What is better IP or LLC: 5 categories for comparison

Which is better: individual entrepreneur or LLC - a comparison of two forms of entrepreneurial activity in 5 categories.

In the Russian Federation, and in other countries, before starting a career as a businessman, you must officially register your business.

When it comes to the need to undergo this procedure for the first time, the question arises: which is better - sole proprietorship or LLC?

After all, the number of documents that will have to be collected for registration, tax deductions, bookkeeping and many other related issues depends on this.

To make a choice, let's compare LLC and OP in 5 main categories.

Registration of IP and LLC

Before analyzing in detail all the subtleties, let's consider a general list of differences between an LLC and an individual entrepreneur.

Where is it better to register LLC and IP?

In addition to the difference in the points listed above, there are differences even in the place of submission of documents.

Place of registration of IP

Occurs exclusively at the place of residence of the entrepreneur.

You can find the necessary data on the website of the Federal Tax Service: https://service.nalog.ru/addrno.do

If you do not have the opportunity to come in person, you can submit documents remotely: https://www.nalog.ru/rn77/service/gosreg_eldocs

And here it will be possible to make the appropriate deductions already at the place of actual residence.

Place of incorporation

Regarding the place of registration of an LLC, other rules apply, which can also be found on the website of the tax office: https://www.nalog.ru/rn77/yul/interest/reg_yl/register

There are three ways to solve the address problem:

Room rental.

For this, a room in the city center or in places with good transport interchanges is best suited to make it easier for customers to get to and find the office.

You can, of course, buy an office space. But, as practice shows, novice businessmen cannot afford such a luxury.

Ask for help from specialized companies.

This method of obtaining a legal address will be much cheaper than buying or renting it.

But the choice of an intermediary company must be approached with all responsibility, because sometimes the addresses they sell are on the black list of the Federal Tax Service.

In this case, it will not work, as the application will be rejected.

It is best to turn to trusted companies for help, such business incubators can be.

Use your home address.

The law does not prohibit doing this, but this step will "tie" to the place of registration.

That is, Ryazan is indicated in all documents as the place of registration, but it is impossible to work in Moscow.

What is better than an individual entrepreneur or LLC: comparing "areas of responsibility"

Among the facts why an LLC is better than an individual entrepreneur, first of all, they call the lack of responsibility for their own property.

What does this mean?

An individual entrepreneur, if suddenly the business goes bankrupt, is responsible for the available real estate, car, cottage, that is, all personal property acquired.

That is, becoming an individual entrepreneur, you designate all your own property as the material capital of the company;

But the LLC is responsible only for the funds of the enterprise that were originally invested in the business.

This financial reserve is called the authorized capital.

Its value can be different, but not less than 10 thousand rubles.

But not everything is as simple as it seems at first glance.

When registering an LLC, the owners automatically take on not only legal responsibility, but physical.

When it comes to this issue, they often mean only legal responsibility - indicated by law and indicated above.

But if the LLC, for some reason, failed to pay the loan to the bank or owed its partners, and the authorized capital did not allow to cover the debt, then the obligations for payments fall on the founders of the company.

So do not expect that you can "make" millions in debt, calmly declare yourself bankrupt and go on an indefinite vacation.

Are there exceptions to the rule?

Even with huge debts, according to the legislation of the Russian Federation, there is a list of properties that are not subject to seizure from individual entrepreneurs.

For example, it could be a single apartment or a piece of land.
See all options on the website http://ogpkrf.ru/st446

What is better LLC or IP: comparing taxation and deductions

The tax payment system is one of the key aspects of doing business, so aspiring entrepreneurs are interested in the question of what form of deductions is the most profitable, and is there a difference in tax deductions for LLCs and individual entrepreneurs.

Who pays and how much?

Regardless of how much IP has received profit, the founder must annually deduct contributions to the Russian Pension Fund.

For 2017, this amount is 27,900 rubles.

Such a fixed payment is considered a minus of individual entrepreneurship in front of an LLC (because the latter can “idle” without any deductions, for free).

But if you consider that this is a one-time amount for the year, then this is a small minus.

But all the funds earned by the IP can be safely spent at its discretion, without making additional deductions.

An LLC does not have such a privilege - all cash movements are displayed in accounting reports, and 13% of each profit goes to the state treasury.

5 tax systems in Russia

All 5 existing types of taxation are equally “workable” for both individual entrepreneurs and LLCs (except for PSN).

This list includes:

As you understand, when choosing which is better - an LLC or an individual entrepreneur, the tax system matters only when you need a patent option for deductions.

In other cases, the choice of the type of taxation occurs after the fact.

A nice bonus for readers is a comparative description of the main 4 systems:

What is better to open - IP or LLC - for certain types of production?

Individual entrepreneurship, unlike LLC, does not have the right to open a business in the following areas:

• alcohol industry;
• banking business;
• pawnshops;
• production of medicines;
• investment funds.

IP does not give the right to obtain licenses. Therefore, sometimes the choice of what is better to open - an individual entrepreneur or an LLC - does not have to be made, because. the state does not provide such an opportunity at all.

What is better to open - LLC or IP - to withdraw money?

The purpose of starting a business is to make money. But before the money is in the hands, it must (obviously) be put out of business.

In this case, the IP has a significant advantage over the LLC.

For individual entrepreneurs, as already mentioned, the money earned is in free use, and it can be easily taken from a safe or from a bank account.

But with an LLC, things are a little more complicated. All the money that the firm earns, even if the owner is one in the state, is the property of the enterprise.

How do the founders of an LLC withdraw money?

The withdrawal can take place in the following way:

• employee salaries;
• with the help of dividends;
• contractual loans;
• contracts with third parties;
• agreements with other companies.

Dividend payments- the very only true system for distributing the funds earned by the company among its founders.

Dividends are paid to each founder after all deductions to the tax service and the deduction of various fees, that is, this is the company's net income.

The distribution of the earnings of the Limited Liability Company can be made quarterly, once every six months, at the end of the year.

The cyclicity of payments at each enterprise is individual, but most LLCs make them at the end of the year.

Accounting for sole proprietorships and LLCs

IP bookkeeping

An individual enterprise has the right to keep accounts in accordance with the following points:

• if you open a business as an individual entrepreneur, then the founder will be able to maintain a more simplified form of accounting than for an LLC;
• you can not enter such an employee as an accountant into the state;
• it is possible to use the patent system;
• equipment is not subject to reporting;
• does not require the payment of property tax;
• you can do without a cashier;
• has a fixed contribution to the PF;
• the debts of the past year are not covered by the profits of the coming year.

Bookkeeping in the form of an LLC

The LLC must keep records in accordance with the following points:

• opening a business under the registration of an LLC means maintaining detailed accounting records for the tax service;
• must have an accountant in the state;
• does not have the opportunity to resort to the patent system;
• it is obligatory to have a cash desk and full control over the money in it;
• equipment is registered in the authorized capital;
• property tax must be paid.
• the debts of the previous year are covered by the income of the coming year.

What is the main difference between sole proprietorship and LLC?

A representative of a consulting company helps to deal with the nuances:

The article discussed in detail the issue what is better to open a sole proprietorship or LLC.

In fact, it makes no sense to compare these two forms of registration, because they are completely different.

But it should be emphasized that an individual entrepreneur is more suitable for running a small business, but an LLC is designed for large-scale production.

It only remains to add that an LLC is more difficult to register and conduct business, but more solid and gives special privileges.

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