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An individual entrepreneur is a legal entity or not. Is an individual entrepreneur an organization with all that it entails?

According to the civil code of R.F. An individual entrepreneur is an individual who has the right to engage in commercial activities. An entrepreneur is liable for his obligations with all his property.

What form of business is individual entrepreneurship?

Many people cannot understand the organizational and legal affiliation of an individual entrepreneur: is it an individual or legal entity? The answer to this question is indicated in Art. 23 of the Civil Code of the Russian Federation, according to which any citizen has the right to engage in labor activity as an individual entrepreneur without forming a legal entity.

The concept of a legal entity is interpreted differently: it is a registered organization (LLC) with founders and authorized capital. An individual entrepreneur conducts business without one.

It is worth noting that individual entrepreneur in many cases, has the same powers as an LLC. For example, he can also open a current account, enter into contracts and carry out almost the same types of activities, with the exception of some of them.

What's the difference?

Table 1. Difference between individual entrepreneur and LLC

Individual (IP)	Legal entity (LLC)
Simplified registration procedure, minimal state duty	Registration requires many documents and higher state fees
Responsible to the Law with his personal property	Risks only the share in the authorized capital
There is no need to keep accounting records and open a current account	Constant documentary traffic control cash, mandatory opening of a current bank account
Disposes of profits at his own discretion	The manager does not have the right to withdraw the proceeds received
Cannot engage in any activities	No restrictions on types of activities
Pays contributions to the Pension Fund even if there is no profit	It is possible not to pay contributions to the Pension Fund if there is no income
You can't sell your business	There are no restrictions on selling a business
Lower penalties	High fines in case of detection of violations under the Tax Code of the Russian Federation
Can't attract investors	Opportunity to attract investors

Thus, each of the organizational and legal forms has its own pros and cons, and any existing individual entrepreneur can register an LLC by contacting the Federal Tax Service with documents, but he will have to pay taxes and fees for all forms of activity.

Example: citizen, being the founder of an LLC engaged in the production building materials decides to sell clothes through an online store. To do this, he has the right to separately open an individual entrepreneur, but he is obliged to pay taxes to the Federal Tax Service, contributions to the Pension Fund and Compulsory Medical Insurance for both organizations.

IN in this case, wondering - an individual entrepreneur is a legal entity. face or ordinary physical face? - it is necessary to proceed from the form of business that the citizen conducts. When resolving legal disputes, filling out documents, submitting reports, he will be a legal entity from an LLC, and an individual from an individual entrepreneur.

Consideration of controversial situations in court

In accordance with the Arbitration Procedure Code of the Russian Federation, the Arbitration Court has the right to accept applications from organizations and individual entrepreneurs when the following disputes arise:

Economic: for example, about debts.
Administrative: when conducting a business that is not legally registered.
Organizational: bankruptcy of LLC.
Tax: failure to pay advance payments on time.
Corporate: when causing losses caused by co-founders, founders and participants to a legal entity.
International economic: in case of failure to fulfill obligations by a company registered on the territory of the Russian Federation in relation to a foreign citizen, or vice versa.

When making a decision to impose penalties, the court has the right to be guided by data on the personal property of an individual entrepreneur. If a fine is imposed on an LLC, then the arbitration can only take into account the authorized capital of the organization.

Due to the fact that an individual entrepreneur is an individual, or an organization is a legal entity, all conflicts and disputes between them fall within the competence of the Arbitration Court and are resolved only in judicial procedure.

Addition

Do you have any questions about the nuances of the legal status of an individual entrepreneur or do you need detailed expert advice on another legal issue? Moneymaker Factory recommends using the online service "Lawyer" to receive professional advice from an experienced lawyer. (Receive the first response within 15 minutes after its publication).

How to understand the status of a person registered as an individual entrepreneur? Is an individual entrepreneur an individual or a legal entity? Is it possible to imply that if a person is registered as an individual entrepreneur, then he is endowed with the rights and responsibilities of the organization? Let's figure it out.

