Illegal business is a fairly frequent offense in the field of small business. This is due to the fact that every novice businessman acts on the principle "as long as there is no line of customers at the door, there is no need to officially register the case."
There is a cold economic calculation in this: if there is no profit, then there is nothing to pay taxes and other payments. And in the case of registering a business, they will need to be paid in any case, even if the personal matter is at a loss. On the one hand, the state understands this, therefore, existing legislation allows a novice entrepreneur to take the first steps in his business without registration legally. But the problem is that the line between legal activity, offense and even crime in this area is very thin. Where is the line of legality?
Illegal business concept
To understand what constitutes illegal business, you need to define its legal form. Entrepreneurship is a systematic activity based on own planning, capital and risks, aimed at making a profit.
Therefore, illegal entrepreneurial activity is the above-described activity performed in whole or in part outside the legal field. Moreover, its illegality can be expressed by various factors.
Types of illegal entrepreneurship
A business will be considered illegal if the actual business activity is outside the legal field, or if it is associated with the use or trafficking of prohibited goods. For example, trafficking is an illegal business. In this case, illegality is determined by the essence of the acts carried out.
Business activity will be illegal even if it is carried out without registration in the manner prescribed by law, without obtaining appropriate licenses and permits, or with a systematic violation of the established licensing conditions or norms. So, if a citizen sells firecrackers in the transition, he carries out illegal business on several grounds at once: he carries out activities without registration, in an unspecified place, without a license. At the same time, a private medical clinic registered in the manner prescribed by law, licensed, but practicing delivery at home, will also be outside the legal field, as it violates licensing conditions.
Subjects of illegal business
The subjects of legal business can be private entrepreneurs and commercial organizations, as well as state and municipal enterprises.
The subjects of illegal economic activity may be a much wider circle of persons. So, illegal business can be carried out by an individual who is not an individual entrepreneur, political parties and other non-profit organizations that are prohibited from doing business, subjects of power (state authorities and local governments, as well as officials).
A special subject of illegal business is an organized group of persons who bears heavier and necessarily criminal liability for such activities.
Responsibility for illegal business
If a business falls under the definition of "illegal business," the punishment may be imposed on its owners at any time. An illegal businessman can be held administratively and criminally liable, as well as civil liability.
The basis for bringing to administrative responsibility is the fact of violation of the order of conducting one's own business. In order to prosecute, the fact of causing substantial damage to the state or citizens in the form of exposing them to danger or causing losses is important.
Civil liability is a derivative of administrative or criminal liability, it can arise only with the private appeal of the injured persons to the court.
Administrative liability for illegal entrepreneurship
The least socially dangerous illegal business activities fall under administrative responsibility. The Code of Administrative Offenses provides for a fine for such a business with confiscation of the means of such an offense or without it.
Persons guilty of such misconduct are brought to administrative responsibility solely upon the fact of its commission. That is, for example, a woman in the transition sells flowers, and it was established by law enforcement agencies or the tax inspectorate that this woman does this regularly, while she is not an individual entrepreneur or someone else’s employee.
In this case, such a businessman is held accountable. It does not matter how much profit she received during the month or the entire period of activity. The strictness of responsibility depends on whether a person is brought in for the first time or is a malicious violator of the law.
Police, prosecutors, federal tax authorities, and licensing authorities can be held administratively liable. The punishment itself is established only by the court in accordance with part 1 of article 14.1 of the Code of Administrative Offenses. The administrative fine for illegal business is up to 2 thousand rubles.
Criminal liability for illegal business
Article 171 of the Criminal Code of the Russian Federation “Illegal Entrepreneurship” criminalizes illegal business. Punishment for such an act is possible only if profit from it exceeds 250,000 rubles, or for organizing one’s own business without registration and obtaining permits if this led to harm to people.
Also prosecuted for carrying out prohibited activities or trafficking in prohibited goods. That is, for any act, the occupation of which is a separate crime. Thus, any economic activity outside the legal field, the income from which exceeds 250,000 rubles, is criminally punishable. Also, criminal liability for such business to traffickers, drug dealers and other criminal elements who regularly violate the criminal law for profit is not inevitable.
