At the beginning of my entrepreneurial activity, I was faced with the question: which is better to open as an individual entrepreneur or an LLC? And I am glad that I made the right choice at the time.
In Russia, it is impossible to simply take up and engage in entrepreneurial activity. If you act without appropriate preparation, you risk coming to the attention of the omnipresent “competent authorities.”
What happens if you don't comply with state requirements and register? At a minimum, you will pay a fine of five hundred to two thousand rubles. But if your business is successful and the total amount of money passed through you exceeds one and a half million rubles, then you will face an article of the criminal code for illegal entrepreneurship.
To understand that registering to do business is not as difficult as it might seem at first, let’s consider ways of doing business in two options - by organizing a limited liability company and becoming an individual entrepreneur.
Individual entrepreneur or LLC, which is better to open, their main differences
- To allow you to do business, the state requires you to go through a simple registration procedure. A citizen has two options:
- become individual entrepreneur(IP), having received permission to engage in business, which is issued to him as an individual;
- register a legal entity, namely – limited liability company(LLC), that is, a certain “virtual personality” on behalf of which he will do business. A legal entity has entrepreneurial status “by default”.
So, the main difference between an individual entrepreneur and an LLC is their legal status. – this is an individual, a person registered with the tax office as an entrepreneur; An LLC is a separate legal entity that has its own property, its own rights and its own obligations.
Here we will consider only the main differences between LLC and individual entrepreneur taxation.
Insurance premiums
Individual entrepreneurs must transfer funds to extra-budgetary funds (PFR, MHIF), i.e. contributions for health insurance and your future pension.
- The amount of these contributions is fixed annually and in 2016 is:
- RUB 19,356.48 to the Pension Fund
- and 3,796.85 rubles. to the Compulsory Health Insurance Fund.
The LLC does not pay these contributions, but makes similar contributions to the same funds for each employee.
Taxes
The amount of taxes paid depends entirely not on the organizational or legal form, but on the chosen tax regime.
- In Russia in 2016, five tax regimes were legally defined:
- general taxation system (GTS);
- simplified taxation system (STS);
- unified tax on imputed income (UTII);
- single agricultural tax (USAT);
- patent tax system (PTS).
- Each of these modes has its own characteristics and conditions of use, requiring separate detailed consideration. Let's focus only on the main characteristics:
- the patent system is not available to LLCs, only individual entrepreneurs can use it;
- on the simplified system, single agricultural tax and single tax on imputed income, the rates are the same for all forms;
- when working under the general taxation system, there are differences - the income tax for individual entrepreneurs is 13%, and the income tax that replaces it for LLCs is 20%.
Payments for employees
Taxes and payments for their employees for individual entrepreneurs and LLCs are completely the same; the legislation of the Russian Federation does not distinguish between these organizational and legal forms.
Registration of individual entrepreneurs and LLCs, which is easier?
To assess which form to choose, consider the main differences between individual entrepreneurs and LLCs at the stage of creation and registration.
Documents required for registration
- As the name itself suggests, only one person, the applicant himself, can be an individual entrepreneur. To register it, only three documents are submitted to the tax office:
- application for registration;
- a copy of his passport;
- receipt of payment of 800 rubles of state duty.
- Having come up with an idea to open an LLC, you will have to submit a different set of documents to the tax office:
- application for registration;
- minutes of the meeting of founders, if there were several of them, or the decision on creation, if the founder is one person;
- constituent agreement and charter of the LLC;
- copies of the founders’ passports;
- receipt of payment of 4,000 rubles of state duty.
In addition, after registering an LLC, you will need to deposit the authorized capital within 4 months - at least 10,000 rubles. Authorized capital for individual entrepreneurs is not required.
Legal address
- When registering an LLC, you must determine its legal address. The future company has several options for obtaining an address:
- renting or purchasing office space;
- use of the apartment, i.e. home address of the founder;
- purchasing a legal address at an entrepreneur support center or a specialized organization.
The choice of one method or another depends both on the financial capabilities of the founders and on the type of activity of the LLC.
If you are going to register an LLC that requires premises, for example, you will repair household appliances or provide hairdressing services, then it is better to use the first method. However, it should be taken into account that if a forced change of office occurs, changes will have to be made to the statutory documents.
If you are planning to provide advisory services and you do not need a special room, then the second and third options are quite suitable.
An individual entrepreneur is registered only at his place of registration. If a future individual entrepreneur has been working for a long time and lives in another city, then he will have to apply to the tax office using his registration. Such registration does not impose any restrictions on where the individual entrepreneur will work. Without any additional notifications or permits, he can provide his services in any region of Russia, but he will have to submit reports at the place of registration. However, with the help of Internet services this is now easy to do.
Features of hiring workers for individual entrepreneurs and LLCs
An individual entrepreneur can conduct his business without employees. If there is a need to hire employees, then it is easier to conclude with them not employment agreements, but contract agreements, paying a fixed amount and giving them the opportunity to pay all the necessary payments to the tax office themselves. If an individual entrepreneur still needs to recruit staff, he only needs to register with the tax office as an employer.
The LLC is registered as an employer immediately upon registration, because at least one employee must be present in it - its director. In the future, the responsibilities of employers for LLCs and individual entrepreneurs are the same.
Property liability of individual entrepreneurs and LLC participants
When choosing an LLC as an organizational and legal form, you must clearly understand that a legal entity has much more responsibility than an individual entrepreneur. In addition, according to the provisions of the Code of Administrative Offences, a fine can be imposed not only on the organization, but also on the responsible persons of the organization - the chief accountant and director.
But on the other hand, an LLC can only be liable for its obligations with its authorized capital and its property; its founders do not risk anything except the loss of this particular LLC. But an individual entrepreneur is always forced to answer with his own property, up to a car and an apartment.