Basic Concepts

A legal entity is an organization that has its own property, civil rights and can represent its interests in legal disputes. In other words, a legal entity is an enterprise without permanent connection to a citizen (founders can change based on current legislation and internal rules of the organization).

An individual entrepreneur is a citizen engaged in entrepreneurial activity, and therefore has the corresponding rights and obligations. Answering the question whether an individual entrepreneur is an individual or a legal entity, it becomes clear that it is definitely physical, but with expanded capabilities in the field entrepreneurial activity as opposed to the ordinary citizen.

Comparison of individual entrepreneurs and legal entities

The main difference between an individual entrepreneur and a legal entity is the possibility of carrying out entrepreneurial activities only by a specific citizen. Simply put, no one except the entrepreneur himself, in whose name the individual entrepreneur is registered, can run his own business.

A legal entity means an organization with its own capital and one or more founders. The company's interests in different situations may represent different people. That is why, when answering the question, is an individual entrepreneur an individual or a legal entity, the answer is always on the surface - an individual entrepreneur refers to an individual.

Despite the fact that the activities of individual entrepreneurs are regulated by clause 3 of Art. 23 of the Civil Code of the Russian Federation, which also controls legal entities, in accordance with paragraph 1 of Art. 23 of the Civil Code of the Russian Federation, only a citizen can become an entrepreneur, i.e. individual. The fact of founding a legal entity is not an obstacle.

A citizen registered as an individual entrepreneur certainly remains an individual, but is automatically entitled to additional rights and obligations before the law. For example, everything that concerns controversial situations of a citizen, as an entrepreneur, is understood Arbitration Court. Therefore, you should not hesitate; individual entrepreneur refers to legal entities or individuals.

Similarities and differences between individual entrepreneurs and legal entities

When running a small and medium-sized business, an entrepreneur is practically no different from a legal entity. However, the difference can be observed during registration - for an individual entrepreneur, an authorized capital and the presence of constituent documents are not required, but for a legal entity these are mandatory conditions.

There are often cases when the founder closed an LLC or additionally opened an individual entrepreneur in order to conduct business as an individual. The benefits of individual entrepreneurs over legal status are as follows:

ease of registration – the procedure requires minimum investment(payment of state duty) and a standard package of documents (TIN, passport, application);
favorable tax rates;
lack of accounting records;
penalties are much lower than those of a legal entity.

When wondering whether an individual entrepreneur is an individual or a legal entity, even a novice entrepreneur immediately understands that he is an individual and grasps the benefits.

Despite most of the advantages of an individual entrepreneur, this status has one serious negative side. If a legal entity is obliged to have an authorized capital upon registration, and in the course of its activities it has rights and obligations separately from its founders, then practically no one bears responsibility during the liquidation of the LLC (depending on the severity of the violation).

An individual entrepreneur, being an individual, even with the status of an individual entrepreneur, bears full financial responsibility to counterparties and the law after the closure of the business. When answering the question, an individual entrepreneur is considered a legal entity or an individual; we should not forget about the responsibility of the entrepreneur, as individual.

Individual entrepreneurship is attracting more and more citizens, and often those who plan to become an entrepreneur have legal issue: Is an individual entrepreneur an individual or an organization? Free market conditions create a situation where people open their own small business, becoming self-employed and receiving a certain income from their activities (selling goods, providing services). To answer the question, you need to understand the peculiarities of the work of individual entrepreneurs and Russian legislation.

From the point of view of the laws of the Russian Federation, an individual entrepreneur is:

individual;
carries out operations in the field of economics according to the right obtained after registering an individual entrepreneur with the tax office.

That is, individual entrepreneur is the entrepreneurial activity of individuals.

However, those who want to start a business face difficulties in determining their legal status as an individual entrepreneur. This vagueness of interpretation is due to imperfect legislation, which does not clearly state whether an individual entrepreneur is an individual or a legal entity. Another difficulty is that, although an individual entrepreneur is characterized as a natural person, he also has a number of characteristics inherent in a legal entity. Thanks to this, the entrepreneur, along with civil rights, is subject to certain paragraphs of state regulations.