That is, in fact, employees of an officially registered company can also be brought to criminal liability for illegal entrepreneurship if it operates in an illegal manner.
Criminal liability can be expressed both in a fine with confiscation, and in imprisonment. Penalties for illegal business activities and confiscation usually threaten to evade registration, and imprisonment - to illegal businessmen, organizers of shadow companies who by their actions cause damage to their customers or endanger them (for example, illegal medical practice).
Illegal business and tax payment
One of the factors of bringing an illegal entrepreneur to justice is the receipt of profit, which is not taxed.But what if the shadow businessman pays taxes? The fact is that one-time or intermittent activity without official registration with the authorities of the Federal Tax Service does not qualify as illegal business activity, but in this case, the person performing such activity must declare their income and pay tax on them.
Suppose a private person committed inconsistent activity, regularly paid taxes, but over time, business activity became more and more frequent and in the end became systematic. At the same time, business activity is not illegal in nature (for example, trading in seeds) and does not require licenses and other permits.
Would such a person be held liable for illegal business? On the one hand, the law does not provide for leniency for such persons. On the other hand, if you pay taxes, the Federal Tax Service will always know whether such acts are carried out systematically or not. Therefore, when income begins to increase, a private person is likely to receive a warning about the need to register. Ignoring the warning, the shadow businessman will rightly receive his administrative fine.
As for criminal liability, such a businessman simply will not have time to earn 250,000 rubles, as he will be fined under an administrative article, after which he will register without hesitation. If he continues to break the law again, then criminal liability will come certainly, naturally and fairly. It follows that a private person who regularly pays taxes is unlikely to receive subpoena like snow on his head. But citizens who have unlawful entrepreneurial activity flourishing in the shadows are at risk of being punished to the fullest extent of the law.
Civil liability for illegal business
Detection by the regulatory authorities of an illegal business will certainly lead to its termination and invalidation of all agreements concluded within its framework. In this case, the illegal entrepreneur has civil obligations to his clients, namely: to return the funds received, as well as to pay the penalty stipulated by civil law.
In this case, the responsibility will fall not only on the person who directly accepted the money, but also on everyone involved in the organization of the illegal business. Counterparties of an illegal dealer may demand a refund and compensation within three years from the moment they learned about his work outside the legal field. Clients who have received the expected service or product, but are dissatisfied with its quality, may also request a refund. At the same time, they can submit their claims also within three years.
Civil liability may concern not only the legal entity as the subject of the offense, but also its founders for illegal participation in entrepreneurial activity, although in fact they could only receive dividends. Responsibility of the founders limited to their shares or the amount established by the charter.
Actions that entail the recognition of business as illegal
A legal business can be declared illegal if the state registration of an individual entrepreneur or legal entity is canceled, and its constituent documents, licenses and permits are invalidated. The fact is that such actions mean that the company or individual entrepreneur never legally worked. Thus, if such illegal businessmen violated someone’s rights by their actions, then they can be held liable for illegal business.Responsibility in this case is expressed in the fact that all transactions made by such a business entity can be declared invalid by a court decision.
How to write a complaint about an illegal businessman
It makes sense to write a complaint against an illegal businessman when you want him to stop his activities. If you just want compensation for the moral and material damage caused, then such a complaint will not help. But if an illegal entrepreneur violates the public order and rules of the operation of premises, for example, places production in a residential building and thereby jeopardizes the safety of residents and violates a calm lifestyle, then it makes sense to write a complaint to the competent authorities that illegal business is being carried out.
Where to complain in this case? Such appeals are considered by the police, prosecutors, the Federal Tax Service, as well as licensing authorities. It is very important to choose the right authority to file a complaint so as not to be denied due to the lack of the necessary jurisdiction to deal with it. The police are considering complaints against illegal businessmen such as merchants in transitions, producers of moonshine, etc. The bodies of the Federal Tax Service consider such complaints regarding illegal entrepreneurs, the illegality of which is due to the lack of registration or a certain authorization issued by the Federal Tax Service, or those with significant shadow profit. Based on this specificity, it is possible to write complaints to the tax authorities if you know exactly what the violations of such a businessman are, and not just because his activities interfere with you.
