Not every person is ready to work for someone else. Therefore, the question of starting a business is always relevant. Current legislation interprets entrepreneurial activity as independent, at its own risk and aimed at making a profit. An entrepreneur can engage in any type of business: buying, selling, providing services. All this should be carried out within the framework of the current legislation. To open the IP, the pros and cons should be weighed in advance. And only after that it is possible to choose in what quality to conduct business - legal entity or individual entrepreneur.
Concept and terms
This form provides for the possibility of opening your own business without forming a legal entity. This status can have lawyers and notaries. For an individual entrepreneur, the main document of title is a certificate of registration, which is issued by the tax authorities.
You should know that an individual private entrepreneur and an entrepreneur without a legal entity is just another acronym for IP.
The main difference between LLC and IP, the pros and cons in statuses. An IP is still an individual. Other forms of entrepreneurial activity necessarily acquire the status of a legal entity. An individual's personal property is not divided into its own and that which is intended to create and conduct a business. Therefore, if a person goes bankrupt, then he risks everything. Speaking of LLC or JSC, the owners or founders can only lose the property that is included in the authorized capital of the enterprise.
Benefits
Despite the fact that the entrepreneur risks all his property, there are not so many minuses, and IP has more advantages.
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If you compare any legal entity with an individual entrepreneur, then to open the latter you do not need to collect a huge package of documents. For registration, you only need a passport of a citizen of the country and a receipt confirming the payment of the state fee. This amount does not exceed 800 rubles.
Taxation
A private entrepreneur has the right to independently choose the appropriate taxation system. There are practically no restrictions, as in the case of LLCs. You can choose a preferential system.
Accounting
The differences between LLC and IP, the pros and cons will be considered in more detail. An individual is exempted from accounting. In this case, you only have to fill out a book of income and expenses. Although it’s better to keep records. It is recommended to do this with the help of special programs in order to minimize errors that may appear during manual maintenance. Accounting allows you to strengthen control over material and financial resources, which is important when an individual entrepreneur has employees.
Profit sharing
Naturally, an entrepreneur without the formation of a legal entity takes all the profits for himself, unlike the same shareholders of the joint-stock company who receive only dividends.
Negative sides
Despite the enormous advantages, IP has a number of disadvantages. As mentioned earlier, the biggest minus is that an individual is liable for his obligations with all property.
Choice of activity
There are a number of restrictions for entrepreneurs to choose the type of activity. To attribute this difference of IP from LLC to pluses or minuses is a big question. Legal entities have much wider activities that they can engage in. An individual is not entitled to sell alcohol without a special license, and to get it, you will have to spend considerable funds. You can’t open an investment fund or produce drugs, or begin to engage in security activities.
Extra-budgetary funds and work with legal entities
IE will have to pay contributions to all extrabudgetary funds. Even if there is no movement, that is, there will be no profit. Stop their payment is possible only in case of closure of the enterprise.
Most legal entities that are on a simplified taxation system do not want to work with individual entrepreneurs, as they cannot offset the outgoing VAT.
Many enterprises do not work with individuals at all, due to distrust of status, and IPs are rarely allowed to tender.
Investors and business sales
To attract investors will have to open a company with the status of a legal entity. "Infusion" of additional financing is impossible, due to the fact that no one can join the founders.
An individual working for himself will not be able to sell his own, even a developed and profitable business. It turns out to realize their property, but not the right to do business.
Choosing a status for your own business
Before any novice businessman, the question necessarily arises - LLC or IP? We will analyze the pros and cons of these statuses in the table. The main thing is that if the choice fell on private enterprise, the citizen, as an individual, does not lose anything, but only acquires new rights and obligations.