There is a prevailing misconception in society that an individual entrepreneur is only a legal entity. This opinion is caused by the conviction that an individual entrepreneur is endowed with the rights and obligations inherent in legal entities. But the Civil Code of the Russian Federation does not allow one to agree with this, establishing for individual entrepreneurs the rights of both a citizen and a legal entity.

This confusion of rights is an integral property of individual entrepreneurs. Thus, a registered individual entrepreneur who has officially received this status has the right to purchase services/goods both for his own needs and for the purposes of his business and any business transactions. Today there are no tools to adequately assess the legality of these actions. There are only a small number of situations where the law describes all the obligations and rights of an individual entrepreneur.

To understand whether an entrepreneur represents a subtype of legal entity or not, it is necessary to learn in more detail what a legal entity is as such.

So, a legal entity is an organization that owns property, ranging in size from small to large. Such a company becomes both a defendant and a plaintiff before the court, and is able to delegate certain rights to itself. The term can be defined as “an officially registered association of a group of persons bound by common goals and interests.”

Signs by which a company is classified as a legal entity. persons:

Separate property.
Responsibility for property rights.
Having your own registered name.

“Separateness” refers to the ownership of certain property by a legal entity. Such property belongs specifically to the company, and not to the individuals within it. Also, any company is required by law to have a company seal and a bank account.

Others characteristic features:

some restrictions regarding the transfer of cash to other companies;
increased level administrative responsibility;
state certificate registration.

Thus, an individual entrepreneur has the features of both a legal entity and an individual, being both a citizen and an enterprise.

To determine common features It is important to understand what responsibilities and characteristics a citizen has. An individual has the right to participate in any process where he has equal rights with other participants.

transport sector;
production;
stock exchange operations;
trade.

Individuals can carry out business transactions, make transactions and enter into contracts on a personal basis. People are also allowed relationships with organizations.

Although an entrepreneur is required to register, the specifics of the work differ from organization to organization.

Signs of difference:

Document management is carried out according to a simplified scheme;
IP is responsible for committed offense, but to a lesser extent compared to legal entities. face;
within the framework of the obligations undertaken, the individual entrepreneur is liable with the property belonging to him - similar to an ordinary citizen.

All these factors bring some confusion to the question of who an individual entrepreneur is in Russia, and whether it is wrong to classify him as an individual or legal entity. Today the situation is such that not a single answer can be considered correct.

An individual entrepreneur is a special subject of the economic life of the state, having the characteristics of both a company and an individual, and enjoying a number of powers of a legal entity. However, it differs from both of these groups. There are no exact grounds to assert that a person who has become an entrepreneur is an organization, since the legislation leaves room for maneuvers and casuistry. It is advisable to focus on the similarities between individual entrepreneurship and the work of a legal entity.

Under certain conditions, an individual entrepreneur has the right to decide whether he will appear as an entrepreneur or as an ordinary citizen when entering into civil or economic relations. This affects the amount of payments to the entrepreneur, the amount of taxation, etc.

So, we found out whether the individual entrepreneur is a commercial organization.

But there are a number of situations when an entrepreneur acts as a legal entity:

Attracting employees is similar to an enterprise.
Opening a bank account to conduct business.
Creation and use of a seal to certify contracts and other documents. In this case, unlike an organization, it is not necessary to have an individual entrepreneur’s seal.
Execution on par with legal entities economic activity- but not all.

There are some areas where only an individual entrepreneur can work, but a legal entity cannot, and vice versa. Good example Such a situation is private security activity.

Becoming an individual entrepreneur has a number of advantages over those who have chosen the form of registration of a legal entity:

simplicity of design. It is very easy to create or liquidate an individual entrepreneur; what takes most of all is waiting for an entry to make changes to the Unified State Register of Individual Entrepreneurs. In comparison with individual entrepreneurs, a commercial organization is forced to follow a difficult path;
stopping the work of an individual entrepreneur also takes very little time;
the entrepreneur is not limited in the use of his income: the money can either be put into circulation for the needs of the business, or spent at his own discretion;
no tax is paid if personal property belonging to the entrepreneur is used for commerce;
accounting and reporting are submitted using a simplified system;
The individual entrepreneur is free to make decisions on issues of conducting business. It is much easier to agree on them, figuratively speaking, with yourself than by convening a meeting of shareholders/directors of the enterprise. There are no internal disagreements, which are often found among legal entities;
taxation is also simplified - net profit is not taxed, simplifying the life and activities of an entrepreneur within the framework of the law.