Thus, it is impossible to say unequivocally what is better, an individual entrepreneur or an LLC. Each time the choice is unique, and you will have to choose the best option for yourself, which reflects both the characteristics of the business and the character of the businessman himself. In any case, when choosing an organizational form, only one piece of advice is effective: a novice businessman must decide for himself which form to choose, since only he will have to regularly make responsible decisions.
Denis Konovalov
Denis Konovalov
Oksana Veksheneva
Oksana Veksheneva
Edgar
Edgar
Alexey Litvinenko
Alexey Litvinenko
- 1. What is the difference between an individual entrepreneur and an LLC?
- Conclusion
- 7. What to choose LLC or individual entrepreneur - video
1. What is the difference between an individual entrepreneur and an LLC?
The first and most significant difference of these two forms of ownership is that a Limited Liability Company is a legal entity, and an Individual Entrepreneur is not.
The meaning of this difference is that an individual entrepreneur is essentially a self-employed citizen whose activities are permitted by the Federal Tax Service. An individual entrepreneur, as an individual, has the right to freely conduct commercial activities, invest his personal money in business, and also easily withdraw and spend profits at his own discretion.
In turn, an LLC is rather an abstract economic entity that does not imply a specific person or group of persons. LLC is an organization that has:
- your legal address, which may, but is not required to coincide with the registration address of the founder;
- your current account- is not the personal “wallet” of the owner of the LLC;
- your “personal deposit”- authorized capital (AC), formed by the participants pooled together. However, the authorized capital cannot be withdrawn and spent on personal needs by any of the co-owners of the Company.
- your legal name in full and shortened format;
- regulated document flow system, in which each action of the Company’s participants is documented in a specific document - an order, an advance report, etc.
Let us note right away that it is impossible to categorically state that one of the two forms of business organization under consideration is an absolute good, while the other has a number of obvious disadvantages. Each of them has its own pros and cons, so the choice is purely individual.
2. Responsibility to creditors and government agencies
Let's consider the main points of how an LLC differs from an individual entrepreneur in the field of financial relationships. The main thing worth paying attention to is the extent of liability for obligations to creditors. When choosing a form of ownership in each case, you need to worry about possible risks in advance.
From whose pocket will the debt be collected in case of failure? If LLC is chosen as the organizational and legal form, the founders will be liable for losses of the company only with the authorized capital (). No one will reach into your pocket, no matter how much money is in your personal accounts.
Administrative liability measures are also strikingly different for LLCs and individual entrepreneurs. Thus, in case of violation of the law, an individual entrepreneur can get away with paying a fine of 2-5 thousand rubles. For LLCs, the fines are an order of magnitude higher and are measured in tens of thousands of rubles.
3. Procedure and conditions of registration
There are also differences in the registration procedure. The founder of an LLC can be either one person or a group of like-minded people. (We recommend reading -)
The only condition is a limit on the number of companions: there cannot be more than 50 .
The state fee for opening an individual entrepreneur today is 800 rubles. without any additional investments. A receipt for payment of the state duty for individual entrepreneur registration when applying through the MFC can be easy to form yourself.
When registering an LLC, you must pay 4,000 rubles, and you also need to have an authorized capital of at least 10,000 rubles. (it can be thought of as equivalent to enterprise equipment). Since the authorized capital is deposited exclusively into a current account, you will have to spend money on opening it. The amount may vary and depend on the tariffs: each bank offers its own cost of servicing a bank account for legal entities.
The period during which the tax authority registers LLC and individual entrepreneur is the same for both entities - 3 days.
It is also worth paying attention to the fact that if an LLC is required to register as an employer immediately from the moment of creation of a legal entity, then for an individual entrepreneur a necessary condition is to hire the first employee.
Individual entrepreneur or LLC?
4. Contributions, deductions and taxes
After registering an LLC, the legal entity immediately becomes a member of various funds:
- Pension Fund,
- Social Insurance Fund,
- Compulsory health insurance fund.
An organization in the form of an LLC instantly becomes an employer, which means mandatory payment of taxes both on the salaries of its employees and on the remuneration of the general director. If, for example, you are the sole owner and founder of an LLC, then you will also be listed as its employee.
An individual entrepreneur, if there are no employees under his command, is not required to register as an employer. It is enough for him to constantly pay insurance payments for himself to the Pension Fund.
In 2018, the amounts of fixed insurance payments were determined as follows: RUB 26,545. for compulsory pension insurance and 5,840 rubles. for compulsory health insurance. In addition, a condition has been introduced: an individual entrepreneur is limited to paying fixed payments if his annual income does not exceed 300,000 rubles.
If an entrepreneur managed to earn more than 300 thousand rubles, then, in addition to fixed contributions, he is obliged to pay 1% of income in excess of this amount to the Pension Fund.
When it comes to applying the taxation system, both individual entrepreneurs and LLCs have the right to choose the one that will ensure the minimum tax burden. Among these “preferential” systems, the most popular are:
- USNO - simplified taxation system;
- UTII - single tax on imputed income;
- Unified Agricultural Tax - similar to the previous system, but created only for those who run a business in production or agricultural services;
- Patent system.
Differences appear in relation to the payment of certain types of taxes. Thus, individual entrepreneurs, unlike LLCs, are exempt from paying personal income tax, VAT, property, land and transport taxes, even if these assets are used in business.
5. Management of funds
How to manage the proceeds from the results of your activities? For many, the answer to this question is obvious: “As the entrepreneur wishes.” However, not all so simple. If an LLC was chosen, the founders have the right to receive dividends exclusively once a quarter after taxes.
The process of managing funds in the company’s accounts is also significantly different. If the individual entrepreneur, after paying all taxes, is free to dispose of at his own discretion, then all funds belonging to the LLC, from the point of view of the law, belong not to the founders, but directly to the Company itself.
