In many documents, the type of person is indicated - physical or legal. In this case, information on individual entrepreneurs is not separately mentioned anywhere.
Is an IP legal entity or not? The answer to this question is contained in the signs that determine the category of persons.
Signs of a legal entity
First of all, in the Civil Code there is the concept of a legal entity, which is briefly specified in article 48. It follows from the provision that a legal entity is primarily an organization that has separate property. What does it mean? This guidance should be understood as the presence of such fixed assets by which the company is liable. Moreover, the property of the founders as individuals is in no way affected.
Signs of IP
In relation to individuals who engage in any type of business, it is worth saying that their registration in the status of an entrepreneur is required. At the same time, to the question of whether an individual entrepreneur is a legal entity, the Civil Code answers quite definitely in article 23.
We can say that an individual entrepreneur is a citizen who receives a systematic profit from any activity and is registered in the tax. Moreover, all the rules that apply to legal entities apply to such a person.
With regard to the property of the individual entrepreneur, it is noted that the businessman is liable for obligations with all property, including personal. Therefore, we can say that the status of an individual entrepreneur is a transitional concept between an employee and an organization. This person is considered only as an individual who, through his own labor, receives a fixed income taxed.
Registration differences
For legal entities and individual entrepreneurs in tax administration, registration procedures have significant differences, as well as the implementation of activities. But even on the basis of this stage, one can understand whether an individual entrepreneur is a legal entity. The law provides for the following:
1. To register an IP, the necessary package of documents includes: a copy of the passport, an application for registration and conducting a business for "simplification", a receipt on payment of a fee. For legal entities, documents are collected in a larger volume, including a copy of the charter and a decision of the meeting of founders; authorized capital and other documents are required, which are not required for individual entrepreneurs.
2. The state duty for registering citizens as entrepreneurs is only 800 rubles, while the same procedure for an LLC is 4,000 rubles in accordance with Article 333.33 of the Tax Code of Russia.
3. The registration deadlines for individuals are the same. That is, both the individual entrepreneur and the legal entity can pick up the documents after 5 working days in the tax service.
Tax
Individual entrepreneurs have a lower tax rate, they have the opportunity to use a simplified system of paying money in favor of the country. Legal entities cannot count on such privileges; they pay taxes on profits, property and value added (VAT) and others to the state treasury. Based on these differences, you can also understand whether the individual entrepreneur is a legal entity.
Thus, an individual entrepreneur has the opportunity at the initial stage to start his own business without any special expenses for paying taxes. Moreover, no one forbids a citizen to re-register his company as a legal entity. Only here it will be necessary to close the IP and go through the procedure as LLC (PJSC, OJSC and other forms).
Reporting
In the process of activity of any businessman there is a need to draw up documents.This is necessary not only for all kinds of checks, but also for internal use, so as not to miss anything. This makes it clear whether the IP is a legal entity or not. The difference is clearly traced, including in the reporting documents.
When the company makes calculations and other financial transactions, which should be recorded in the documents. IP in its activities in total is less than documents than LLC. For example, individual entrepreneurs are required to fill out only a tax return and keep book of income and expenses. Legal entities submit fully accounting reports, which include many documents.
Criminal and administrative liability
In order to finally answer the question of whether an individual entrepreneur is a legal entity, one can also consider Russian laws. With respect to violations that the organization allows, sanctions are stricter than for the same unlawful acts committed by the individual entrepreneur. For example, in paragraph 3 of Article 6.25 of the Code of Administrative Offenses on non-fulfillment of control obligations in relation to the smoking law, a legal entity pays a fine of 60 to 90 thousand rubles, and an individual entrepreneur pays 30 to 40 thousand.
Thus, without actually revealing the question of whether an individual entrepreneur is a legal entity of the Russian Federation, the law nevertheless separates these concepts from each other by means of differences in punishments.
Disadvantages of IP
Revealing the advantages of doing business when registering an individual as an individual entrepreneur, one should not forget about the disadvantages of such activities. Among these, more signs of a stereotypical direction can be distinguished:
- few know whether an individual entrepreneur is a legal entity in the Russian Federation, and therefore they are more willing to go to work, just in case, to an organization that provides a full social package;
- future partners have more confidence in the enterprise than in individual entrepreneurs, and therefore it is easier for an organization to conclude agreements with contractors than an individual entrepreneur;
- since the answer was given earlier to the question of whether an individual entrepreneur is a legal entity in our country, it can be said that one of the minuses is the lack of a company name and the impossibility of establishing branches;
- for any obligations, the entrepreneur is liable with all property, unlike a legal entity, which is liable only with the authorized capital and property of the enterprise.
These shortcomings are in fact not so significant that it was possible immediately, at the initial stage, to open an LLC. Nevertheless, if funds and a “far-reaching” business plan allow, it is most convenient to thoroughly gain a foothold in the Russian market as a legal entity.
Abroad
Unlike the Russian business system, in some countries there is no mandatory registration, for example, in the USA. If a Russian individual carries out activities, he is obliged to be recorded in the Unified Register, otherwise Article 171 of the Criminal Code of the Russian Federation - "Illegal Entrepreneurship" applies. Even if a citizen does not hire workers and works alone, registration is required.
In the United States, an entrepreneur without employees has the right to carry out activities without state registration, and IP associations can conclude, like an ordinary person, transactions with Russian businessmen. It does not matter if the individual entrepreneur is a legal entity in Russia or not, everything will be legal for American citizens.
In Germany, the process of starting a business is rather complicated, but despite this, small business is developing there. In order to become an individual entrepreneur, in this country you need to prove that the plans include only engaging in certain activities. It is more difficult to persuade German officials to issue a permit for free professional employment. Registration takes 6-8 weeks, and you still need to get a variety of documents and register a name. Unlike Russia, in Germany you can fill out and send everything on the Internet.
As for Russian entrepreneurs who decided to register an organization in another country, not necessarily in the above, they need to get a certain status to start this difficult procedure. By the way, registering a branch or representative office of an existing company is much easier than fixing, for example, a new company in the financial department.
Thus, we found out that an individual entrepreneur in the Russian Federation is still not a legal entity, but an individual.