But not everything is so wonderful; there are also some disadvantages of this form of management:

Thus, answering the question, an entrepreneur is an organization or an individual entrepreneur, it is impossible to give an unambiguous answer. This is a separate subject of economic activity that has some of the characteristics of both groups with disadvantages and advantages.

An individual entrepreneur has responsibilities, rights and powers both as an organization and as an ordinary citizen, which entails the above-mentioned disadvantages and advantages.

Responsibilities of the IP include:

The entrepreneur is also responsible for:

for unpaid taxes;
for illegal use trademarks;
for the supply of products and quality of services to contractors;
in other cases provided by law.

The liability of an individual entrepreneur arises when an entrepreneur has violated the law or debt obligations: in case of debt, he is obliged to pay the debt with his own funds or sell (transfer) property to the creditor.

The entrepreneurial activities of individuals are regulated by law.

Despite the prevalence of individual entrepreneurship, Russian laws contain little regulatory information. However, it is advisable to study this information and understand the meaning of the main provisions of the laws.

Full texts can be found in online services - Consultant or the Garant system, as well as on the websites of relevant departments.

Constitution of the Russian Federation: Article 34, paragraph 1 affirms the right of citizens to entrepreneurial and other commercial activities.

Part 1 of the Civil Code:

Article 2, which regulates the relationship between participants in business activities and determines which operations fall under the category of entrepreneurship;
Article 18. It specifies how citizens can own and dispose of property, and how they can carry out business, create legal entities, and make transactions.

Part 2 of the Civil Code:

paragraph 4 469 of the article: responsibility of the individual entrepreneur for transferring goods of proper quality to the buyer;
paragraph 3 481 of the article: determines that the transfer of goods must be carried out in proper packaging, if such a requirement is provided for by law.

Tax code: special attention needs to be given to everything NK. It made many changes to tax rules.

There are also a number federal laws, orders and government regulations that in one way or another regulate the activities of individual entrepreneurs. Law 54-FZ deserves attention, according to which the mandatory transition to online cash registers begins.

In addition to this, the following are important:

These documents regulate the activities of entrepreneurs in general, but there are also more narrowly focused ones among them. legislative acts concerning separate forms property, including individual entrepreneurs.

Individual entrepreneur is a legal entity or an individual? Answer clearly the question “Is an individual entrepreneur a legal entity or an individual?” difficult - at least to understand common man. If the answer to this question is unknown to you, but you need to figure it out, this article will help you.

Who is an individual entrepreneur and why is it important to choose the right form of doing business?

An individual entrepreneur is a person who, wanting to engage in entrepreneurial activity, registered with the tax office as an individual entrepreneur and received the corresponding right.

When understanding whether an individual or a legal entity is an individual entrepreneur, it is necessary to understand the differences between individuals and legal entities.

A legal entity is an independent company that has the right to acquire rights and obligations on its own behalf. For example, when purchasing a product, it becomes the property not of the founders of the legal entity, but the property of the company, i.e. The organization independently acquires rights to property in its own name. Speaking about responsibilities, we can give a simple example - the obligation to pay taxes. Taxes must be paid by the organization, not its founders. The income tax of the individual entrepreneur is paid by the individual entrepreneur himself.

We emphasize: the organization acquires rights and obligations not on behalf of the persons who founded (organized) this legal entity. face, namely from one's own.

An individual, in turn, has personal rights and obligations, bears independent responsibility - he receives ownership of the assets he acquires, bears personal responsibility for paying taxes, etc.