Therefore, it is impossible (if you comply with the law) to withdraw money from your current account. The funds can be used to pay salaries to employees, pay for their business trips, or for some business needs. This means that all expenses must be supported by accounting documents.
The only possible legal withdrawal of funds from LLC accounts directly to the founders is through the payment of dividends, the amount of which is indicated in the accounting statement.
Geography of activities
The difference between an individual entrepreneur and an LLC also lies in the localization of business activities.
Individual entrepreneurs are given the opportunity to engage in business throughout the Russian Federation, regardless of their place of registration. Nuances arise only if the individual entrepreneur is on UTII and on the Patent. In the first case, the individual entrepreneur must register with the local tax authority. In the second, the entrepreneur is obliged to pay for and obtain a patent in the city/region where he plans to conduct his business.
If an LLC wishes to develop new settlements and regions, it must necessarily register the opening of a branch. In this case, the taxation system used by the Company does not play a role.
6. Termination procedure
As experienced businessmen say, it is easier to open an LLC than to close it.
The procedure for terminating its activities for the founders of an LLC is indeed more labor-intensive and time-consuming. It consists of the following chain of steps:
- members of the Society make and document their decision on liquidation;
- within 3 working days, the LLC notifies the tax office at the place of its registration - sends the completed Form No. P15001, to which is attached the Decision on liquidation;
- in parallel with this, a liquidation commission and an interim liquidation balance sheet are formed;
- The liquidator publishes a notice about the termination of the LLC’s activities in the newspaper “ State Registration Bulletin" Creditors, if any, can learn about the procedure and deadlines for filing their claims in this message.
- a state duty is paid in the amount of 800 rubles. The payment receipt is attached to the general package of documents for liquidation.
After 6 working days, the applicant can receive the coveted Unified State Register of Legal Entities, which will indicate that the organization has been successfully liquidated.
Conclusion
Thus, by providing a detailed explanation of how an LLC differs from an individual entrepreneur, conclusions can be drawn. The determining factor in the decision to choose the form of business organization is the set of advantages that the businessman considers more significant in a particular case.
It is better to open an LLC or individual entrepreneur - perhaps this is the first question that everyone who starts their own business asks themselves. Each of these two forms of enterprise organization has its own strengths and weaknesses for the entrepreneur, and for each they are different, it all depends on the specific conditions and on what goals and objectives the entrepreneur sets for himself and his business.
To understand whether an LLC or an individual entrepreneur is better, we will divide the whole mass of differences, pros and cons into three groups: organizational differences, economic ones, and a group of differences based on legal consequences. An entrepreneur makes a choice after carefully assessing all the differences, pros and cons of each form.
Organizational differences between individual entrepreneurs and LLCs
State registration fee
Individual entrepreneur – 800 rubles, LLC – 4000 rubles. The difference between an LLC and an individual entrepreneur is more than significant - opening an LLC is five times more expensive! An entrepreneur should immediately keep in mind that when working in the form of an LLC, he may have to face the need to make changes to the constituent documents. There can be many reasons for this - a change in the number of founders, a change in legal address, the opening and closing of branches, etc. So, each such change must be registered with the tax service (registration and registration is carried out by the Federal Tax Service) and each time it will be necessary to pay the state duty - another 800 rubles.
Preparation of documents
When registering an individual entrepreneur, it is enough to write an application and present your passport. That's it - the IP is ready. Opening an LLC is somewhat more difficult. It is necessary to hold a meeting of LLC participants regarding its creation, prepare minutes of this meeting, and prepare a charter. If any property is contributed as authorized capital, prepare an assessment report for this property. All this must be submitted to the tax office upon registration. Of course, you can use the services of a law firm that deals with LLC registration: they will prepare everything for you. But you will have to pay for this - these are additional costs.
Stamp and bank account
An LLC must have a seal and a bank account. Making a seal and opening a current account are additional costs. Although they are insignificant, at the stage of starting a business, this difference between an LLC and an individual entrepreneur can affect the choice of an entrepreneur. It is not necessary for an individual entrepreneur to create these business attributes. Although, of course, today it is difficult to imagine an entrepreneur working only with “cash”.
Authorized capital
It is not needed for IP. For an LLC you need at least 10,000 rubles. Although it is possible to contribute property to the authorized capital of an LLC, which will then be used in business. Moreover, this does not necessarily have to be some kind of industrial equipment: it can be a computer, a cell phone, etc. When contributing property to the authorized capital, you need to prepare an act of its assessment, in which it will be written something like the following: “We, the founders of the LLC, are contributing into the authorized capital of LLC Laptop and estimate its value at 10,000 rubles.”
Legal address
Individual entrepreneur is registered at the place of residence of the entrepreneur. IN LLC charter The legal address must be recorded. It can be a rented office, or you can use the address of one of the founders of the LLC.
Number of founders
An individual entrepreneur is the sole owner of a business. An LLC, unlike an individual entrepreneur, can be owned by several people, up to 50 (more - this will require registering a joint stock company). Moreover, the number of LLC founders may increase and decrease, but this will not affect the work of the company in any way.
Economic differences between individual entrepreneurs and LLCs
This is the largest group of characteristics in terms of quantity and the most significant in terms of consequences, based mainly on which the entrepreneur will choose: individual entrepreneur or LLC.
Activities
LLCs are not limited to this. An individual entrepreneur cannot engage in the production and sale of alcohol (beer and beer drinks can be produced and sold both wholesale and retail). An individual entrepreneur will not be able to organize a bank, an insurance company, an investment firm, nor will he be able to open a non-state pension fund or a pawnshop. An individual entrepreneur cannot be a tour operator (you can be a travel agent). To engage in the production of aviation equipment, pyrotechnics and weapons, as well as some other types of activities, you will also have to register something other than an individual entrepreneur.