Visual status differences:
IP | Ltd | |
Taxation | For the size of the profit you do not need to report, but just take it for yourself. Only IP can choose a patent form of taxation, which has some advantages. | You will need to pay 13% of the profit, and the withdrawn funds are subject to reflection in tax accounting. |
Bookkeeping | No accounting required. | We are obliged to keep records, as a rule, for this we have to hire an employee. |
Startup Costs | Only the state fee of 800 rubles for registration. You can open a bank account at will. | The duty is about 5 thousand rubles, the authorized capital of 10 thousand rubles. Will have to draw up title documents, charter, open a bank account in a banking institution. |
Extrabudgetary Funds | Regardless of whether the individual entrepreneur works or not, you will have to make contributions to the Pension Fund. | For each employee you will have to pay contributions, and for violation of the deadlines for their payment - liability, up to the criminal. |
Liabilities | An individual is liable for all his obligations with his own property, of course, with the exception of that which he is not entitled to take. | The liability of the founders is limited solely by the size of the share that is invested in the enterprise. |
Liquidation | The closing cost is not high, about 160 rubles, but even a liquid business cannot be sold, due to attachment to a private person. | The closure of the enterprise will cost 800 rubles. It can be sold, reorganized, merged with another or divided. |
So, having considered the pros and cons of IP design, we can conclude that this is the simplest form of doing business, which is ideal for a novice entrepreneur. Moreover, there is always the opportunity to change the organizational legal form of your business.
Legal advice
Having decided on the pros and cons, open the IP. Begin by choosing an activity. All of them are systematized in a single classifier. Do not choose as many as possible. Codes can always be adjusted and changed. They all have numeric and literal meanings.
When choosing a type of activity, remember that many of them will require a businessman to obtain a license and the presence of a certain specialized education. For example, to work in the field of pharmaceuticals and the pharmacy business, it will be necessary to have a pharmaceutical education, and to open a medical office - a medical one. If you compare with LLC, then with this form you only need to recruit the appropriate specialists who are responsible for the education and experience of the licensed conditions.
An individual entrepreneur should remember that he bears full financial responsibility for his actions, as well as personal property. In the case of LLC creation, the situation is slightly different. The liability of each participant is limited to its share. There is subsidiary liability, but this is still a little bit wrong. Therefore, if an individual entrepreneur goes bankrupt, then you have to pay for debts with your own property.
Regarding administrative responsibility, entrepreneurs win. Enormous fines are provided for company officials for violation of the law, which cannot be said about IP.
If an individual decides to terminate his entrepreneurial activity, then he will only need to submit an application, and the legal entity will need at least 3 months for the liquidation procedure. During this time, it will be necessary to pay off debts with employees, divide assets between participants and undergo a series of checks.
Accountant Tips
Having considered the pros and cons of IP, it has already become clear that accounting is not necessary.
If an individual has chosen the general taxation system, then they will have to pay VAT on a quarterly basis, and income tax for the reporting year, in the amount of 13%, on a cash basis. Do not forget that you will need to make contributions to the Pension Fund.
Unlike an LLC, an entrepreneur does not need to explain to a bank why he is withdrawing cash from his current account. If the legal entity withdraws money, then it needs to indicate the purpose, for example, for the payment of wages or dividends.
Considering the pros and cons of IP, it should be borne in mind that employees of any formation have the same security, rights, that is, no legal differences in status.
Innovations in the legislation of this year
The legislation of our country is regularly changing. Therefore, it is important to know about the pros and cons for LLC and IE in 2017.
The main innovation is that all contributions to extrabudgetary funds have been transferred to the tax service. And this means that the accrual methodology and payment methods are changing. The settlement scheme is also changing, and this will entail an increase in the size of obligatory payments.
The changes will affect those who are on a simplified system, in particular, the Crimeans. STS will increase by several percent.
Those who have an annual income of up to 120 million and a property value in excess of 150 million rubles will not be able to stay on simplification. But the UTII extended until 2021. At the same time, the declaration form is only slightly modified.
For individual entrepreneurs who are required to have a cash register, they will have to replace it with a more modern one, with access to the Internet.
The classifier of OKVED is changed, which should be taken into account when choosing activities.
This year there are a number of changes that reflect the pros and cons of IP, but they cannot be called critical for making a decision.