Let's explain in simple words, why it is necessary to distinguish between the organizational and legal form. The point is that from the right choice a lot depends - the procedure for registering as a legal entity or individual entrepreneur, the procedure for paying taxes, the ability to engage in one or another activity (for example, individual entrepreneurs cannot sell strong alcohol, but LLCs can), the procedure for submitting reports and accounting, and much more. Accordingly, when choosing an organizational and legal form, you proceed from the tasks of the future business and answer the question - is it possible with one or another form of doing business to succeed in the chosen direction of business activity.

Is an individual entrepreneur a legal entity?

Is an individual entrepreneur a legal entity? The answer is clear - no.

When considering this situation, it is necessary to pay attention to similar signs Individual entrepreneur and legal entity persons:

the obligation to maintain accounting, personnel records (if there are employees), and pay taxes related to business activities;
availability of mandatory tax registration, the ability to have a stamp;
increased (in comparison with an individual) responsibility for administrative offenses.

However, there are even more differences:

An individual entrepreneur, unlike the founders of a legal entity, is liable for debts with all of his property.
One individual entrepreneur cannot be registered by 2 or more persons, but one organization can.
An individual entrepreneur does not submit as many reports as an LLC, and maintains simplified accounting.
An individual entrepreneur has the right to choose a patent tax regime, but an LLC does not.

What do individual entrepreneurs have in common with individuals?

For ease of understanding, we can state: an individual entrepreneur is an individual who is registered with the tax office and can legally conduct business.

Just like an individual, an individual entrepreneur pays taxes, but he has more of them, because he also pays tax on profits.
like an individual, an individual entrepreneur is liable for debts with all acquired property, including a personal car, apartment, dacha, etc.
An individual entrepreneur can file for bankruptcy, just like an individual.
An individual entrepreneur, like an individual, can be a citizen of Russia, a foreigner and a stateless person.
An individual entrepreneur, like an individual, can defend his interests in court, but issues related to business are considered not by courts of general jurisdiction, but by arbitration courts.

Conclusions

So, we have dealt with the question of whether an individual entrepreneur is a legal entity or an individual. By virtue of the law, an individual entrepreneur is an individual, but endowed with a special status and the ability to carry out entrepreneurial activities. There are plenty of pros and cons of running a business. You can read about them in our article: “Which is more profitable and easier to open an individual entrepreneur or LLC.” Some types of business cannot be run by an individual entrepreneur in principle, and this is a significant limitation. However, if the business is small, then individual entrepreneurs are an excellent alternative to legal entities.

An individual entrepreneur (IP) can be considered the starting point of a business. According to statistics, more than 80% of people who have their own business or enterprise today have gone through the individual entrepreneur stage. This status is considered one of the simplest for many factors, from registration to reporting. That is why he is chosen to start.

However, someone who has planned to become a businessman has huge amount questions. They are interested in the legal side, the peculiarities of the status of an individual entrepreneur, its differences from an individual and a company such as an LLC.

Who is a sole proprietor?

The legislation says that an individual entrepreneur is “an individual registered in established by law order and carrying out entrepreneurial activities without forming a legal entity.” If translated to accessible language, then an individual entrepreneur is a special status of an ordinary adult and capable person, which gives the right to engage in permitted commercial activities.

The term replaced the abbreviations PBOYUL (entrepreneur without the formation of a legal entity) and PE ( self employed), previously in force. Today, individual entrepreneur is the only name denoting this status.

Is an individual entrepreneur a legal entity?

No it is not. There is a widespread belief in everyday life that all structures engaged in business (or, in other words, permitted commercial activities) for the purpose of obtaining benefits are legal entities. Although logic dictates that a farmer who takes a couple of buckets of apples collected from his own garden to the market is clearly out of this category. Just like a shoemaker repairing shoes with his own hands in a small kiosk, the size of a doghouse.

That is, we understand that not only a legal entity, but also an individual can legally engage in business. It is the individual entrepreneur (special status) that gives him the opportunities and authority to conduct business.

This phenomenon is widespread - sole proprietorship in the USA, autonomo in Spain, sole trader in Australia - all this foreign analogues Russian individual entrepreneurs, allowing a person to conduct commercial activities in order to obtain benefits without creating a legal entity.

