What is better to open: LLC or IP? Having decided to throw off the shackles of office slavery and no longer work “for your uncle”, developing your own business, you should know that it should be legally legitimate. That is, you need to register with the Federal Tax Service. And for this, first of all, you should decide which of these two options is more suitable.
Definition
To understand what the difference between LLC and IP is, and which of these two forms of doing business is better, first you need to look at the Civil Code of the Russian Federation and read their definitions.
IP is an individual who has been registered in the manner prescribed by law, as an IP, conducting business.
LLC - a business company or association established by one or more persons, with the authorized capital divided into shares.
This means that by registering as an individual entrepreneur, you confirm that the entire business is entirely yours. If it is planned that several persons will manage the company or company, it is more profitable to register an LLC - this form protects the interests of each of the founders.
Documents required for registration
The difference between LLC and IP also lies in what documents are necessary for registering a business. In order to start working as an individual entrepreneur, you need:
- Application for registration completed in the form 12001;
- application for the simplified tax system (if necessary);
- state duty receipt.
To register an LLC you will need more documents:
- Application for registration, compiled in the form of 11001;
- protocol or decision on registration of LLC;
- charter in 2 copies;
- receipt confirming payment of state duty;
- application for the simplified tax system (if necessary).
In some cases, in order to register a new legal entity, LLC you will need to supplement the main package of documents with an agreement on establishment (if there are several founders), as well as papers regarding your legal address (a certified copy of the certificate of ownership or a letter of guarantee from the owner).
State Duty Size
Trying to understand what is better to open - LLC or IP, you, among other things, should pay attention to the fact that for the registration of various forms of business the size of the state duty will also be different.
In accordance with paragraph 1 of the first part of Article 333.33 of the Tax Code of the Russian Federation, the creation of an LLC is subject to a duty of 4 thousand rubles. The same document determines the necessary contribution for those who plan to work as an individual entrepreneur - in this case, the cost will be much lower, only 800 rubles.
Responsibility
Of course, the difference between IP and LLC is closely tied to liability for obligations. So, individual entrepreneurs are liable with all the property that belongs to them, with the exception of that to which collection cannot be extended by law (article 24 of the Civil Code of the Russian Federation). But the participants of the LLC bear only the risk of losses associated with the activities of the organization, as part of their shares in the authorized capital. However, they do not respond with personal property.
Administrative responsibility
What is better to open: LLC or IP? Studying this issue, you should carefully consider issues related to administrative responsibility. If any offense was committed by an individual entrepreneur, then, in accordance with the laws of the Code of Administrative Offenses of the Russian Federation, they are liable as officials. At the same time, the measures imposed in such cases on the LLC (for example, fines) are much higher than those that are applied to officials. That is, IE, brought to administrative responsibility, as a result suffer much smaller losses.
Registration Address
Individual entrepreneurs are registered at the place of residence, at the address of permanent residence, which is indicated in the passport. LLC - at the place where the sole executive body of the organization is located. In fact, in the second case, you have to rent or buy a legal address, which will entail additional costs.
Features of taxation and withdrawal of funds from accounts
In terms of withdrawing money from a settlement account, doing business in the form of IP is, of course, a more convenient option. You can contact the bank at any time in order to receive funds in cash. In this case, your expenses will be limited by the amount of tax - 6 or 15% (if a simplified taxation scheme is used).
As for the LLC, the withdrawal from cash accounts is quite problematic, and without appropriate justification it is completely impossible. One of the possible ways is to pay dividends to a member of the organization, which are additionally taxed in the amount of 9% (personal income tax). In addition, as for individual entrepreneurs, a tax amount of 6 is required (if the general taxation system for LLC is applied) or 15% (for the simplified tax system).
