Pros and cons of LLC and IP

Even if the time comes for hyperinflation in the country, ambitious people will not disappear from this. And even in the most severe market conditions, they will come up with ways to create, conduct and register their own business. 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 IE, the pros and cons of organizations.

What is IP and LLC?

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

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

LLC is a legal entity, a limited liability company. It can act as a company, company or corporation. All members of this company are responsible for the share capital.

IP and LLC have their advantages and disadvantages. They are mainly associated with obligations and the level of responsibility, but before deciding what is best to start with, it is worthwhile to familiarize yourself with the pros and cons in detail.

Pros and cons of IP and LLC

The table evaluates the individual entrepreneur and LLC according to the following criteria: registration procedure, taxation, reporting, accounting, use of profits, risks of the founder, limitation of activities and the possibility of expansion.

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

Registration and liquidation

Pros and cons of LLC and IP can be seen already at the time of registration. The cost of 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 documents, 800 rubles. state duty and several weeks of waiting.

The situation is the same with the liquidation of the enterprise. In order to liquidate the IP, you must write a statement to the appropriate authorities and provide a receipt for the payment of state duty (the amount will be about 200 rubles). A few weeks later, a notice will come that the IP is excluded from the Unified Register. With organizations, things are more complicated, sometimes the liquidation process can drag on for several months. Here one statement can not do. It is necessary to place an advertisement in a special journal, pay benefits to employees, fully pay off debts and provide liquidation and interim balances to the authorities.

Taxes and profits

In general, income tax is the same, the pros and cons of LLC and IP begin with profit. The entrepreneur is free to dispose of all proceeds. Save, invest or spend at your discretion.

LLC members cannot bypass the cash desk and collect revenue. In fact, all the profit that organization receives is spent on the internal needs of the enterprise, and payments are certified by protocols. Some entrepreneurs also bring IP to the LLC in order to be able to withdraw funds.

Accounting and reports

All legal entities must maintain an accounting report. There is no way to deal with this without special knowledge. If a person wants to independently conduct his accounting, he should register an IP, as its participants are exempt from the obligation to maintain financial statements. In LLC, all documentation must be properly drawn up. This applies not only to the accounting report, but also to tax authorities.

What is the risk of the founder?

Due to the unstable economic situation, enterprises can not always stay afloat, sometimes they lose their ability to conduct business and are forced to disband.

Most LLCs or IPs are now starting to grow thanks to loans or private investments. In the case when the company forcibly suspends its activities, the founder is obliged to pay all existing debts. The pros and cons of LLC and IP are hidden here in material risks. LLC risks only property that belongs to the company. Often these are goods, equipment or furniture. Moreover, the LLC has an authorized capital that 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”, therefore, if something unexpected happens, the last shirt can be removed from an individual entrepreneur.

Evolution

Another pluses and minuses between LLC and IP are hidden in such a concept as development. LLC has the ability 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 constrained. Only legal entities can participate in some activities. For example, an individual will not be able to obtain a license to trade in alcohol. If an individual entrepreneur has found a person who wants to conduct a joint business and participate in shared policies, he needs to re-register his business in LLC. A companion for an individual entrepreneur will not have equal rights with him if he is also not registered as an IP.

Opening LLC

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

Pluses of LLC registration:

• Responsibility for obligations does not go beyond the authorized capital.
• An LLC participant can leave the company if he sells or transfers his share to someone.
• A similar legal entity can be bought or sold.
• Specialists can conduct flexible tax planning, which will increase profits.
• The interests of the LLC are represented by both the director and his authorized representative.

Cons of LLC registration:

• The registration and liquidation procedure takes a long period of time.
• It is mandatory to keep accounting and tax reports.
• The authorized capital must not be less than 10,000 rubles.
• You need to have a seal.
• It is difficult to withdraw profits “past the cash register”.
• If violations have been noticed in the activities of the enterprise, then penalties will be higher than for entrepreneurs.

However, despite frightening disadvantages, an increasing number of IPs are moving to LLC. Someone opens organizations on their own, someone seeks reliable partners, and someone acquires a limited liability company.

Buying LLC

Often, limited liability companies buy those who cherish their own time and effort. The pros and cons of buying an LLC can be distinguished as follows. The following factors are usually attributed to positive factors:

• There will be no need to waste time registering an enterprise.
• LLC is already known in the market, which will help to achieve the location of customers.
• There are employees, production has been established, which means that profits can be made from the first month.
• No need to spend extra 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 points:

• If the company has shown itself from the worst side, you will have to spend a lot of time, money and effort to restore a good reputation.
• Quite often there is a problem with employees. As practice shows, they may not be competent enough or not accept new guidelines and just leave. And to find a good replacement for them, you will have to spend a lot of time.
• There may be a problem with the equipment, which will result in new investments.

Key differences

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