It is believed that the individual entrepreneur has a number of advantages, thanks to which he enjoys high level popularity in business. Although it is worth noting separately that an individual entrepreneur is not a legal entity, therefore there are a number of functions of a “company” that are not available to him.

Comparative table of individual entrepreneurs and legal entities

The first and main difference is that an individual entrepreneur is a natural person, but a legal entity implies the use of completely different organizational and legal forms.

Advice: if you ask yourself at the start what is better, an individual entrepreneur or an LLC (as an example of a simple legal entity), then understand one thing. To pose the question this way is essentially to compare sandals and winter boots. That is, both are shoes in which you can walk. However, these two types perform various functions and provide different opportunities. It's the same in business. Individual entrepreneurs and LLCs allow you to conduct commercial activities, but differ significantly in details. Therefore, before making a decision, carefully and thoroughly analyze which type of business entity is suitable for your purposes. At the same time, take into account not only the “immediate moment” or the coming months, but also the distant future, as well as options for the development of your project.

You can often find information on the Internet that individual entrepreneurs are preferable, especially at the beginning, that it is simpler. Let's try to understand the issue based on our realities. Actually, what worries us more is not the differences in the use of different regulatory documents, which regulate the activities of an individual entrepreneur or any legal entity (LLC, JSC), and those practical features that will affect our business.

So, let’s compare individual entrepreneurs and LLCs (as the most common legal entity submitted as an alternative) with all their pros and cons. At the same time, several common myths will be debunked.

is extremely simple, but opening an LLC involves a lot of difficulties.

There is some truth in every statement. However, the facts indicate that:

registration period is the same (5 days);
the set of documents required to open an LLC is only three pieces of paper more, and, or rather, their templates are in free access;
it is possible only if there is one participant, as well as when organizing an individual entrepreneur;
the state duty for an LLC is higher (no one argues), in addition, you will need to contribute the authorized capital (there is a period of 4 months, as well as the opportunity to make this an equivalent - materials, equipment, goods), which is not required in the case of creating an individual entrepreneur;
It is easier and much cheaper to close an individual entrepreneur, but claims can be brought against its former owner, who has not been an entrepreneur for “eleven” years, which is impossible after the liquidation of the legal entity.

Separately, it is worth mentioning the need for an LLC to have a legal address, which is not necessary for an individual entrepreneur. There are also a bunch of pitfalls here. A legal address can be obtained without much difficulty, it can even be non-residential premises or a business center that rents out office storage rooms with an area of 6 square meters. And individual entrepreneurs have a strict connection to registration. That is, business in Tomsk for an Omsk resident will be complicated by the need for mandatory registration, submission of reports and payment of taxes in his native Omsk.

Important: in the legislation there are no restrictions on registering an LLC with a legal address at the place of residence (registration) of the founder, one of them or general director. Tax authorities who refuse this act according to their own rules, which, in fact, violate the law.

The biggest “scare” for individual entrepreneurs and a plus for LLCs is property liability. In the first option - with all your property, in the second - only with what was contributed to the authorized capital.

And again, there is only a grain of truth here:

Indeed, an individual entrepreneur is liable with all his property, even those received before the start of his activity. However, there is a list (clause 1 of Article 446 of the Code of Civil Procedure of the Russian Federation), which indicates the property of an individual entrepreneur, which is never collected for debts, for example, a single dwelling or a plot of land.
For an LLC, which is liable only for part of the property it owns, this is a kind of bonus. That is, the personal property of the founders is, as it were, protected. And this is precisely what is considered a huge advantage of this format. Although if you delve deeper, it becomes clear that this is, to put it mildly, a fiction. If an LLC is declared bankrupt in court, the principle of subsidiary liability will come into force, where the founders will have to pay off debts with their own property.

Important: that is, the biggest advantage of an LLC (such protection of personal, unbearably acquired property) in the event of troubles for the company is not at all so reinforced concrete. And the individual entrepreneur has an inviolable minimum that allows him to at least stay in his pants, even without socks.

