Pros and Cons of LLC and IP

Even if there is a time of hyperinflation in the country, ambitious people will not disappear from this. And even in the harshest conditions of the market, they will come up with ways to create, maintain and register their own businesses. And for sure in the future, as well as now, there will be a problem with such a difficult question, which is better - LLC or IP, pluses and minuses of organizations.

What is IP and LLC?

In the world of big business there are many organizations, the main specificity of which is business activity. But before turning into a big corporation, entrepreneurs start small - registering IP or LLC.

An individual entrepreneur, or an individual entrepreneur, is a person who is registered as a participant in entrepreneurial activity, but does not form a legal entity, but has all his powers.

LLC is a legal entity, a limited liability company. Can act as a firm, company or corporation. All participants of this company are responsible for the authorized capital.

IP and LLC have their advantages and disadvantages. Basically, they are related to obligations and the level of responsibility, but before deciding on what to begin with, it is worth exploring in detail the pros and cons.

Pros and Cons of IP and LLC

The table evaluates the IP and LLC according to such criteria: the registration procedure, taxation, reporting, accounting, use of profits, risks of the founder, restriction of activities and the possibility of expansion.

These are the main differences. Next, consider more subtle nuances. Pros and cons of LLC and IP always attracted a lot of public attention, so it makes sense to consider them in more detail.

Registration and liquidation

Advantages and disadvantages of LLC and IP can be seen already at the time of registration. The cost of the state duty for a limited liability company will be about 4000 rubles. With all this you need to have a solid package of documents, create a bank account and wait a few months. IP registration is much faster, easier and cheaper. Minimum of documents, 800 rubles. State duty and several weeks of expectations.

Similarly, the situation with the liquidation of the enterprise. In order to liquidate a PI, it is necessary to write an application to the appropriate authorities and provide a receipt for payment of the state duty (the amount will be about 200 rubles). A few weeks later, a notice will come that the IP is excluded from the Single Registry. The organization of the case is more complicated, sometimes the liquidation process may take several months. Here one statement is indispensable. It is necessary to place an ad in a special magazine, pay employee benefits, fully pay off debts and provide liquidation and interim balances to the instances.

Taxes and profits

In general, the profit tax is the same, plus and minus LLC and IP begin with profit. Entrepreneur can freely dispose of all proceeds. To save, invest or spend at your own discretion.

Participants of the LLC can not bypass the cashier and take the proceeds. In fact, all the profits that the organization receives are spent on the internal needs of the enterprise, and payments are certified by protocols. Some entrepreneurs also have an IP to the company to be able to withdraw funds.

Accounting and reports

All legal entities must maintain an accounting report. Without special knowledge this can not be understood. If a person wishes to conduct his own bookkeeping independently, he should register the FE, since its members are exempted from the obligation to maintain financial statements. In LLC all the documentation must be correctly drawn up. This applies not only to the accounting report, but also to the tax departments.

What is the risk of the founder?

Because of the unstable economic situation, enterprises can not always stay afloat, sometimes they lose their ability to conduct business and are forcibly disbanded.

Most LLCs or IPs are now beginning to develop thanks to loans or private investments. In the event that the enterprise forcibly suspends its activities, the founder is obliged to pay all existing debts. Pros and cons of LLC and IP are hidden in material risks. LLC risks only property that belongs to the firm. Often these are goods, equipment or furniture. Moreover, LLC has authorized capital, which covers almost all debts.

With an individual entrepreneur such a trick will not work. According to the documentation, his property is not divided into "things for business" and "things for life", so if something unexpected happens, an individual businessman can take off his last shirt.

Evolution

Still pluses-minuses between Open Company and IP disappear in such concept, as development. Ltd. has the opportunity to expand. Hire more people, try yourself in a new market segment. The only condition is to regulate everything legally. In this regard, individual entrepreneurs are somewhat embarrassed. In some types of activities, only legal entities can take part. For example, a license to trade in alcohol IP can not be obtained. If the IP has found a person who wants to lead a joint business and participate in equity policy, he needs to re-register his business in LLC. A companion for an individual entrepreneur will not have equal rights with him unless he is also registered as an IP.

Open Company

Starting your own business is always a risk, especially the opening of an LLC. Pros and cons of this procedure are as follows.

Pluses of registration LLC:

• Responsibility for obligations does not go beyond the authorized capital.
• A member of an LLC may withdraw from the firm if he sells or transfers his share to someone.
• Such a legal entity can be bought or sold.
• Specialists can conduct flexible tax planning, which will increase profits.
• Interests LLC represents both the director and the person entrusted to them.

Registration Minuses:

• The registration and liquidation procedure takes a long time.
• It is mandatory to maintain accounting and tax reports.
• The authorized capital must be at least 10 000 rubles.
• You need to have a seal.
• It is difficult to deduce the profit "past the cash desk".
• If violations were observed in the activities of the enterprise, then the penalties will be higher than for the IP.

However, despite the frightening disadvantages, an increasing number of IPs are transferred to LLC. Someone opens organizations themselves, someone is looking for reliable partners, and someone buys limited liability companies.

Purchase of LLC

Often, organizations with limited liability are bought by those who value their own time and energy. Pros and cons of buying an LLC can be identified as follows. To positive factors it is customary to include such moments:

• The registration of the company will not need to waste time.
• Ltd. is already known in the market, which will help to achieve the location of buyers.
• There are employees, production is adjusted, which means that the profit will be available from the first month.
• You do not need to spend too much effort on preparing the company for work, as there is everything you need.

Priorities for the acquisition of LLC are obvious, but there are also negative aspects:

• In case the firm showed itself from the worst side, it will take a lot of time, money and effort to regain a good reputation.
• Quite often there is a problem with employees. As practice shows, they may not be competent enough or accept new guidelines and simply leave. And to find them a good replacement, you have to spend a lot of time.
• There may be a problem with the equipment, which will result in new attachments.

Key differences

It does not matter, LLC or IP, pluses and minuses will always accompany any kind of entrepreneurial activity. A private entrepreneur is responsible for his personal property for debt obligations, an organization with limited liability - only authorized capital. This is the main difference between LLC and IP. Advantages and disadvantages can be found in registration and liquidation procedures, taxation, withdrawal of profit or documentation. Every entrepreneur should understand that there is a difference between these enterprises. LLC and IP? Pros and cons can be searched for a long time, and most importantly - to find. But, stepping on the path of business, an entrepreneur must first determine his own goals and opportunities and only then choose who to become - LLC or IP.