lease agreement will need to be attached to the package of documents.

Next, you need to create and deposit into the current account the authorized capital. The minimum amount is 10,000 rubles. Fill out the application in the form P11001, notarize. Make a charter of the enterprise, print it in two copies. Make a decision of the founder, if he is one, or the minutes of the meeting of the founders, if there are several. Pay the state fee. If you have chosen a simplified tax system, fill out the application. Supplement all this with copies of the passports of the founders (founder).

The application is pending at the tax office for 5 days. As a result, you receive a certificate of registration or denial.

IP liquidation

The procedure for the elimination of IP is also simple and does not require a large number of documents. To do this, you will need to fill out form P26001, assure it of a notary public. You will also need to pay the state duty for liquidation. It is easiest to get a receipt for payment using the FTS service. You need to apply for liquidation to the same tax office where you applied for registration. You will also need to present a passport. After five working days, you will receive a certificate of liquidation, as well as an extract from the Unified State Register of Enterprises. You can pick up the documents personally, but if you do not arrive, everything will be sent to you by mail.

If we again return to the question of which is better - IP or LLC, then from the point of view of simplicity of the liquidation procedure, of course, IP.

Liquidation LLC

This procedure is complicated and quite lengthy. It takes about two months.First you need to organize a meeting of founders, the result of which should be a protocol on liquidation of the organization. A liquidation commission is also appointed. Within three days the tax inspection shall submit an application in the form P15001 (notarized) and a decision on the appointment of a commission. Further, a message on liquidation is published in the publication “Bulletin of State Registration”.

Then you need to submit reports and declarations to the tax office, to close all tax debts. Remove from registration in the PFR, FSS, MHIF, and EGRPO.

Often, the founders seek help in the liquidation procedure in specialized firms that deal with this. It is quite difficult to independently complete all the steps without errors.

It is logical that at the beginning of the opening of a business no one even wants to allow the thought that sometime a liquidation procedure may be needed. However, this point also needs to be considered when thinking about the question of what is better to open - IP or LLC.

Use of IP revenue

Any business is created in order to receive revenue, and then to dispose of it in any way. Therefore, when deciding that it is better to register - LLC or IP, you need to consider these points too.

An individual entrepreneur has the full right to dispose of the proceeds received at his current account or at the cash desk as he sees fit. You can spend it on personal needs or on the needs of the enterprise. It is only important to consider that it is, of course, impossible to include money spent on personal needs in expenses when calculating taxes.

However, this phenomenon has a flip side. The burden of responsibility also falls on all the property of an individual entrepreneur. Therefore, if a firm has serious debts or large penalties are accrued, then the foreclosure will be directed at all that the individual entrepreneur has, regardless of whether it relates to business activities or not.

Use of LLC revenue

The proceeds that go to the settlement accounts or to the cash desk of the LLC may be used only in the interests of the LLC. To pay suppliers, to pay salaries, to transfer taxes and fees, and so on. The owner of a legal entity has only two options in order to receive money from an LLC at his own disposal. The first option is the annual calculation of dividends. However, this only happens if the company has a profit for the year. No profit, no dividends.

The second way is when the founder of the LLC is also a director. In this case, he has every right to a monthly payroll, the amount of which he sets himself, if he is the sole founder. It is not possible to use the proceeds of one's own company for personal purposes in the case of an LLC. This point also needs to be taken into account, weighing all the pros and cons in the question of what is better to open - IP or LLC.

IP or LLC: which is better? Table of differences

For convenience, all information from the article is collected in a common table.

There is no universal answer to the question of which is better to issue - IP or LLC. In each case, you need to analyze all the positive and negative points individually. But there is a general trend. If you are planning a small private business, maybe you are a freelancer who wants to start working officially, or want to open a small online store, in which case the most convenient option would be to open an IP.

If you plan to engage in any type of activity that is prohibited for entrepreneurs, if your goal is a large, serious company with a large number of employees and solid turnover, then it is better to work as a legal entity.

However, to decide which is more suitable - the opening of an IP or LLC, which will be better for the business, the owner will have to in any case.