The legal nature of an individual entrepreneur (IE) has a dual character. An individual entrepreneur can be regarded as an individual, although at the same time it has many qualities of a legal entity (LE).
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This means that a citizen who has received the status of an individual entrepreneur enjoys the rights that are enshrined in laws for individuals and norms that reflect the essence of legal entities.
Many people tend to characterize an individual entrepreneur as an individual because when mentioning him, one hears not the name, as, for example, for YL (LLC "Bereg"), but the surname of the entrepreneur. Of course, this characteristic is characteristic of ordinary people who do not understand the legal framework. For those who come across an entrepreneur due to their work, they can confidently judge that an individual entrepreneur is endowed with a large number of rights and obligations of legal entities.
For example, if a dispute arises between a legal entity and an individual. To resolve the issue, the parties must apply to the Arbitration Court. This circumstance indicates that the relationship of the entrepreneur with other participants in economic activity is based on the rules of law relating to legal entities.
For example, duality can also be attributed when an entrepreneur makes a purchase in a store. How to understand that he is making a purchase as a legal entity or as an individual? In fact - nothing. Since the purchased product can be used for both personal and business purposes.
The main thing is that the entrepreneur himself does not have doubts about the duality. Even at the stage of deciding on the registration of an individual entrepreneur, it is necessary to distinguish between the status of an individual entrepreneur and a legal entity, which will allow creating the correct work and discarding the question of the duality of concepts.
Pros cons of IP
The advantages of an individual entrepreneur include:
- simplified cash transactions;
- a simple registration procedure that does not require large expenses;
- no complicated accounting is required, no need to prepare reports;
- income received in the course of entrepreneurial activity can be used at its own discretion and for any purpose;
- a current account is not required;
- use of the simplified taxation system (STS);
- reduced tax rates.
The disadvantages of an individual entrepreneur include:
- sole responsibility;
- the scope of activity is narrowed;
- not all large firms are ready to cooperate with individual entrepreneurs;
- it is impossible to sell the business;
- with zero balance and losses, a contribution to the pension fund is required.
Pros Cons of LLC
LLC advantages:
- Its founders are not responsible for the obligations of an LLC, bearing the risk of losses only within the limits of their contribution to the authorized capital.
- Joint business is possible.
- The right to withdraw from the LLC at any time with the receipt of the value of your share.
- Business sale.
- Obtaining a license for certain types of activities that an individual entrepreneur cannot carry out.
- If we compare an individual entrepreneur and an LLC in terms of licensed activities, then an LLC has the opportunity to obtain some licenses that are not available for an individual entrepreneur.
- You can hire a director who will act without a power of attorney.
- The ability to choose a name for your business.
Disadvantages of LLC:
- Complicated registration and liquidation process.
- Obligation to deposit the minimum authorized capital (10,000 rubles).
- Availability of creating a seal and opening a current account.
- Accounting reporting, bookkeeping.
- The size of the fines has been increased.
- The need to enter into the Criminal Code of the equipment used for work and it is required to pay tax for it.
Legal entity rights
A legal entity, like any citizen, has its own specific rights. Of course, they will differ in many respects, but the very fact that a person has rights as a legal entity indicates that it is a full participant in civil relations.
Rights are necessary for a legal entity to properly build work, participate in business relations, and, of course, to realize its interests.
First of all, the presence of rights is necessary to defend their rights in court. It is no secret that in the work of a legal entity, conflict situations often arise that require the protection of their rights and the fulfillment of their duties.
The rights that a legal entity is vested with can be spelled out in the constituent documents.
The emergence of rights correlates with the moment of registration of a legal entity, and end from the moment of its liquidation. Not all rights can be exercised freely. Depending on the type of activity, a legal entity is required to obtain a license. Rights can be limited only in cases directly specified in the law. If such a restriction arises, a legal entity can appeal against it in court.
Individual status
An individual becomes the owner of his rights from the moment of birth and uses them throughout his life. A citizen can exercise his rights under his own name and surname. Among the basic rights enshrined in the law is the right to open an individual entrepreneur.