Money, reporting and taxes - for individual entrepreneurs, the withdrawal of the former is easier, the latter - less, and there are more benefits. As a rule, most of the privileges of individual entrepreneurs in tax and financially upon thorough study, they turn out to be either far-fetched or not so tempting. Same with reporting:
- The content of employees is the same for both organizational and legal forms, and LLCs are almost identical.
- In most tax regimes the rates are also identical. Differences exist in common system(OSNO - 20% for LLC and 13% for individual entrepreneurs), as well as the ability of individual entrepreneurs to use the PSN (patent system).
- Insurance is considered the main disadvantage of individual entrepreneurs. But these funds form health insurance and a future pension for the owner, that is, they are by no means useless expenses. And an LLC cannot do without payroll, even if its only employee (he is required) is the general director. And here, too, there will be contributions to all funds. The icing on the cake is that an individual entrepreneur has the right to reduce the accrued tax amount by 100% of fixed payments, an LLC - only by 50.
- What is really attractive in terms of individual entrepreneurs is the withdrawal of earnings. There are no restrictions - take as much as you need, the main thing is that it remains for mandatory payments, the rest is at the owner’s disposal. An LLC has a number of restrictions; its owner(s) cannot easily withdraw a couple of million from their current account to buy a yacht. Here you will have to arrange everything correctly.
- Individual entrepreneurs have much less paperwork, reporting is simpler, communication with the tax office is easier... The statement is not entirely true because reporting on employees is the same for individual entrepreneurs and LLCs, as well as tax returns. The type and complexity of the latter depends on the system used, and not on the legal form.

As a conclusion, saving on insurance premiums and taxes depends not so much on the format, but on certain conditions and the literacy of the accountant, as well as the ability to get funds at your own disposal.

Here you also need to take into account that tax liability for violations for individual entrepreneurs and LLCs in most cases is almost the same, which cannot be said about administrative and criminal ones. Much more lenient measures are applied to violators who are individual entrepreneurs, both in monetary terms and in punishments in accordance with the Criminal Code of the Russian Federation.

Prospects and opportunities for business development - on this issue everyone agrees that an LLC is more profitable. This format has a little more potential:
- The first and main advantage is that LLC has much more wide list by type of activity. It is unlikely that his entrepreneur will be able to include in the details of the contract for the sale of alcohol, as well as its production and medicines. An individual entrepreneur cannot engage in banking and insurance activities, be a tour operator, or holder of pawnshops and investment funds.
- Another advantage of an LLC is that this format is more attractive to investors, that is, investors in a business project. Although competent management of one’s own business by an individual entrepreneur can interest many, from the immediate environment of an individual to a bank, and all of them can give money.
- VAT and nuances. This point is maximally promoted in the discussion “for” and “against” IP. Although the VAT payer can be either an individual entrepreneur or an LLC, it all depends on the tax system applied. That is, cooperation with large companies, which are “endessniks” (as they say in certain circles), can be difficult for those who do not pay value added tax and are not registered as its payer.

Important: if you are planning to develop your business by attracting investments or are focused on working with large companies, then the success of these two areas will depend not so much on the chosen organizational and legal form, but on the taxation system. Moreover, it can be changed during operation.

For clarity, all information is combined into a short table:

Individual entrepreneur	Limited Liability Company
Registration is cheaper, the procedure is simpler, there is no need for a legal address or authorized capital.	The duty is much higher, a larger package of documents, authorized capital is at least 10 thousand rubles.
Individual entrepreneur – one individual.	Partners in an LLC can be up to 50 individuals or legal entities. It is possible to attract, exit, and dispose of your shares in the authorized capital.
Receiving money from business is easier and cheaper, there are no additional taxes on income. Mandatory payment of insurance premiums for yourself, regardless of income.	Profit distribution is quarterly, dividends are subject to 13% personal income tax. There are no insurance premiums for owners.
An individual entrepreneur is liable for obligations with all his property, with a few exceptions.	The participants are not liable for the debts of the LLC, except in situations where the principle of subsidiarity applies.
The fines are lower, and the interest of the inspection authorities is also lower.	The fines are higher; both the organization and its leaders are subject to sanctions.
Closing is quick and relatively easy, and debt claims may still arise after liquidation.	Liquidation of an LLC is more expensive and the process is lengthy and complex. Upon final closure, all debts are considered cancelled.