Licensing authorities consider complaints only regarding compliance with licensing conditions, as well as the implementation of business without a license. Here, too, it is unlikely that a citizen living or working in the neighborhood can know about the presence of a suspicious businessman of a permit. If the businessman violating your rights is not so petty, or his illegality is not so obvious that the case was considered by the police, or you have already been refused, you should contact the prosecutor’s office. You can write a complaint to the prosecutor's office, regardless of the nature of the illegal entrepreneurial activity. The mechanism for consideration of appeals, complaints and applications by the prosecutor's office provides for the redirection of the application to the authorities of the relevant jurisdiction. Therefore, if you do not know where to write a complaint, it is better to go there.
You can complain about illegal business by writing a statement about the crime. You must write a complaint if, in your opinion, an illegal business violates your legal rights or simply interferes with the normal way of life. In this case, the complaint must describe the factual circumstances that indicate a violation of your rights. If you know for sure that the actions of the shadow businessman fall under the qualification of a criminal article, you can write a statement about the crime.
In this case, a large illegal business is implied. The Criminal Code of the Russian Federation and the Code of Criminal Procedure of the Russian Federation require adherence to certain rules when preparing a statement. Firstly, in such a statement you need to write which article of the criminal code the activity of your offender falls under, in addition, you need to correctly describe his activities to confirm the qualification of an illegal act. In addition, you will need supporting documents and, most importantly, confirmation of the damage caused by such activities to you personally. In the petitioning part of both the complaint and the statement of crime, you should write what you ask the control body for. In the header of the document you must indicate your passport and contact details with a phone number.
Appeal of decisions and protocols on holding liable for illegal economic activity
Bringing an illegal businessman to justice requires careful preparation and collection of documents, therefore, if the law enforcement or regulatory body still decides to indict, he must have substantial evidence. The established facts are documented by an act of verification of the collection authorities. On the basis of the act, a protocol is drawn up with which such a body has all chances to win in court.
Therefore, the protocol must be appealed before it is presented in court by a law enforcement or regulatory authority. The appeal takes place in the manner prescribed by the Administrative Code. You can appeal only the protocol, although it will be necessary to refer to the unproven circumstances specified in the act. The act itself cannot be challenged, because this document only confirms that the law enforcement or regulatory body conducted the audit and made up its own subjective opinion on the activities of the inspected at a certain point in time.
Based on the results of the review, the court may cancel the protocol or leave it in force. Cancellation of the protocol exempts the person from liability. It is recommended that you first appeal the decision or protocol to a higher authority. Thus, it is possible, on the one hand, to save on legal costs, and on the other hand, to find out from the higher authority which documents he, and therefore the court, is ready to accept as confirmation of innocence.
If the conduct of illegal entrepreneurial activity has led to the opening of a criminal case, the court cannot be avoided. It is almost impossible to defend oneself in criminal proceedings, so you will have to hire a lawyer who will study the case and protect the interests of the offender as much as possible. In this case, you need to hire a defender immediately after receiving the first subpoena to the police or prosecutor. In rare cases, law enforcement agencies themselves close cases before they are brought to court if the defense's arguments are constructive and convincing.
Summing up all of the above, we can conclude that the illegal implementation of entrepreneurial activity is dangerous, because you can fall into disgrace to the law and even find yourself in jail. At the same time, you can conduct your own business for years without realizing the possible consequences until violations are discovered. In addition, illegal entrepreneurship negatively affects the business reputation of a businessman and may even cause him to be forced out of the market by dissatisfied individuals and competitors. Both a large illegal enterprise and a simple trader in transition can be held liable for illegal business activities. Therefore, it is better to take care of registering your business in advance and obtaining all permits.
