What is more profitable: a trading house or an individual entrepreneur? Business from scratch: what to choose - individual entrepreneur or LLC? Bookkeeping according to LLC form

09Mar

Hello! In this article we will talk about what is better to open: an individual entrepreneur or an LLC in 2018.

Today you will learn:

Advantages and disadvantages of opening an individual entrepreneur and LLC;
What form of ownership is suitable for;
Is it possible to open an individual entrepreneur if an LLC has already been opened?

Individual entrepreneur or LLC - table of differences

The decision to open your own business will lead to the question of what form of ownership to resort to. It is important to make the right choice, because it determines not only what documents need to be prepared, but also the provision of tax reporting.

IP is a form of ownership in which the business is carried out by one person.

OOO is a form of ownership in which business is carried out by one or more participants - the founders. It may include up to 50 persons, and each of them can influence the management of the enterprise.

However, the differences are not only that. Below is a comparative table that shows how the presented forms of ownership differ.

№	OOO	IP	Note
1	The state fee for opening is on average 4,000 rubles	State duty – 800 rubles	Payment of state duty for individual entrepreneurs is 5 times cheaper
2	A huge list of documents that must be notarized (protocol, application, etc.).	Minimum package of documents (receipt, application)	Creating an IP is much easier
3	Constituent documents are required, for example, the Charter, which must be drawn up by a specialist	Lack of any constituent documentation	To create an individual entrepreneur there is no need to attract qualified specialists, which significantly saves the budget
4	Business decisions are made at a general meeting	Decisions are made individually	Managing an individual entrepreneur is easier
5	Mandatory presence of a seal	No printing required	For individual entrepreneurs, you can conduct business without a seal
6	enterprises must exist. Its size is at least 10,000 rubles	No authorized capital	To create an individual entrepreneur, no start-up capital is required
7	The use of profit is possible after its distribution among the founders	The use of money is carried out individually.	An individual entrepreneur can use funds at his own discretion
8	LLC participants are liable for the obligations of the enterprise within the limits of the money they contributed to the organization’s fund	The individual entrepreneur will be liable for obligations with all personal property	An LLC participant is responsible only for the amount of money contributed when organizing the enterprise
9	Possibility to obtain a line of credit, sell part of the authorized capital	Drawing up a simple consumer loan agreement	LLCs have more opportunities to attract investment for business development
10	There are no business restrictions	There are restrictions on the type of activity	For example, an individual entrepreneur will not be able to sell retail alcoholic products
11	The liquidation procedure is complex and can take up to 6 months.	The closing procedure is simple. Up to 1 month	IP is easier to close
12	To run a business you need premises or a lease agreement	No separate room needed	IP can. In this case, his legal address will be considered to be his place of residence.
13	Income tax, simplified tax system, UTII is paid, and each founder is also required to pay income tax on dividends received	Individual entrepreneurs pay income tax, simplified tax system, UTII or	Taxes are calculated for individual entrepreneurs and LLCs according to the standard scheme, the only difference is the amount of amounts that will need to be paid

As can be seen from the table, the difference is significant. You need to thoughtfully approach the issue of registering a business. If it is easier to open an individual entrepreneur, then an LLC provides an opportunity to develop.

In order to understand whether it is more profitable to open an individual entrepreneur or an LLC, you need to decide on the purpose of creating a business. If, for example, you want to grow and want to attract investment, then you need to open an LLC. If you don’t have enough money and you are not yet ready to use it to develop your business, then an individual entrepreneur will be the best option.

The system by which entrepreneurs and organizations are taxed is the same. However, LLCs are required to maintain accounting records and cash documents strictly in accordance with the established procedure.

What is the property liability of LLCs and individual entrepreneurs?

In the course of their activities, entrepreneurs and organizations may incur debts. They will have to answer for their debt obligations in accordance with the law.

The individual entrepreneur is obliged to satisfy all legal demands presented to him, and responds with his property. In this case, it does not matter at all whether it was purchased before or after the start of the activity.

However, the Code of Civil Procedure of the Russian Federation contains Article No. 446, which states that despite the fact that the property of an entrepreneur is not divided into personal property and that which was used in work. There is a list of things that cannot be seized. For example, housing, land, etc. If an entrepreneur owns several apartments, then, naturally, encumbrances may be placed on them.