Thus, a citizen acquires the status of an entrepreneur. If the status as a natural person arises from the moment of birth, as mentioned above, then the status as an entrepreneur arises only after his registration. Having passed it, an individual assumes double rights and obligations, that is, not only a citizen, but also a person who opened an IP.
For a citizen to be able to open an individual entrepreneur, he needs to achieve full age-related legal capacity.
The norms of civil legislation are applied to the activities of an individual - an entrepreneur. While for a citizen - an individual, other laws may apply, for example, on the protection of consumer rights.
Accordingly, an individual acquires equal rights and equal obligations, along with other business entities, and the laws under which individuals fall are applied.
The law may restrict a citizen-entrepreneur in the choice of activity or oblige to obtain a license to carry out activities.
If, in the course of the activity of an individual as an individual entrepreneur, disputes arise with other participants in economic activity, he cannot refer to the fact that at the time of the violation he was acting as an individual. Such norms of the law are aimed at protecting contractors and encouraging citizens to comply with the established rules.
Activity as an individual entrepreneur ends with the onset of the following circumstances:
- the fact of death of an individual;
- by personal decision;
- the passing of a judgment against an individual;
- making a decision in relation to individual entrepreneurs.
The right to carry out entrepreneurial activity is not subject to inheritance; it is also impossible to donate an existing individual entrepreneur.
The difference between an individual entrepreneur and a legal entity
Differences:
- Registration: individual entrepreneur - one person, legal entity - 2 or more participants.
- Responsibility: individual entrepreneur - sole proprietor, with all his property, legal entity - limited by the size of the participant's contribution.
- Registration: individual entrepreneur - simplified, minimum term and package of documents, legal entity - creation of a large package of documents (charter, decision, etc.), presence of a seal and a bank account.
- State duty: individual entrepreneur - 800 rubles, legal entity - 4,000 rubles.
- Taxes: individual entrepreneur - a simplified taxation system, contributions to the FIU are of a fixed nature, regardless of whether the activity is in progress or not, legal entity - in the absence of activity, contributions to the FIU are not made.
- Types of activity: individual entrepreneur - limited by law, legal entity - the scope of activity is unlimited.
- Accounting: individual entrepreneur - optional, legal entity - obligatory, filing of financial statements is required.
- Profit: IE - can be used for personal purposes at any time, LE - is distributed no more than once a quarter.
- Authorized capital: individual entrepreneur - not required, legal entity - at least 10,000 rubles.
- Selling a business: individual entrepreneur - impossible, legal entity - has no restrictions.
- Power of attorney: individual entrepreneur - valid when certified by a notary, legal entity - certified by the seal and signature of the director.
Having identified all the main points of the work of a legal entity and an individual entrepreneur, drawing a parallel between them, we can come to the conclusion that both entities are full participants in economic activity, with equal rights and obligations.
Before defining the differences between an individual entrepreneur and a legal entity (for example, LLC), it is necessary to understand the very concepts of "individual entrepreneur" and "legal entity", to see what they are.
Entity- an organization registered in accordance with the procedure established by law, which owns, economic management or operational management of separate property and is responsible for its obligations with this property, can, on its own behalf, acquire and exercise property and personal non-property rights, bear obligations, be a plaintiff and defendant in court ...
Individual entrepreneur(IE) does not have the status of a legal entity, however, it can engage in any legal activities, be a customer and contractor of works, and also use hired labor. The IP form is convenient to use for setting up small businesses.
The main differences between an individual entrepreneur and an LLC:
An individual entrepreneur is not obliged to have an individual entrepreneur's authorized capital; it is not necessary to have a current account in a bank. The procedure for registering and terminating an individual entrepreneur is simpler. There is no need to waste time on the preparation of legal constituent and other special documents. An individual entrepreneur can use a simplified accounting and tax reporting system. The presence of an accountant on the individual entrepreneur's staff is not necessary.
Often, people who have opened their own business cannot clearly understand their new legal status. Whether the individual entrepreneur remains an individual or has become a legal entity.
