How does an individual entrepreneur differ from an LLC? Pros and cons of individual entrepreneurs and LLC

Starting your own business is a serious undertaking that requires a reasonable approach and consideration of many details. Most young businessmen have a question about the choice of the form of entrepreneurship. To make the right decision, you need to clearly understand how an individual entrepreneur differs from an LLC. Other options (joint stock company, partnership) are too difficult to start your own business, so in practice they are used much less often.

The role of the organizational and legal form in business

The future of the company directly depends on the choice. Individual entrepreneurs and legal entities differ markedly from each other. Even one and the same type of activity in the considered organizational and legal forms will develop in completely different directions, therefore, the choice should be treated with full responsibility and must be oriented towards the future.

For a young entrepreneur to be able to make a reasonable decision, he must understand how an individual entrepreneur differs from an LLC. To do this, you need to find out the characteristics of each species.

Features of opening an IP

To obtain a business certificate, certain documents are required:

• notarized statement (form p21001);
• copy of the passport;
• receipt of payment of state duty;
• application for the use of the simplified tax system.

A young businessman must definitely choose the types of activities that he is going to do. If all the documentation is properly executed and the inspector does not find specific reasons for the refusal, the procedure will go smoothly. Obtaining a legal address, depositing the amount into the authorized capital - all this does not require the registration of an individual entrepreneur. The price of the state duty is 800 rubles, and the duration of all events is about a week.

Features of LLC registration

The process is more complicated and requires the following documents:

• registration certificate;
• order on the appointment of the head of the company;
• charter;
• extracts from the Unified State Register of Legal Entities.

In some situations, you may need a letter of guarantee for the provision of premises for a legal address, copies of the passports of the founders and the head, acts of appraisal and transfer of property. The cost of the state duty is approximately 4000 rubles. Legal entities are required to open a bank account and obtain their own seal, but entrepreneurs do not need this - this is how an individual entrepreneur differs from an LLC.

Economic policy of individual entrepreneurs and LLC

Despite the fact that an entrepreneur has a low initial payment, a legal entity has more economic advantages. Firstly, in most cases, less expenses are required for maintaining a company, because even if a businessman does not do his job or does not make a profit, he will still be obliged to regularly pay a certain amount to the Pension Fund and the tax office. In such a situation, it can provide a "zero" report and an information letter on the absence of payments to individuals.

Secondly, there is the fact that the organization is a more reliable partner in business than an individual entrepreneur. In this regard, it is much easier for her to build a deal with partners and counterparties. But this is far from all the difference between an individual entrepreneur and an LLC.

Individual entrepreneur and limited liability company taxes

In tax liabilities, there are no special differences between the considered organizational and legal forms (if the same regime is chosen). The rates and terms are the same for both parties. The only difference is that an additional type of taxation is available for individual entrepreneurs.

In 2014, businessmen and legal entities can choose one of the following tax regimes:

1. OSN is a general taxation system used by default (if there was no application for another category). For a merchant, it offers unfavorable conditions, since it requires payment of VAT (18%) and personal income tax (13%), and accounting is also difficult in it.
2. The simplified taxation system is a simplified taxation system available to businessmen with an income of less than 64 million rubles. This regime is popular because it assumes the absence of VAT, and instead of income tax, an individual entrepreneur must pay 6% of profit or 15% of revenue.
3. UTII is a unified tax on imputed income. In this regime, there is no VAT and the tax rate is 15%.
4. PSN - the patent taxation system (not provided for legal entities) differs in that the individual entrepreneur will have to pay 6% of the possible income, depending on the type of activity.

In the presence of employees, the individual entrepreneur and LLC undertake to make additional financial payments.

Lending and administrative fines

In the field of obtaining loans, businessmen may face certain difficulties, since banks are more loyal to legal entities. The reason is that credit institutions know a specific amount of authorized capital, which they can count on in case of non-payment. Even if the size of the founders' contribution is minimal, a limited liability company has a better chance of getting a loan.

Those who want to understand how an individual entrepreneur differs from an LLC (2014) should know that the legislation is more lenient towards those who have the status of an individual entrepreneur, since the amount of administrative offenses for them is set less than for legal entities.

The difference in liquidation and bankruptcy risks

Sooner or later practically all types of activity have to be stopped, but not necessarily because of ruin. This may be required in order to start a more profitable business. Then you will need to close the business certificate or liquidate the legal entity. Such events are similar to each other, but a limited liability company takes them much longer.

In the event of bankruptcy to pay off debts to creditors, the businessman risks losing all his possessions, regardless of whether they are related to business activities. This is where the main danger of doing business in the form of an individual entrepreneur lies. In such a situation, legal entities are liable for financial obligations only by the amount of the authorized capital or the property of the organization (which may not exist). That is why some people are interested in how to transfer the status of an individual entrepreneur to an LLC.

What is the difference between an LLC and an individual entrepreneur: pros and cons

Based on the above material, the following advantages of IP can be distinguished:

• quick opening of the certificate;
• low registration cost;
• there is no need for the costs of setting up a legal address.

Disadvantages of IP:

• payment of contributions to the Pension Fund, regardless of the level of income and activity of a businessman;
• distrust on the part of large firms, difficulties in concluding contracts;
• in case of bankruptcy, the individual entrepreneur risks losing all his property (apartment, car, dacha, house).

Positive aspects of LLC:

• if the income is zero, you do not need to pay money to the Pension Fund (upon submitting the relevant documents);
• in case of collapse, it is only liable for the authorized capital.

Negative sides of LLC:

• high cost at opening;
• funds are required to form the capital of the company;
• search for a legal address (additional costs).

That's all there is to know about the forms of entrepreneurship in question. A clear understanding of how an individual entrepreneur differs from an LLC will allow a novice businessman to think carefully about everything, avoid unnecessary mistakes and make a reasonable decision that will lead to success.