Participants in a legal entity are not liable for the obligations of the company they created. They only risk losing their money paid towards the authorized capital.

You should remember that when organizing an LLC, responsibility arises, which has the following types:

The first is the responsibility of the enterprise itself;
The second is the responsibility of the participants.

If the company can pay off its debts with its property, then no claims will be made against the founders. If an organization, in the case of, for example, forced debt, is unable to repay the debt, then claims for compensation of losses will fall on the shoulders of the founders. In this case, subsidiary liability arises, and compensation can be recovered in court.

Differences in registration of LLC and individual entrepreneur

The differences in the registration procedure are as follows:

The director and owner of an individual entrepreneur is a single person - himself, while the registration of an LLC can be carried out either for one participant or for several. It all depends on the number of founders. Let us remind you that there can be up to 50 people;
The second difference is the number of documents provided to the tax authority. For an individual entrepreneur, it is enough to provide an application, a receipt for payment of the state fee, and a copy of an identity document. To register an enterprise, a package of documents twice as large is required, which is supplemented by a charter, decision, etc.;
As for paying the state duty, when registering an LLC it will be about 4,000 rubles, for an individual entrepreneur – 800 rubles;
The founders of an LLC are required to contribute an amount of at least 10,000 rubles to the authorized capital of the enterprise, no later than 4 months from the date of registration.

The registration period for individual entrepreneurs and LLCs is the same; it is at least 5 working days.

What are the restrictions on activities?

Individual entrepreneurs are prohibited by law from engaging in certain types of activities:

An entrepreneur cannot produce and trade alcoholic products, with the exception of beer;
Carry out insurance activities;
Carry out banking activities;
Open investment funds;
Provide pawnshop services;
Produce medicines;
Be a tour operator.

As for LLCs, these rules do not apply to organizations and they have the right to carry out any type of activity that does not contradict the law.

How do individual entrepreneurs and LLCs use money?

The goal of creating any business is to make a profit. In order to freely manage the money owed, you must withdraw it correctly.

There are no restrictions on the use of funds for individual entrepreneurs. All funds stored in the cash register or on current accounts are your property, and you can withdraw them without restrictions.

There is no need to pay any additional taxes. You should remember that in the course of your activities you should not allow the formation of debts to pay insurance premiums or taxes. Otherwise, the tax authorities may send an order to the banks to seize the current account, and you will not be able to withdraw money until the debt is fully repaid. In addition, you will have to pay penalties.

All funds at the disposal of the LLC are the property of the organization. Even if you are the only founder of the company, you still do not have the right to manage the company’s money based on your personal desires.

LLC founders can withdraw money as follows:

Pay dividends to participants;
Payment of wages;
By concluding a loan agreement;
Draw up an agreement with the individual entrepreneur.

Withdrawing money from a company’s turnover is an absolutely legal procedure. You should remember that dividend payments must be made from profits remaining after paying taxes. The participants of the enterprise distribute income at their own discretion, unless this is stated in the company’s charter.

Availability of legal address of LLC and individual entrepreneur

Any organization cannot exist without a legal address, so when creating an LLC, you should take care of this in advance.

There are three ways to solve this issue:

Purchase property or draw up a lease agreement. The premises can be either an office or a warehouse. This method is the most expensive, so not all entrepreneurs use it;
Use the services of companies that provide opening LLCs with “mass addresses”. However, caution must be exercised here. If, during an inspection by the Federal Tax Service, it is revealed that such a company is on the black list, then you will be denied registration.
Register the organization’s address at the Business Support Center. This method will save you from all sorts of expenses for purchasing premises.

The use of the founder's registration in the form of the legal address of an LLC is not prohibited by law, however, the Federal Tax Service does not approve of this fact and may refuse to register the enterprise.

An individual entrepreneur is required to register at his place of residence. The specified data will become his legal address.

If, for example, an individual entrepreneur is registered in one city, but lives and works in another, then he should contact the Federal Tax Service of his city with a question about registration. At the same time, the legislation does not prohibit him from conducting his business throughout Russia without opening branches.

You should also clarify in advance which taxes need to be paid at the place of registration of the individual entrepreneur, and which at the place of business.