The current legislation lacks extremely clear wording on this score, which seriously complicates the explanation of the current legal situation.
In essence, an individual entrepreneur remains an individual (hereinafter referred to as an FL), but at the same time it is endowed with the rights of a legal entity (LE). Thus, his dual position is taking shape. The entrepreneur continues to enjoy all the rights of a citizen of the Russian Federation, like the Federal Law. A legal entity cannot exercise such rights under any circumstances.
At the same time, an individual entrepreneur receives broad rights as a subject of entrepreneurial activity. In many ways, they are similar to the rights of legal entities. Since this combination of rights is permanent, in some sense there is a mixture of rights.
An entrepreneur who sells on election day near the polling station uses the opportunities of legal entities for entrepreneurial activity. However, at any time he can go to this site and exercise his right to FL by voting for any candidate.
Thus, an individual entrepreneur remains an individual entrepreneur, but he owns a very significant part of the powers inherent in a legal entity. It is impossible to call an individual entrepreneur a legal entity, since the current law contains a direct answer to the question of its status. The Civil Code of the Russian Federation, without reservation, calls any individual entrepreneur an individual. This formulation is clear enough and does not require clarification.
The law often emphasizes that the duality of the position of an individual entrepreneur lies in the fact that he enjoys the rights of both the FL and the legal entity. The fact that an individual entrepreneur refers specifically to individuals, even if he has a special status, is not disputed by any legislative act.
Individual entrepreneurs have access to most of the activities that a legal entity has the right to engage in. In addition, there are activities that can be carried out exclusively by citizens with the status of an individual entrepreneur (for example, the provision of private detective services). An individual entrepreneur can act as a founder of a legal entity, as an individual entrepreneur. He has the right to work for hire. Often, individual entrepreneurs enter into an agreement with other persons as individuals, and not as legal entities. This allows you to significantly reduce the amount of taxes that must be paid when making this kind of transaction.
Starting a business is always a serious step that requires a careful approach in all aspects. And one of the main questions that a novice entrepreneur needs to answer: which is better and more profitable to open - an individual entrepreneur or an LLC?
Much in the work of a business depends on the choice of the organizational and legal form. Therefore, when deciding to open your own business, you need to immediately determine what to open. Indeed, in many respects, the difference between the forms is significant, from the procedure to the termination of activities.
Usually the choice is made between individual entrepreneurs and LLCs, since the rest of the forms are either, as practice has shown, not profitable enough(for example, partnerships), or too difficult to start a business(for example, joint stock companies).
Even within the framework of one type of activity, the activity itself will often develop in completely different directions. Therefore, the choice must be approached responsibly, thinking about the future.
What is better to open: an individual entrepreneur or an LLC, how to make the right choice?
When making a choice, you need to have a clear idea what is the difference between an individual entrepreneur and an LLC.
It is necessary to take into account the conditions of a specific type of activity; also, one must not forget that for some types of activity, only one option is possible. For example, a private detective can be registered only as an individual entrepreneur, and only an LLC can provide security services.
What documents will be required for registering an individual entrepreneur and how to draw up them correctly, you can find out
Scheme: Registration differences between individual entrepreneurs and LLCs. What is the difference between a legal entity and an individual?
Property liability
When creating an LLC, 2 types of liability arise:
1. Responsibility of the founders as individuals. persons.
2. Responsibility of society as a legal entity. faces.
If we talk about limited liability, then usually the second type of liability is meant: LLC is really like a legal entity. the person is liable for the obligations with the property belonging to him.
5. General taxation system.
Employee taxes and payments
Taxes and payments for employees are the same for sole proprietors and LLCs. Any employer must pay insurance premiums of 30% of the amount issued and withhold 13% employee income tax.
Restrictions by type of activity
Individual entrepreneurs are not allowed to engage in certain types of activities, which include the following:
- Drug production.
- Banking activities.
- Investment funds.
- Insurance services.
- Tour operator activity (but you can be a travel agent).
- Alcohol trade and production (except beer).
There are no such restrictions for LLCs.