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Withdrawal of money from business
For example, to spend on personal needs. If suddenly an entrepreneur wants to buy himself a new car, an apartment, or go on vacation abroad, then, as an individual entrepreneur, he can easily take the required amount from the cash register or withdraw it from his current account and spend it as he pleases. The only limitation: the main thing is that there is no debt on taxes and mandatory fees, for example, to a pension fund. You can't do that in an LLC. It may seem that if the LLC belongs to the entrepreneur, then the money, accordingly, belongs to him, but in fact, all this money is the property of the company and can only be used for the purposes for which this LLC was created. The founder can use the LLC's money and spend it on any personal needs in two ways: 1. Receive it as dividends. But, firstly, dividends are the net profit of the LLC; accordingly, it is obtained only after paying income tax (20%). And secondly, dividends can be paid no more than once a quarter. 2. The founder can appoint himself as a director of the LLC and assign himself any salary, receive it and spend it. But he must pay part of the salary in the amount of 13% to the budget in the form of personal income tax, and also pay all social taxes for the entire amount of the salary (about 30%).
Attracting investments and loans
If a business needs additional financial resources for development, then individual entrepreneurs are very limited in this compared to LLCs. In fact, this is one of the important differences that you will have to pay attention to when choosing: individual entrepreneur or LLC. An individual entrepreneur can rely mainly only on his own funds, for example, on the money that a person saved before he decided to start his own business. For potential investors, individual entrepreneurs are, as a rule, not attractive. For development, an individual entrepreneur can, for example, borrow money from friends. Or use the limited lending opportunities in banks: most likely it will be a small loan, for example, a consumer loan. Since individual entrepreneurs most often do not keep accounting records, accordingly, banks will not be able to assess the financial position of individual entrepreneurs in the same way as they do in the case of an LLC: assessment of the financial condition, calculation of financial indicators is carried out using reports such as the balance sheet, profit and loss statement , cash flow statement and others that are in the LLC and not in the individual entrepreneur. Accordingly, individual entrepreneurs cannot count on serious financial support (investments and loans), but LLCs can. LLCs can also attract foreign investment, which is practically impossible for individual entrepreneurs.
Participation in tenders and government procurement
Providing services and supplying goods for government needs is for many companies a good opportunity for development and an almost guaranteed stable income. But for individual entrepreneurs, the opportunities to become a supplier to the state are very limited. Firstly, experience in similar work will almost always be required. Secondly, again reports: balance sheets, profit and loss statements and others, which in the vast majority of cases individual entrepreneurs do not have.
Tax system
Individual entrepreneurs and LLCs can choose any - regular, with payment of all the usual taxes, simplified, or pay UTII. The only difference here is that only individual entrepreneurs can switch to the patent system. Considering this difference between individual entrepreneurs and LLCs, it is necessary to remember that purchasing a patent is most suitable not even for small businesses, but rather for micro-businesses, which are mainly carried out by individual entrepreneurs.
Mandatory insurance contributions
To the Pension Fund and Social Insurance Fund. For hired employees, individual entrepreneurs and LLCs pay these contributions only when there are employees and they are paid a salary (an individual entrepreneur can work alone, and an LLC may not pay wages at some times for various reasons). However, the individual entrepreneur is obliged to make these payments at all times, even when he works alone and even when the individual entrepreneur does not work.
Branches and representative offices
An individual entrepreneur can work in any region of the country, he does not have to open a branch. But for an LLC, if you need to organize activities in another region, you will have to open a branch or representative office there and register with the tax service of that region. And this is, at a minimum, additional costs, albeit insignificant.
Cash discipline
LLCs are obliged to comply with it in full. Individual entrepreneurs do not need to comply with most of these rules. For example, individual entrepreneurs working under a patent may not use a cash register. If in this case the buyer needs a document confirming the payment of money, the individual entrepreneur can issue him any receipt at his discretion.
Liability and fines
If an individual entrepreneur or LLC is fined for something (for violating the rules of cash discipline, for example, or for violating the deadlines for submitting a tax return), then they will be fined differently: the individual entrepreneur as an individual, and the LLC as a legal entity. For an LLC, the amount of the fine will be 10 times greater.
Legal differences between individual entrepreneurs and LLCs
Prestige and reputation
There is such a stereotype: they say that a legal entity, LLC, is more prestigious than a simple individual entrepreneur, that serious structures prefer to work with legal entities and do not like individual entrepreneurs. If we are talking about small and medium-sized businesses, then in general there is practically no difference. If we talk about a more serious scale, then it will be easier for legal entities, including LLCs. Government agencies and foreign companies actually often prefer to work with legal entities. In fact, it all depends on the specific circumstances.
Property liability of the founder
In business, as in any area of life, at one moment something can go wrong: the business may go bankrupt, the finances invested in the business, including borrowed money from others, may not be returned. And from the point of view of property liability to other persons (counterparties, business partners, banks, investors, etc.), an LLC is more attractive compared to an individual entrepreneur. The fact is that an individual entrepreneur is liable for his obligations with all his property, regardless of whether this property is used in business activities or not. Moreover, the individual entrepreneur continues to be liable for its obligations with all its property even after the individual entrepreneur has ceased to exist: after closure, an apartment (except for the only one for living) can be taken away from the individual entrepreneur for debts, a car, money, valuables and everything else, due to which debts can be covered. The liability of the founder or founders of an LLC is limited by the size of the authorized capital; this stems from the very nature of the LLC - a limited liability company. The LLC is responsible to creditors only for what it earned and is on the LLC’s balance sheet: money, equipment, securities, etc. The founders are not responsible to creditors for anything except the contributed authorized capital. Most often, this liability is limited to a minimum amount of 10,000 rubles. But if suddenly the LLC goes bankrupt, and its money and authorized capital are not enough to pay all the debts, then the founder may have a subsidiary (additional) liability to pay off these debts, including at the expense of his personal property. But this can only happen when the founder gave the management of the LLC some instructions on commercial activities, which ultimately led to bankruptcy. That is, if the LLC went bankrupt due to the fault of the founder, and not due to ordinary commercial risks.
