The choice of the organizational and legal form for a business depends on the tasks, scale and prospects of its development. Let's consider the differences in the forms of these organizations.
Let's analyze the main differences between one form of organization from another
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Responsibility for their obligations
LLC is liable for debts with the property of the company and the authorized capital. And an individual entrepreneur - with all his personal property, including an apartment, a car, and cash. If necessary, the LLC can be re-registered to another person; this cannot be done with an individual entrepreneur.
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Registration difference
When registering, an entrepreneur only needs a passport and payment of a state duty in the amount of 800 rubles. An entrepreneur can work without a stamp and a current account anywhere in the country, but be registered with the Federal Tax Service Inspectorate only at the place of registration. The exception is UTII. This type of activity must be registered at the place of business. LLC is registered at the location (legal address) and for this you need to prepare a whole package of documents, involving hired specialists. The state duty for registration is 4000 rubles. Mandatory contribution of the authorized capital - at least 10,000 rubles. An LLC can have up to 50 founders, but an individual entrepreneur cannot have them. Consequently, entrepreneurship is not suitable for running a collective business. The individual entrepreneur himself manages his business or his representative under a notarized power of attorney, and the founders of the LLC appoint a director who represents the organization without a power of attorney.
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Accounting
For LLC, accounting is required, except for the simplified tax system. From 2013, this will apply to all tax systems. Keeping records of an LLC is difficult and requires the involvement of an experienced accountant. Entrepreneurs are exempt from accounting. You just need to fill out a book of income and expenses in order to calculate taxes.
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Penalties
When committing tax and administrative violations, the fines applied to an LLC are several times higher than for an entrepreneur. For example, violation of the order of conducting cash transactions threatens individual entrepreneurs with a fine of up to 5 thousand rubles, and LLC - up to 30 thousand rubles. In addition to the collection from the company, the collection from the head is also applied.
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Individual entrepreneurship and LLC taxes
When applying the simplified taxation system for individual entrepreneurs, there are no restrictions on income and the cost of fixed assets. Legal entities, however, can apply the simplified tax system if their annual income does not exceed 60 million rubles, the number of people is not more than 100 people, and the residual value of fixed assets is less than 100 million rubles. When applying the generally accepted taxation system in terms of the formation of taxes in the framework of economic activities, individual entrepreneurs pay VAT and personal income tax, while limited liability companies pay VAT and income tax. An individual entrepreneur without hired workers pays only tax on income from his entrepreneurial activity and insurance contributions in the amount determined based on the cost of the insurance year to the Pension Fund and FFOMS from the minimum wage adopted by law. An LLC cannot function without employees. And in addition to taxes on income received, he pays insurance contributions to extra-budgetary funds (PFR, FFOMS, FSS) from the amount of accrued wages, which must be higher than the minimum. Individual entrepreneurs and LLCs are obliged to keep records of cash transactions since 2012. But at the same time, entrepreneurs can take for themselves all the proceeds, cash and non-cash, without any account. And organizations cannot do this, since this is the firm's income, and they can only be spent on necessary needs.
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Closure of IP and LLC
IP closure, like registration, is quick and inexpensive. The entrepreneur submits an application for liquidation and a receipt for payment of the state duty (160 rubles) and a week later receives a decision on exclusion from the USRIP. Liquidation of an LLC takes at least 3 months. The process is very long and costly. It is necessary to submit an advertisement in a special magazine, settle accounts with creditors, pay severance pay to employees, hand over the interim and liquidation balance sheets.
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Other differences
Entrepreneurs are prohibited from producing and selling alcoholic beverages, unlike organizations. In addition, the organization is considered more solid than the entrepreneur. And large firms are more willing to work with them than with individual entrepreneurs, although this is not justified. Individual entrepreneurship is simpler and more profitable in terms of accounting, taxes and reporting.
In conclusion, I would like to note that the choice of an organizational and legal form for a business still depends on the tasks, scale and prospects of its development. For a small business, an individual entrepreneur is preferable, while an LLC is better for a growing and promising direction. The choice of individual entrepreneur or LLC is yours!