Fixed contributions for individual entrepreneurs

According to the law, entrepreneurs, regardless of their income, are required to transfer amounts to the Pension Fund both for themselves and for their employees. This amount does not have a specific value; it changes every year. For example, in 2018, insurance premiums are 32,385 rubles.

Many entrepreneurs believe that a fixed payment is a disadvantage of an individual entrepreneur, but in fact this is not the case:

Firstly, the money in question is not a tax. This amount is spent on the formation of a future pension and health insurance;
Secondly, insurance premiums are paid from the salaries of both individual entrepreneurs and LLC participants;
Thirdly, unlike an LLC, an individual entrepreneur has the right to reduce the amount of taxes paid exactly as much as he paid in insurance premiums.

Are there any differences in taxation between individual entrepreneurs and LLCs?

The amount of taxes paid for both individual entrepreneurs and LLCs depends entirely on the tax regime in which they operate.

There are 5 modes:

– general taxation system;
– a simplified view of the taxation system;
– tax on imputed income;
– agricultural tax;
– the tax is paid according to the patent, it can only be used by individual entrepreneurs.

For many types of these regimes, there are the same rates for individual entrepreneurs and LLCs. The difference may be in paying income tax. For individual entrepreneurs, income tax is 13%, for LLCs – 20%.

As for taxes for employees, payments for both forms of ownership will be the same and are mandatory. Personal income tax and insurance premiums are paid from employee income. Income tax is subject to withholding at the time of payment of wages and is 13%.

Reporting

The reporting that LLCs and individual entrepreneurs are required to submit to the tax service depends not on the form of ownership, but on the tax system under which the enterprise operates.

As for the company’s personnel, LLCs and individual entrepreneurs provide the same package of documentation for them. Accounting statements are required only for LLCs. You should take into account the fact that when using cash registers, there are certain rules by which entrepreneurs report. For individual entrepreneurs it is much simpler.

Possibility of hiring employees

Both individual entrepreneurs and LLCs have the opportunity to attract hired workers. Regardless of where the employee works, for an individual entrepreneur or in an organization, his rights will be the same. According to the law, every employer is obliged to create normal working conditions and take into account the rights of employees.

Employers remain responsible for formalizing the employee's employment by entering into a contract with him and paying him the compensation due. You should also remember that you need to pay insurance premiums to the Pension Fund and other funds.

Does reputation depend on the form of doing business?

The opinion that working with an LLC is more prestigious is erroneous. In fact, your partner absolutely does not care in what form you conduct business. The most important criterion by which you earn your reputation is the strict fulfillment of contractual obligations.

How to close individual entrepreneurs and LLCs

Much simpler than LLC. All an entrepreneur needs to do is submit an application to the Federal Tax Service for liquidation and pay the state fee.

For you need:

Convene a general meeting of the organization’s participants;
Make a decision on liquidation;
Elect a responsible person;
Collect a package of documents for the tax office, and they must be prepared in strict accordance with the requirements of the law;
Publish an article about liquidation in print media;
Notify creditors;
Pay state fees, etc.

On average, the procedure for closing an LLC takes a period of 4 months, provided that no violations have been identified in the activities of the enterprise.

Liability and fines

Undoubtedly, the responsibility for violations committed by the organization is much higher than by the individual entrepreneur. The fines that the company will pay will be 10 times higher than those of the entrepreneur.

However, not only the enterprise itself, but also its founders can be held liable. As for criminal liability, the leaders of an organization can be punished much more severely than an individual entrepreneur. The Criminal Code of the Russian Federation contains many articles devoted to the illegal activities of the management of organizations.

The Tax Code of the Russian Federation provides for both LLCs and individual entrepreneurs, if they commit violations, the same penalties.

What form of ownership is convenient for trading?

To know what is better for trading as an individual entrepreneur or LLC, you need to decide on the scope of your activity. If the business involves small volumes of trade, then an individual entrepreneur is best suited. Creating an LLC is most suitable, for example, for opening a pawnshop.

For example, if you want to open a hairdresser, then an individual entrepreneur is best suited. And if in the future your plans include selling cosmetics or opening a beauty salon, then for services of this kind you will need to open an LLC. Do not also forget that health services, such as a solarium, for example, are not eligible for UTII reporting.

Is it possible to open an individual entrepreneur if an LLC is open?