Liquidation
Whatever one may say, this issue still should be divided into two parts - official and unofficial. From a legal point of view, an LLC needs about 3-4 months to liquidate and up to 30-40 thousand rubles for various expenses. Liquidation of IP requires much less financial costs (an average of about 5000 rubles) and time (up to 2 weeks). With the informal closure of IPs, there are no problems at all, but in the case of LLC you will need additional costs (depending on the appetite of the organization, the amount can reach 30-50 thousand rubles). It’s worth mentioning right away that subsequently it will not work to convert IP into LLC: it will be necessary to create a new legal entity.
Attraction of investments
The difference between IP and LLC can also be traced in how easy it is to find investors for a business of one form or another. Practice shows that it is extremely difficult for an individual entrepreneur to do this, because he does not have an authorized capital, and, in fact, he acts on his own. The situation is complicated by the fact that the whole business belongs to the citizen, and therefore investing cannot guarantee anything to the investor.
In the case of LLC, everything is much simpler. After all, at least a guarantee of the interests of the investor can be his inclusion in the list of participants of the organization due to the redemption of a share in the authorized capital.
Reputation and Image
Here, the IP again loses a little. Even despite the fact that with this form of business you are responsible with all your property, the status of an LLC is much higher in the eyes of partners and contractors, and therefore many companies prefer to cooperate with such organizations.
To summarize
In order to simplify your choice, we will combine the pros and cons of IP and LLC in one table.
| Benefits | disadvantages |
IP | For registration, you need a minimum set of documents (a notarized application for registration, passport, receipt of payment of state duty). Within 5 working days you will be registered at the local INFS. | There are certain types of activities that are not available to private entrepreneurs (for example, banking or insurance). |
Until 2014, IPs were exempted from accounting in general, however, from January 1, 2014, under new laws, they should also provide all reports to the tax authority if necessary. | When commercial debt arises, the individual entrepreneur is liable with all his property, including one that does not take part in the business (cottage, apartment, etc.). |
The lack of authorized capital allows not to declare start-up capital when starting a business. | The revenue tax must be paid no later than 30 days from the date of payment. |
The advantages of individual entrepreneurs also lie in the peculiarities of tax accounting of activities: once a quarter it is required to submit a report of one form. In addition, entrepreneurs pay only one of the taxes: either personal income tax on activities, or one dictated by the general taxation system for entrepreneurs. | If the turnover exceeds the mark of 3000 minimum wage / month, the entrepreneur must also pay VAT. |
Opening requires minimal costs - 800 rubles of state duty that you pay to a notary. | At the beginning of the operation, payment of a single tax can even cause losses. |
All profits of IP are at their sole discretion. | Unfavorable banking conditions - tariffs can reach 30% of the total turnover. It is almost impossible to get a loan from a bank. |
No need to get a license for wholesale and retail trade. | |
The difference between IP and LLC is also traced during the liquidation period - in the first case, you can close the business within a couple of weeks. | |
Ltd | The advantages of the LLC are, first of all, that the owner is liable for obligations to a limited extent (only in accordance with the paid share of the deposit). | The LLC requires several times more documents, time and money (the state duty is 4000 rubles) for registration and the start of activities. |
There is an opportunity to change the form of ownership, merge with another legal entity, reorganize the LLC into several companies. | A prerequisite is the presence of authorized capital (which, however, can be symbolic). |
If there is no commercial activity, the legal entity does not pay any taxes. | The registration algorithm is much more complicated than in the case of IP, and the liquidation can take many months. |
The company reserves the right to open representative offices and branches in other countries and cities. | The need to pay a much larger amount of taxes. |
LLC can be bought or sold by concluding a contract in the presence of a notary. | The company is obliged to regularly report to the statistical authorities, maintain a tax and accounting report. |
What is better to open: LLC or IP? In fact, it all depends specifically on the situation and on the scale of the future business. If you plan to work on a large scale, cooperate with a huge number of companies and organizations, open branches and expand, attract new investors, then it is more profitable, of course, to open a full-fledged legal entity.
However, it is worth remembering that for all the costs of registration, if you change your mind at some point or something does not work out, you will remain in the red, and the closing process can take more than one month. The advantages of IP allow you to do this much faster and without serious costs.