Selling a business
The founder of an LLC can sell his business to another person. To do this, changes will need to be made to the charter. For natural reasons, an individual entrepreneur cannot do this. LLC, as a business as a whole, can serve as collateral for bank loans. For the same natural reasons, an individual entrepreneur cannot be mortgaged to a bank.
Closing and liquidation
To close an individual entrepreneur, it is enough to pay the state fee and write an application to the tax office. The procedure for liquidating an LLC is much more cumbersome: you need to hold a meeting of the founders and prepare a decision on liquidation, issue an order to create a liquidation commission, appoint its head and members, who will deal with the liquidation. It will be necessary to publish an announcement in a special publication “Bulletin of State Registration” stating that the LLC is being liquidated. You will need to notify all creditors in writing that the LLC is in liquidation. This will be followed by an on-site tax audit, when tax officers at the LLC office will study all tax documents. After this, you will need to submit not one, but two balance sheets to the tax office: an interim liquidation balance sheet and a simple liquidation balance sheet. Depending on the size of the LLC and the volume of its activities, its liquidation may take months.
Differences between LLC and individual entrepreneur in one table
To make it easier to decide whether an LLC or an individual entrepreneur is better, we will present all the differences in a convenient comparative table.
| Signs and differences | IP | OOO |
| Organizational differences | ||
| State registration fee | 800 rubles | 4000 rubles |
| Documents for registration | Statement | Package of documents |
| Seal | Not necessary | Necessarily |
| Bank account | Not necessary | Necessarily |
| Authorized capital | No | Minimum 10,000 rubles |
| Legal address | Not required, individual entrepreneur at the place of residence | Required |
| Number of founders | 1 | Up to 50 |
| Economic differences | ||
| Activities | Limited | Not limited |
| Withdrawal of money from business | Is not limited | Impossible in its pure form |
| Investments and loans | Severely limited options | Wide opportunities for attracting |
| Participation in tenders and government procurement | Almost impossible | Maybe |
| Tax system | Any | Anything except patents |
| Mandatory insurance contributions | Yes: the individual entrepreneur always pays himself | No: if wages are not paid to staff |
| Branches and representative offices | You don't have to register | It is necessary to register |
| Cash discipline | You may not comply | Must comply |
| Fines | As for an individual | 10 times more |
| Legal differences | ||
| Prestige and reputation | In the areas of big business they suffer | Do not suffer in all areas of business |
| Property liability of the founder | Not limited | Limited by authorized capital |
| Selling a business, pledging it | Impossible | Possible |
| Closing, liquidation | Simple | Labor-intensive |
In order to understand whether an LLC or an individual entrepreneur is better, an entrepreneur will have to carefully study all the above comparative characteristics and “try on” each of them for his future business. And the more carefully he does, the greater the likelihood of successful development. One small but true piece of advice that will help you choose whether an LLC or an individual entrepreneur is better: if an entrepreneur plans to engage in small commercial activities in a small or medium-sized business, earn money to provide for himself, his family, to be financially and not only financially independent, then he It is worth paying attention to the IP. If the entrepreneur has more ambitious plans and the corresponding confidence, register an LLC.
The issue of completing documentation and confirming the legal form of activity remains relevant for businessmen - and those who decide to open a business. The only question is how to choose a legal form, because the promotion and conduct of business in the future depends on this decision.
Let's give an example of a table that will help you determine what is better and more profitable to open - an individual entrepreneur or an LLC.
We will point out the advantages and disadvantages of each of the systems, and understand all the nuances associated with the design.
|
Business form |
IP |
OOO |
|
Decoding the concept |
An individual registered in accordance with the procedure established by law and carrying out entrepreneurial activities without forming a legal entity. |
A business company established by one or more legal entities and/or individuals, the authorized capital of which is divided into shares. |
|
Registration procedure |
Simple. You must provide the tax office with: A copy of the individual's passport. Application on form No. P21001. No stamp required, bank account if possible. |
Complicated: other documentation is submitted. You need to provide the tax office with: Foundation agreement (if there are 2 or more founders). Minutes of the Meeting of Founders (if there are 2 or more founders) or the decision to establish a founder (if there is one founder). Application for state registration. Form P11001. Personal documents. Receipt for payment of state duty. A stamp and a bank account are also required! |
|
Payment of state duty |
The state tax is 800 rubles. The receipt is submitted along with all documents. |
The fee is 4000 rubles. |
|
Registration period |
The same for both individual entrepreneurs and LLCs. Is 5 working days. |
|
|
Authorized capital |
The authorized capital is not paid. |
It is necessary to deposit at least 10,000 rubles within 4 months after registering the LLC. |
|
Legal address |
Registration is carried out at the address of residence, permanent or temporary registration. |
Registration is carried out at the legal address. It is necessary to indicate: rented or own premises, mass address or home address of the founder. |
|
Number of owners |
The owner can only be one individual. |
There can be either one founder or several persons (up to 50). |
|
Amount of workers |
An individual entrepreneur can act independently, without involving employees. After hiring the first employee, starting from January 1, 2017, you no longer need to register with the Pension Fund of Russia as an employer. An application for registration must be submitted to the Social Insurance Fund no later than 30 calendar days after hiring the first employee. Otherwise, the responsibilities of individual entrepreneurs and LLCs as employers are the same. |
An LLC cannot operate on its own; at least there must be one employee who coordinates its activities - the director. This could be one of the owners or a third-party employee. One founder, managing the company, must draw up an employment contract and pay himself a salary. Registration as an employer occurs automatically after registering an LLC. |
|
Property liability and obligations |
Responsible for obligations with all of his personal property, even after the closure of the individual entrepreneur. The only exception is property that cannot be recovered by law: The only housing. Clothing, shoes and home furnishings. Food and money for a total amount not less than the established subsistence level. Other things necessary for life. |
Responsible for obligations only within the company's property. But founders, participants and managers may be held vicariously liable. Upon closing, the LLC's obligations cease. |
|
Exit from business |
To exit the business, an individual will have to close the individual entrepreneur. |