The legislation provides for the possibility that two forms of doing business can exist. In this case, it is necessary to comply with the rule according to which an individual entrepreneur cannot be the head of an LLC. In this case, the registration authorities may suspect you of fraud and invalidate the registration of the individual entrepreneur.

In order not to arouse suspicion among the inspection authorities, an individual entrepreneur can enter into an employment contract with an LLC and act as an employee.

The main mistake of LLCs is that when appointing an entrepreneur to a managerial position, they try to save money and do not pay taxes on his behalf, citing the fact that the employee received remuneration in the form of wages. In the future, such disputes are resolved in court. It is important to remember that when creating an individual entrepreneur, tax reporting is required.

Do not also forget that when appointing a director, information about the hired individual entrepreneur must be entered into. Based on this, tax authorities may conduct additional audits to identify underpayment of taxes.

Another legal way of doing business is the conclusion of various agreements between an individual entrepreneur and an LLC. The main condition is that transactions concluded between them should not arouse suspicion on the part of the tax service. Otherwise, you will need to prepare for ongoing visits to identify violations of the law.

The legislation of the Russian Federation prohibits conducting double business. In which income from the LLC is transferred to income in the individual entrepreneur.

The founder of an LLC who has decided has the right to open an individual entrepreneur. The main thing that needs to be taken into account in such a situation is that the business that an individual entrepreneur runs must be transparent, and its income should not intersect with the income of the LLC.

Each form of ownership must exist independently, submit the necessary reports, and pay different taxes.

You should also remember that the responsibilities you will have as a sole proprietorship and as an LLC will be different. Failure to comply with the law may result in criminal liability.

A traditional question for novice entrepreneurs: “Which is better - individual entrepreneur or LLC?” The answer to this question can only be given by you, because it all depends on what types of activities you are going to engage in, whether you will have partners, what your income and expenses will be, who your counterparties will be and whether you plan to expand your business. Also, individual entrepreneurs and LLCs have their own pros and cons, which it is advisable to weigh before submitting documents for state registration. The registration procedure, the volume of document flow and other related factors will depend on the decision that will be made in the end; we will try to consider all this in this article, which will help you make the right choice.

What is the difference between an individual entrepreneur and an LLC, the difference between an individual entrepreneur and an LLC

	IP	OOO
Registration	Simple, includes only an application and state fee. Registration is carried out exclusively at the place of residence (registration in the passport). Activities can be carried out throughout the Russian Federation.	Complex, in addition to the application and state fees, requires the conclusion of a constituent agreement, the development of a charter, minutes of the constituent meeting and documents to the address.	In case of self-registration, the cost of registration is equal to the state duty of 4,000 rubles.
Owner	The individual entrepreneur is the sole owner of the business.	Several participants are possible (up to 50).
Responsibility	Bears responsibility for the property belonging to him.	Responsible with authorized capital.
Accounting	An individual entrepreneur without employees is not required to keep accounting records and submit financial statements to the tax authorities, but has every right to do so. An individual entrepreneur using the simplified tax system must keep a book of income and expenses.	Required to keep accounting records and submit reports to the Federal Tax Service, Pension Fund and Social Insurance Fund.
Income	There is an opportunity to freely dispose of the proceeds.	LLC participants can distribute dividends no more often than once a quarter, that is, income from the company’s activities can also be received once a quarter after the corresponding meeting of the company’s participants. The LLC must withhold personal income tax on dividends from its participants at a rate of 9%.
Activities		The list of activities is not limited.
Fines	In an out-of-court procedure, you can be fined up to 5 thousand rubles. (only if you have a current account).	An out-of-court fine may be up to 50,000 thousand rubles.
Authority	Only the entrepreneur himself can represent the interests of an individual entrepreneur. Otherwise, he will need to issue a power of attorney for the representative.	The director can act on behalf of the organization without a power of attorney.
Investments	Credit only. If an investor wants to become a participant, it will be necessary to create a legal entity.	If an investor wants to become a participant, it will be enough to register for him a part of the share in the authorized capital.
Employees	Can operate without employees. As soon as an entrepreneur has his first employee, he must register as an employer.	Automatically registered as an employer from the moment of creation, since the director himself is an employee.
Branches and representative offices	Can open offices throughout Russia under its own name. Does not create or register branches and representative offices.	Creates branches and representative offices. In this regard, it is obliged to make changes to the constituent documents and each time register for taxation at a new place of business. In this case, the right to use the simplified tax system is lost.
Availability of seal
Availability of a current account
Contributions to funds	Leave your comments and suggestions for improving this article in the comments.