Money withdrawal
An individual entrepreneur has the right to freely dispose of all available money (the main thing is to have time to pay taxes and transfer insurance premiums). There are no taxes on withdrawal of money.
The situation with LLC is somewhat different: all the funds earned belong to the society, therefore, even if there is only 1 founder, he cannot freely dispose of the money.
You can withdraw funds in the following ways:
1. As dividends (they can be distributed among the founders no more than once a quarter). Withholding personal income tax - 13%.
2. As a salary (for officially registered employees of the LLC). Insurance premiums are credited 30% + income tax withheld 13%.
How can an individual entrepreneur withdraw money from a current account? The answer is
Reporting
Basic moments:
- Individual entrepreneurs and LLCs must comply with the rules of cash discipline.
- SP does not need to take a booze. reporting. Small organizations can draw up accounts. reporting in a simplified form.
- The reporting for employees is the same.
- Tax reporting depends on the tax regime.
You can learn how to correctly draw up a report on the average headcount and see a sample of it.
Wage-earners
There is an opinion that individual entrepreneurs have much less rights, but this is not the case. In both forms of business, employees must be registered in accordance with the Labor Code (conclude contracts, pay sick leave and leave, make entries in work books, transfer insurance premiums, etc.).
For an LLC and an individual entrepreneur, only the process of registering the employer itself is different. An individual entrepreneur must write an application for registration after hiring his first employee, an LLC does not need to do this: from the beginning of the company's activity, he already has a general director, therefore, the LLC is registered immediately after registration is completed.
Attraction of investments
LLC is much more preferable in terms of financial investments than individual entrepreneurs. Using the funds raised, the organization can reach a completely new level.
However, in return for the invested funds, the investor will receive a share in the authorized capital, so financial investments are profitable for him.
An individual entrepreneur can theoretically also raise funds, but usually this ends with a regular loan or loan.
Therefore, if you are going to further develop your business through additional fundraising, then you should think in advance about choosing an LLC as a form of organization.
Business closure procedure
It is much faster and easier to close an individual entrepreneur than an LLC. To do this, you only need to submit an application for termination of activities and pay the state fee = 160 rubles.
The LLC liquidation procedure is much more complicated, more expensive and requires a considerable amount of time (usually the procedure lasts at least 4 months); as a solution to the problem, you can sell the LLC or change the founders.
Liability and penalties
- When deciding on the registration of an LLC, you need to remember that a legal entity. the person is much more liable than that of an individual entrepreneur (for example, a fine for violating the rules for using a cash register for individual entrepreneurs is from 3 to 4 thousand rubles, and for an LLC it is 10 times more). Also, officials of the LLC can be brought to administrative responsibility.
- For heads of organizations, criminal liability is much more serious than for individual entrepreneurs.
- Tax liability for LLCs and individual entrepreneurs matches in most cases.
What is the responsibility of the chief accountant of an LLC since 2016, you can find out
Based on the foregoing, depending on your goals, plans and available funds, you can make the best choice between the forms of organizing your business - LLC or individual entrepreneur.
What to choose: individual entrepreneur or LLC? What's better? What is the difference between a legal entity and an individual? Answers to these and other questions are contained in the following video:
The Civil Code of the Russian Federation and other legislative acts provide a clear definition of the concepts of a legal entity and an individual entrepreneur. They have their own characteristics.
Main similarities and differences
To understand what is the difference between the concepts of an individual entrepreneur and a legal entity, you need to understand the legal nature of these definitions.
Under SP means an individual who carries out his activities independently and on his own behalf, as well as duly registered.
Entity Is an organization that has separate property and is independently responsible for its obligations.
These two concepts are united only by the fact that both conduct business activities, but they are different in the registration procedure, structure, taxation and other legal aspects.
Individual entrepreneurs are registered under the full name and at the place of residence, and the legal entity also has a legal address, which is indicated during the registration process.
The main difference between an individual entrepreneur and a legal entity is that the latter has the Constituent Documents or the Charter, within the framework of which it carries out its activities. Any changes must be made without fail. An individual entrepreneur has a freer form of business, which does not require a procedure for revising the Articles of Association.