Leaving the LLC does not stop the company's activities. |
|
Withdrawal of funds |
Can freely dispose of the funds received, of course, subject to timely payment of taxes and contributions. There are no additional taxes when withdrawing money. Money is considered personal. |
The money in the account is the property of the organization. Withdrawing funds from your current account may be more costly. You can make a profit in only two ways: in the form of a salary (personal income tax 13% + contributions 30%) or as dividends (personal income tax 13%). |
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Activities |
Individual entrepreneurs cannot engage in certain types of activities. The most common ones include: Production and trade of alcohol (except beer). Insurance services. Banking activities. Investment funds. Activities of pawnshops. Tour operator activities (in this case, you can provide the services of a travel agent). Production of medicines. Production of weapons, pyrotechnics, aviation equipment, etc. |
There are no restrictions on types of activities. |
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Tax systems |
You can use all existing tax regimes, including PSN. |
You can use all tax regimes except PSN. |
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Taxes and payments |
Insurance contributions are mandatory. Other taxes and payments depend on the availability of employees and the chosen taxation system. |
There is no need to pay if there is no activity, there are no employees, and there is no property on the balance sheet. In other cases, the amount of taxes and payments depends on the chosen taxation system and the number of employees. |
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Insurance premiums |
Pays insurance contributions to the pension fund and the Federal Insurance Fund in the amount of 27,990 rubles (for 2017). Pays even in the absence of activity and regardless of income level. In almost all tax regimes, an individual entrepreneur has the right to reduce the calculated tax by the entire amount of fixed payments paid, unlike an LLC, where it is allowed to use only up to 50% of the transferred insurance premiums. |
The tax burden is greater. The founders pay 13% (since 2015) on their dividends (profits). Insurance premiums even for one employee with the minimum wage will be approximately the same as for an individual entrepreneur. |
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Reporting |
The volume of reporting is significantly less. |
The volume of reporting is greater. |
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Accounting |
Accounting is not required. Individual entrepreneur under special taxation regimes – simplified tax system, UTII or patent – submits one report for one tax. |
It is necessary to maintain complete accounting records. Small LLCs have the right to rent in a simplified form. If you have a lot of income/expenses, you will need to hire an accountant. Other reporting depends on the chosen taxation system. |
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Cash discipline |
Compliance with most cash discipline rules is optional. |
All rules of cash discipline must be observed. Small LLCs have the right not to set a cash balance limit. |
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Equipment acquisition and reporting
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There is no need to account for the equipment in the business where it came from. |
The management of the LLC must contribute all equipment to the authorized capital. |
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Liability and fines |
There are fewer types of liability, and the fines are lower than for legal entities. For example:
Another example:
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There are many more types of responsibility than an individual entrepreneur. Fines are significantly higher and are imposed not only on the organization itself, but also on its officials. For example:
Another example:
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Attracting investments |
It is impossible to attract investments in their pure form. As a rule, you have to take out a loan, loan or leasing. There may be problems with lending for large amounts. |
You can find investors, but in return for the invested funds you will need to allocate a share in the LLC. Attractive to investors. The prospect of expanding into a joint stock company and going public. It is easier to get loans from banks for large amounts. |
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Cooperation |
They cooperate with individual entrepreneurs in the same way as with legal entities. |
They interact more willingly than with entrepreneurs. There are situations in which organization is the only possible form of cooperation. For example, when participating in some government tenders. |
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Kudos |
Many companies do not want to work with individual entrepreneurs, considering them less reliable and prestigious partners, and also because of problems with VAT. |
No problem. The company's reputation is higher than that of the individual entrepreneur. |
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Opening of branches |
You can work throughout the Russian Federation. There is no need to register branches, but, as a rule, you have to report at your place of residence. The right to the simplified tax system is not lost. |
To work in another region, you have to open a separate division and register with the local Federal Tax Service. The right to the simplified tax system is lost. |
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Sale of business, re-registration
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An individual entrepreneur cannot be sold, donated, or transferred to another person. You can only close and reopen the business. |
The LLC can be sold or the founders can be changed or re-registered. |
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Closing and liquidation |
Liquidating an individual entrepreneur is easier, faster and cheaper. Enough: Write an application to the Federal Tax Service. Pay a state fee of 160 rubles. |
Closing an LLC is a complex process that can take up to 4 months. In addition, liquidation requires monetary costs. 11.01.18 57 948 0 Why do you need it and how much does it cost?The most common forms of business in Russia are individual entrepreneurs and LLCs. Natalia Chelovan Briefly: an individual entrepreneur is suitable for those who will work independently, and an LLC is suitable for those who are going to do business together with partners. We need to figure it out further. ResponsibilityIf the conditional Vasily opens an individual entrepreneur and something goes wrong, then in the event of bankruptcy Vasily will be liable to creditors with all his property - including the car that he bought even before he became an individual entrepreneur. In some cases, they can even take away the apartment if he has more than one. If Vasily opens an LLC and goes bankrupt, then in most cases they will only take away what belongs to the company: property, money in current accounts and furniture from the office. A personal car should not be touched, although there is a way. Administrative liability, that is, fines, also differs. Typically, the law provides for different amounts of fines for organizations and officials. Individual entrepreneurs are fined as officials by default. OOO is more painful. For example, if a company accepts money from individuals and does not have a cash register, then the fine is from 75 to 100% of