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.

Note
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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 periods 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 organizational form of a business worries many beginning entrepreneurs. A lot will depend on the choice - taxation, powers, types of activities, etc.

Dear readers! The article talks about typical ways to resolve legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:

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What is better to open in Russia in 2019, an individual entrepreneur or an LLC? When opening your own business, it is important to determine in advance what its legal status will be.

The wrong choice can become an obstacle to the implementation of certain types of activities.

Future costs also depend on the organizational form. What is better for a Russian entrepreneur to choose in 2019, an individual entrepreneur or an LLC?

Basic moments

The main difference between an LLC and an individual entrepreneur is considered to be only the legal status. Beginning entrepreneurs don’t think too much about what exactly to choose.

Most often, the choice is based on the number of people - one organizer is an individual entrepreneur, several participants are an LLC. But this is by no means the main criterion.

If we consider some aspects of legal identification, then, first of all, we need to note the degree.

An individual entrepreneur is a private person. He is responsible for all the consequences of his economic activities with his personal property.

In the event of bankruptcy of an individual entrepreneur, the entrepreneur’s property may be confiscated by authorities with proper sanctioning powers as part of the repayment of debt obligations.

That is, from the point of view of loss of property, being an individual entrepreneur is quite risky. As for LLC, this is a legal entity and, therefore, an independent entity.

Information about all LLC participants is entered into the Unified State Register of Legal Entities and is publicly available. In Russia, LLC is the most common form of legal entity in small business. More than ninety percent of all Russian legal entities are LLCs.

Main activities

Entrepreneurial activity is an activity carried out independently, aimed at regularly making a profit from the use of property, sale of goods, performance of work or provision of services.

The key criterion is the regularity of income. You can make a sale once or without registering a business.

But the law does not spell out what exactly is meant by regular.

Therefore, repeated receipt of income from business to one degree or another can be considered regular.

Penalties are provided for carrying out business activities without registration.

This is a fine of up to three hundred thousand rubles, or compulsory work of up to two hundred and forty hours, or arrest of up to six months.

The degree of punishment increases when income is received in a particularly large amount (more than one and a half million rubles).

At the same time, the absence of registration does not relieve the entrepreneur from obligations under transactions and agreements.

The law defines the main types of business activities. Some of them are not available for individual entrepreneurs.

At the same time, there is no single legal act that lists all specific types of business. The ban on certain types of entrepreneurship for individual entrepreneurs is based on different legislative norms.

For example, the legislation on the production of alcoholic beverages prohibits private individuals from producing and wholesaling alcohol.

Individuals cannot engage in microfinance and tour operator activities, pawn shops, etc.

Not all laws regulating activities contain an explicit prohibition for individual entrepreneurs.

However, if the text only mentions an organization, this indicates a ban on entrepreneurship in this area for individuals.

Sometimes the law makes no mention at all of who it applies to.

Requirements regarding the legal form follow from the rules if the type of activity requires a license.

Restrictions for individual entrepreneurs may also arise when accessing various auctions and tenders. For organizations, there is no prohibition on engaging in certain types of activities and you can do whatever you want.

Having chosen an individual entrepreneur, you need to find out in advance about all possible restrictions and prohibitions for the chosen type of activity.

Current standards

The procedure for registering legal entities and individual entrepreneurs is regulated (latest edition).

In particular, it provides a definition of the standards that must be observed to carry out business activities.

The very concept of entrepreneurship is discussed in the Civil Code (). The activities of the LLC are regulated.

No separate laws have been adopted regarding individual entrepreneurs. The legal framework for individual entrepreneurs consists of parts of laws and regulations.

But at the same time, certain rules affecting the entrepreneurial activities of private individuals are regularly adopted.

In addition, some provisions regarding individual entrepreneurs are adopted at the regional and municipal level.

The lack of a unified legal framework for individual entrepreneurs significantly worsens the situation for them.

The array of legal acts on entrepreneurship as a whole is quite large, and other norms contradict each other.