The disadvantages of an individual entrepreneur's business system in comparison with a legal entity include:
- limited types of activities (license), for example, the former cannot engage in both retail and wholesale sales of alcoholic beverages, medicines, etc .;
- personal participation of an individual is required, no one has the right to represent the interests of an individual entrepreneur.
The status of a legal entity presupposes the existence of an executive body that is actually engaged in the management and activities of the organization. A sole proprietor is managed by the individual who created it.
The address (location) of the legal entity is recognized legal address registered in registration documents(often occurs when the specified address does not coincide with the real location of the company). Registration of the location of the individual entrepreneur is carried out at the place of residence of an individual or at the place of his stay.
The reorganization of an individual entrepreneur's business in comparison with a legal entity also has a number of preferential benefits... To change the required data, you must provide an application and a document (a copy) confirming their change.
Legal entity rights
Any participant in legal relations has a set of rights and obligations. Legal entities have civil rights that are consistent with the goals of their activities. This set of rights is spelled out in the Statutory Document. Limitation in legal capacity can only be by law.
Individual status
An individual is a citizen who has the appropriate rights and obligations. He acquires them from the moment of birth and uses them all his life. One of these rights is, after which the laws regarding the activities of an individual entrepreneur are applied to the citizen, as well as any others relating to individuals separately.
Why is there confusion in terms
Firstly, it is already clear from the definition of an individual entrepreneur that this is an individual who is independently responsible for its obligations. That is, everything is assigned to a specific person, which cannot be said about a legal entity, where the firm bears all responsibility. Confusion occurs due to the fact that an individual entrepreneur has the same attributes as a legal entity, namely, a seal, a current account, etc.
Cases when an individual entrepreneur acts as a legal entity
Despite the obvious differences between the two concepts, there are options in which the actions of an individual entrepreneur are similar to a legal entity. Such cases include:
- Hiring workers.
- Opening bank accounts and using them in the interests of business.
- Using a seal to certify documents.
Pros and cons
The advantage of LLC is that none of the founders bears in full responsibility for the obligations of the company... For example, compensation for losses is determined in the amount of the share contributed by the founder to the statutory fund of the company.
If the LLC is declared bankrupt, the debt collection is applied only to the property contributed by the founder to the fund of the company.
Individual entrepreneur as a person directly conducting business, fully responsible for all debts formed during the working period. In this case, debt collection is applied to all property belonging to the individual entrepreneur, with the exception of property that is not subject to seizure and circulation to pay off the debt.
In addition to all of the above, an individual has the right to bequeath all his property to another person.
In their daily activities, individual entrepreneurs and LLCs can use different tax regimes... First of all, this is the general taxation system, which is mainly used by enterprises due to the large turnover. Also, individual entrepreneurs use other special taxation regimes: simplified, imputed, patent.
Any of the above systems implies taxation of profits from business activities.
In addition, businesses are required to pay other additional taxes and fees depending on the type of activity. Among them are:
- gambling tax;
- tax related to excisable goods;
- subsoil use fee;
- fee for the use of objects of flora and fauna, etc.
Enterprises pay additional taxes and insurance premiums on employees' wages.
Withholding tax from the wages of an employee is recognized income tax... For citizens of the Russian Federation, the rate is 13%, for foreigners - 30%.
Insurance premiums are divided into the following types:
- pension fund (PFR);
- compulsory health insurance fund (FMS);
- social insurance fund (FSS).
The contribution rate is 22%, 5.1% and 2.9%, respectively.
An individual, when using the general taxation system, pays:
- business income tax;
- property tax if used in business;
- value added tax.
Also, an individual pays other compulsory contributions: health insurance, pension fund, insurance fund.
The legislative framework
At the legislative level, registration is regulated by the Federal Law "On State Registration of Legal Entities and Individual Entrepreneurs", the Civil Code, decrees of the Russian government, and other regulatory legal acts.
More information about LLC and individual entrepreneur is in this video.