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How is the PI different from LLC? Pros and Cons of IP and LLC

Organizing your own business is a serious undertaking, requiring a reasonable approach and taking into account many details. Most young businessmen have a question about choosing the form of entrepreneurship. To make the right decision, you need to clearly understand what the PI is different from LLC. Other options (joint stock company, partnership) are too complicated to start their 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 firm directly depends on the choice of form of entrepreneurship. IP and legal entities are significantly different from each other. Even the same type of activity in the organizational and legal forms under consideration will develop in completely different directions, therefore, the choice should be treated with full responsibility and should be guided in the future.

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

Features of IP discovery

To obtain an entrepreneurial certificate, certain documents will be required:

  • A notarized application (form p21001);
  • copy of the passport;
  • Receipt of payment of state duty;
  • Application for USN application.

A young businessman must choose the types of activities that he is going to do. If all documentation is properly documented and the inspector does not find specific reasons for refusal, the procedure will pass safely. Obtaining a legal address, making an amount in the authorized capital - all this does not require registration of IP. The state duty is 800 rubles, and the duration of all activities is about a week.

Features of Registration LLC

The process of creating a legal entity is more complicated and requires the following documents:

  • Registration certificates;
  • The order appointing the head of the firm;
  • Statute;
  • 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 manager, acts of valuation and transfer of property. The cost of the state duty is approximately 4000 rubles. Legal entities are required to open a bank account and receive their own stamp, and entrepreneurs do not need this - that's why the PI differs from LLC.

Economic Policy of IP and LLC

Despite the fact that the entrepreneur has a low initial contribution, a legal entity has more economic advantages. First, in most cases, the maintenance of the company requires less expenditure, because even if the businessman does not do his business or does not make a profit, he will still have to pay a certain amount to the Pension Fund and the tax inspection. In such a situation , a limited liability company can provide a "zero" report and an information letter on the lack of payments to individuals.

Secondly, there is a stereotypical thinking that an organization is a more reliable partner in business than an individual entrepreneur. In this regard, it is much easier to build trust in the deal with partners and counterparties. But this is not all that the PI from LLC differs from.

Taxes of an individual entrepreneur and a limited liability company

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

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

  1. OCH is the general taxation system used by default (if there was no application for another category). For a merchant, it offers disadvantageous conditions, as it requires VAT (18%) and personal income tax (13%), and it is difficult to maintain accounting records.
  2. USN is a simplified taxation system available for businessmen with incomes less than 64 million rubles. This regime is popular because it implies the absence of VAT, and instead of income tax, an IP must pay 6% of the profit or 15% of the revenue.
  3. UTII - a single tax on imputed income. In this mode, there is no VAT, and the tax rate is 15%.
  4. PSN - the patent system of taxation (not provided for UL) is different in that the IP will have to pay 6% of the possible income, depending on the type of activity.

If there are employees, the IP and LLC will undertake additional financial payments.

Lending and administrative fines

In the sphere of obtaining loans, businessmen may face certain difficulties, since banks are more loyal to legal entities. The reason is that credit institutions know the specific amount of the authorized capital, which they can rely 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 obtaining a loan.

Those wishing to understand the difference between the PI from LLC (2014) should be aware that the legislation is more lenient towards those who have the status of an individual entrepreneur, since the sizes of administrative offenses for them are set less than for legal entities.

The difference in liquidation and risks in bankruptcy

Almost all activities sooner or later have to stop, but not necessarily because of ruin. This may be required in order to start a more profitable business. Then it will be necessary to close the business certificate or liquidate the legal entity. Such activities are similar to each other, but the limited liability company takes them much longer.

In case of bankruptcy to pay off debts to creditors, a businessman risks losing all his possessions, regardless of whether they are related to entrepreneurial activity. This is the main danger of doing business in the form of IP. In such a situation, legal entities are only liable for financial liabilities in terms of the amount of the authorized capital or the property of the organization (which may not be). That's why some people are interested in how to transfer the status of an IP to an LLC.

What is the difference between an LLC and an IP: the pros and cons

Based on the above material, we can distinguish the following advantages of IP:

  • Rapid discovery of evidence;
  • Low cost of registration;
  • Do not need the cost of creating 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 by large firms, difficulty in concluding contracts;
  • When bankruptcy IP risks losing all its 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 (when submitting the relevant documents);
  • In case of collapse, it is only responsible for the authorized capital.

Negative aspects of LLC:

  • High cost at opening;
  • Requires funds for the formation of the company's capital;
  • Search for a legal address (additional costs).

That's all you need to know about the forms of entrepreneurship in question. A clear understanding of what the PI is different from LLC will allow a beginning businessman to carefully think everything over, not to allow unnecessary mistakes and make a reasonable decision that will lead to success.

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