Such nuances make it difficult for beginning entrepreneurs to choose between an LLC and an individual entrepreneur.

What is better to open an individual entrepreneur or LLC?

When choosing the legal status of a future business, it is worth comparing the features of a particular organizational and legal form.

In the absence of a direct or indirect ban on opening an individual entrepreneur for the chosen type of activity, you should be guided by the greatest benefit.

You can compare the features of individual entrepreneurs and LLCs using the example below. Comparison of organizational and legal forms of activity:

IP	OOO
Minimum number of documents	Extended package of documents
Registration cost 800 ₽	Registration cost 4,000 ₽
Registration is carried out at the individual’s home address, no need to purchase an office	A legal address is required, that is, premises for conducting activities. Mass registration to an address may result in refusal. Registration is possible at the home address of the founder
No authorized capital required	The minimum amount of authorized capital is 10,000 rubles. Must be paid within four months after registration
Registration is carried out for one person. Partial withdrawal from individual entrepreneurs is not possible	The number of participants varies up to fifty people. The exit of one participant does not terminate the activities of the LLC
The individual entrepreneur is liable for all obligations with personal property, recovery is possible even after completion of activities	Property liability is permissible within the limits of the LLC's property, although there is subsidiary liability for individuals. After termination of activity, claims cannot be legally made.
Insurance premiums are paid even in the absence of activity	In the absence of employees and property on the balance sheet, mandatory payments are not provided
The individual entrepreneur disposes of the profits at his own discretion.	All expenses require documentary confirmation; the manager receives income in the form of salary or dividends with payment of the due
The control order is determined independently	Strict adherence to internal management procedures established by law is required
Private activity is tied to one person, which minimizes the possibility of raider takeover	The threat from raiders is many times higher
Direct investment is not possible	Investors are welcome, it is possible to include them in the list of participants
There is a ban on certain activities	All legal activities are permitted
No need for accounting, a wide range of tax regimes	Accounting is mandatory, the choice of modes is limited, control by government agencies is higher
Administrative fines are ten times lower compared to LLCs	Fines for violations are high, with separate sanctions applied to the manager and responsible persons
Termination of activities takes a minimum of time, the presence of debt on insurance premiums is not an obstacle	takes a long time, requires fulfillment of existing obligations

Advantages and disadvantages of individual entrepreneurs

Advantages	Flaws
No authorized capital required No legal address required Accounting is carried out according to Reporting to regulatory authorities is minimal Administrative fines are lower than for legal entities Application of the patent system is allowed Easy registration Minimum document flow Low	Liability for obligations with personal property Restrictions on certain activities Insufficient legal regulation Difficulties with business expansion Inability to attract direct investors Complexity of banking

Pros and cons of a limited liability company

The best organizational and legal form for various types of activities

The question of the legal status of business is somewhat akin to Hamlet’s “To be or not to be?”

It is impossible to accurately answer which organizational and legal form is more convenient, except in cases of direct prohibition of activities for individual entrepreneurs.

A variety of aspects should be taken into account, from taxation and the degree of responsibility to issues of using profits.

According to statistics, the majority of Russian individual entrepreneurs are involved in retail trade and the service sector.

Typically, individual entrepreneurship is chosen when interaction with individuals is planned.

An LLC is opened if it is expected to attract and expand business in the future. But still, the choice remains with the businessman himself.

To provide services

The provision of services refers to a very wide range of activities. When choosing a status, you need to be guided by the volume of your business.

When only one or two or three services are provided, then you can limit yourself to individual entrepreneurs.

For example, to provide legal services in a narrow industry, an individual entrepreneur is more than enough. If a wide range of services is expected, then an LLC is preferable.

And if related products are also sold, then a license will be required, and this requires the formation of a legal entity, even with a single owner.

As an example, if you open a small hairdressing salon, you can register as an individual entrepreneur. But when opening a beauty salon with numerous services, it will not be possible to work without opening an LLC.

For trade

What is better to open an LLC or individual entrepreneur for retail trade? When opening a small store aimed at serving ordinary citizens, the best organizational form is an individual entrepreneur.

This is due to simpler accounting. In addition, you can use UTII, which does not pay.

But if several people open a trading enterprise, then the choice leans towards LLC. Registration of a legal entity is also preferable in cases where it is planned to gradually expand the business.