the amount paid by the cash register, at least 30,000 RUR. The fine for individual entrepreneurs is from 25 to 50% of the settlement amount, minimum RUR 10,000. Founders, documents and registrationAn individual entrepreneur is an individual entrepreneur who decided to start a business. He does this individually; he cannot have co-founders. To register as an individual entrepreneur, Vasily needs a passport, an application and a paid fee of 800 RUR. A legal address is not needed: individual entrepreneurs are registered at the place of permanent residence in the passport. A limited liability company is organized by one or more people - up to 50 founders in total. The LLC has an authorized capital; all founders invest in it. The minimum capital amount is RUR 10,000, shares may be unequal. How are shares and profits distributed in an LLC?Basil 5000 R Elena 3000 R Peter 2000 R If the company's business goes uphill, the founders will receive profits in proportion to their investments. If you want to contribute to the authorized capital property that costs from 20,000 RUR - for example, computers - then an independent appraiser must estimate their value and draw up a property valuation report. These are additional costs that fall on the founders. In advance, even before registering the company, you need to agree on a name; legal address; size of the authorized capital (from 10,000 R); OKVED (types of activities that the company will engage in) and the taxation system. After this, you need to approve the charter and appoint a general director - either from among the founders, or from outside. If there are no co-founders in the company, then the sole founder, by his own decision, appoints himself as CEO or hires someone. Please note: all decisions must be recorded on paper. If there is only one founder, print sole decisions. If there are several, minutes of meetings. Make the first protocol at the time of creation of the organization. Article 181.2 of the Civil Code lists what must be indicated when drawing up a protocol. All these protocols are insurance that confirms the company's decisions. If something goes wrong, then in court you will use the protocols. How to submit documentsIn large cities, documents must be submitted to a unified registration center, or UCR. In St. Petersburg, the LLC registers MIFTS No. 15, in Moscow - MIFTS No. 46. Here's what you need to collect:
Additionally, you may need a document confirming your legal address, such as a copy of the lease agreement, a letter of guarantee from the owner of the premises, or a certificate of ownership of the premises.  What documents will be issued after registration?Within three working days after submitting the full package of documents to the Federal Tax Service, the company will be registered, and you will receive a package of documents. Certificate of registration with the tax authority. The certificate contains the TIN and the reason for registration code - KPP. The TIN is assigned to an organization once and remains unchanged throughout its existence; if the address of a legal entity changes, the checkpoint will change. Record sheet of the Unified State Register of Legal Entities. Since 2017, this sheet has been a confirmation of LLC registration. It reflects all the basic data about the company. If changes are made, for example, if the composition of participants or legal address changes, the sheet will need to be obtained again. Charter with a registration mark from the tax authority. Store it carefully. The charter must be amended if the legal address, amount of authorized capital or name changes. To make changes, you will need to draw up minutes of the general meeting of all participants, the documents must be submitted and registered with the Federal Tax Service. The state fee for registering a new version of the charter is 800 RUR. 800 R state duty for registering a new version of the charter The tax office itself notifies the pension fund, Social Insurance Fund and statistical authorities about the registration of the organization. Can registration be refused?Yes. In this case, you will receive a paper stating the reason for the refusal. It often happens that an incomplete package of documents was submitted, typos have crept in, and so on. In this case, you need to correct the error and submit the documents again. The state fee will have to be paid again. How to choose a legal addressIn fact, in the legislation of the Russian Federation there is no concept of “legal address”, there is “location of the company”. But for convenience, we will continue to use the concept of “legal address”. The legal address is the one at which its head is located, in the language of lawyers - “a permanent executive body.” This address determines the tax office with which the LLC will be registered. Paper requests from the Federal Tax Service, the Pension Fund of Russia, and the Social Insurance Fund will be sent to this address. If the company moves, it is necessary to make changes to the charter and the Unified State Register of Legal Entities, the state duty is 800 RUR. But there are times when you don’t need to pay it. The legal address can be your own or rented premises, and even the home address of the founder, but there are nuances everywhere. Own premises must be uninhabited. The tax office may ask for a document of ownership (an extract from the Unified State Register of Real Estate - or a certificate of ownership). Rented premises. You need permission from the owner to use the address to register an LLC. Home address of the founder or manager. The founder or manager whose address is indicated must be the owner of the apartment or have registration in it. If the apartment has several owners, then each will need permission to use the premises. The apartment is not as interesting an option as it might seem at first glance: the address will be indicated in the Unified State Register of Legal Entities, which any passing crocodile can receive. At the same time, a pharmacy, warehouse, store, dental office, etc. cannot be located in a residential building. Renting an address is a bad option. Basically, you pay not for the premises, but for the address at which the company is registered. Further, depending on the price, your mail will be accepted at the address or you can even be there if the tax office decides to visit the company with an on-site audit. You can also rent space in a business incubator. In large cities there are such entrepreneurship support centers. If the organization and type of activity meet the conditions of a business incubator (for example, information technology), then it can rent premises and register at the incubator address. An individual entrepreneur does not need a legal address: it is registered at the place of registration. The organization needs to provide documents on the lease of the premises (or ownership of it); as an option, you can indicate the home address of the founder, but it is not advisable. Current account and printingAn individual entrepreneur can operate without a current account, but an LLC needs to open one immediately after registration. In Tinkoff business, to reserve details you will only need the company’s TIN. To open an account - photos of the statutory documents, photos of the founders’ passports, photos of an extract from the Unified State Register of Legal Entities. You can open several accounts in different banks at once - this is not prohibited. Previously, all companies were required to have a seal, but now they are not. If you don’t write about the seal in the charter, then you don’t need it. If you wrote it, you will have to make a round stamp.
Name Location TaxesThe amount of taxes depends entirely on the type of taxation system. Companies choose from four:
In some cases, additional taxes arise: excise taxes, water taxes, transport taxes, property taxes, mining taxes, etc. More on this another time. You need to choose a taxation system with an eye on your business plan: will you work with individuals or legal entities, what will be the structure of the company’s income and expenses. There are still a lot of nuances. Consult an accountant: you never know what they can write on the Internet. To simplify, there are three criteria for choosing a taxation system: type of activity, number of employees and amount of income. Choosing a tax system By type of activity BASIC - can be any type of activity. The simplified tax system cannot be used by banks, manufacturers of excisable goods, insurers, and pawnshops. The full list is in Art. 346.12 Tax Code of the Russian Federation. UTII is suitable for retail trade, catering, and household services. Unified agricultural tax - for business in the areas of production, sale and processing of agricultural products: crop production, agriculture and forestry, livestock. Choosing a tax system By number of employees OSNO - any number of employees. STS - up to 100 employees, including part-time workers and employees on the GPD. UTII - up to 100 employees. Unified Agricultural Tax - there are no restrictions for agricultural organizations. For fish farms - up to 300 people. Choosing a tax system By income BASIC - any amount of income. STS - up to 150 million rubles per year. In 2018, companies that earned no more than 112.5 million rubles from January to September 2017 can switch to the simplified tax system. If during operation the number of employees or income exceeds the limits, then the company is obliged to switch to OSNO and independently report this to the tax office With UTII, the tax base does not depend on income or expenses, but depends on physical indicators: store area, number of cars or number of employees. Unified agricultural tax - 70% or more of income must come from agricultural production. What income taxes are paid?OSNO - income tax 20%, VAT 18, 10 or 0%. STS “Income” - 6%. STS “Income minus expenses” - from 5 to 15%. There is a dependence on the region and type of activity. For example, in the Leningrad region the rate under the simplified tax system “Income minus expenses” is 5%, in St. Petersburg - 7%. UTII - from 7.5 to 15%. Depends on the region, payer category and type of activity. Unified agricultural tax - 6%. Pay from income from which expenses have been deducted. Accounting and tax accountingThere are two types of accounting: accounting and tax. Accounting- this is an accounting of all business transactions in the organization: what was bought, what was sold to whom, etc. The idea is that the general director looks into the accounting records and sees the answer to the question “where is the money?” Individual entrepreneurs are exempt from accounting and decide for themselves whether they need it. There is no choice for the company; maintaining full accounting records is mandatory: you need to fill out accounting registers. The register is a collection of information about business activities. The register must record information from cash receipts, delivery notes, acts, invoices and other primary documents. For OSNO and simplified taxation system, every year you must submit tax accounting (financial) statements, also known as a balance sheet, and a statement of financial results. Tax accounting- information that helps you and the tax office calculate how much is due from you. Here, only those operations that affect the amount of tax are important, and the number and frequency of reports depend on the taxation system. Tax reporting depends on the taxation system. Under OSNO, you must submit a profit tax and VAT return once a quarter. With the simplified tax system, submit a declaration under the simplified tax system once a year. For UTII - submit a UTII declaration once a quarter. In case of Unified Agricultural Tax, submit a declaration under Unified Agricultural Tax once a year. If the company has employees, then the tax office will also have to submit 2-personal income tax (annually), 6-personal income tax (quarterly) and calculation of insurance premiums (also quarterly). Also, reports will need to be sent to the funds - FSS (quarterly in form 4-FSS) and Pension Fund (SZV-M monthly, SZV-STAZH annually). If there is no activityIf an individual entrepreneur does not have a job, then he is obliged to submit zero reports, and no one exempts him from fixed contributions for himself. Even if the individual entrepreneur has not earned anything, he is still obliged to pay RUB 27,990 for 2017. A company on OSNO and simplified tax system, if it does not operate, does not pay taxes. You have to submit zero declarations and financial statements, but you don’t have to pay. Please note that you need to pay UTII even if there is no activity. If you don’t want to pay, immediately after ceasing your activity, deregister under UTII. If for some reason the company does not operate, then the general director (when he is the only employee and participant) may go on unpaid leave. The leave is unpaid - the director is not paid, therefore Personal income tax STS, OSN - do not pay, UTII - pay Contributions for Pension Fund, Social Insurance Fund, Federal Compulsory Medical Insurance Fund Does not pay if the director is on unpaid leave Earned moneyEverything that an individual entrepreneur earns belongs to the individual entrepreneur. You can spend directly from your corporate card account, or you can transfer it to an individual’s personal card. The main thing is to pay taxes and fees on time. It is not so easy for company participants to receive what they earned, but there is a procedure for paying dividends. They are paid from the company’s net profit - that is, from the amount that remains after paying taxes and fees. Dividends can be distributed no more than once a quarter. The company must withhold and transfer 13% to the personal income tax department. How to closeClosing an individual entrepreneur is simple: you need to pay a state fee of 160 R (in 2017) and submit an application to the tax office or MFC. The individual entrepreneur will be closed within 5 working days if the application was submitted to the tax office, or after 8 working days to the MFC. After this, you need to pay off debts, if any, and sleep peacefully. Closing an LLC takes longer and is more difficult. As a rule, this is either self-liquidation or bankruptcy. Both procedures take time, but bankruptcy also involves an arbitration court with a bankruptcy trustee. On average, it takes 3 to 5 months to close an LLC. Participants have the opportunity to sell shares or divide the company. ImportantEnlist the help of a professional accountant. Do not solve complex issues using advice and articles from the Internet. Don't take risks. Find a professional. Also on topic
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