To give preference to an LLC or an individual entrepreneur - this question must be answered comprehensively and taking into account all the nuances. But the familiar statements of Internet experts by no means give big picture. Study the equipment before making a decision.

Frequently asked questions and a little more about what is rarely voiced:

Question: Why do many people recommend starting an independent swim in the business world by registering the status of an individual entrepreneur, although from a comparison of an individual entrepreneur and an LLC as a business unit it is clear that the advantages of each of them are not so great?
Answer: An individual entrepreneur can be closed at any time, this is easy to do, the procedure is much simpler than in the case of an LLC.
Question: What is the main difference between individual entrepreneurs and other legal forms?
Answer: Only the status of an individual entrepreneur allows an individual to engage in commercial activities. All other organizational and legal forms that participate in business processes require the creation of a legal entity.
Question: Why not bring the business environment into uniformity by removing, for example, individual entrepreneurs and leaving only legal entities?
Answer: The activities of individual entrepreneurs can be reduced to the simplest business processes. An individual entrepreneur can make all stages as easy as possible, from creation to liquidation. He has the right to choose the least complex system taxation, work without VAT, independently, without employees, maintain simplified accounting. In addition, only an individual entrepreneur can apply the PSN, a special taxation system that provides for the acquisition of a patent.
Question: Do individual entrepreneurs need a current account?
Answer: Legally, no. An individual entrepreneur has the right to conduct commercial activities without opening and using a bank account.

Advice: if your line of work requires you to provide services or sell goods to private individuals, then it is worth considering that today a plastic card as a payment instrument is already much more popular than cash in your pocket. By opening a r/account, you can cover larger number potential buyers, improving the service for them.

Question: Do you need an individual entrepreneur seal?
Answer: On legislative level The mandatory seal is not fixed. This moment is left to the businessman himself. Although it adds a kind of weight to the written out documents.

And a little more about the details. In a professional environment (among tax specialists, financiers, lawyers) you can find such slang names as physicist and... no, not lyricist, but lawyer. The first are individual entrepreneurs, the second are all legal entities. In addition, in almost every service, from the tax service to various funds, as a rule, there is a division into departments. Some serve individual entrepreneurs, others serve legal entities.

Can an individual entrepreneur be converted into a legal entity?

Actually, the law does not provide for an algorithm for directly converting an individual entrepreneur into a legal entity. And in fact, this is not possible, because an individual entrepreneur has the status of an individual, although it is not a limiter on the rights and freedoms of a citizen. That is, an individual entrepreneur as ordinary person can become a founder or co-founder of any legal entity (LLC, JSC).

However, the law does not oblige the registration of a legal entity to indicate this status in any of the documents. Founders ( individual citizens) here act exclusively as individuals. The rule does not apply to founders who are legal entities.

Can an individual do business without registering as an individual entrepreneur?

Yes and no. It all depends on what a person understands by the term “business”. If, in his opinion, it consists of selling cucumbers grown on his personal plot or providing the services of a tutor, then that is one thing. If you plan to open a permanent outlet or a shoe repair shop, then this is completely different.

In many cases, it can be several times larger than the amount required for registering an individual entrepreneur and fixed payments to funds.

Although there are a number of exceptions where an individual entrepreneur is not needed or optional:

For the sale of agricultural products of a plant nature grown on a personal plot, dacha plots or on a private farm. To do this, you only need a certificate from the administration of the gardening partnership or an extract from the business book. Relevant for 2018, starting next year they plan to change the rules of the game.
For those who receive profit from transactions no more than twice a year, and the amount of turnover on them (indicated in the documents confirming payments) does not exceed 200 thousand rubles.
Those who work under civil contracts and declare their income do not have to become an individual entrepreneur. The list of permitted ones includes any agreements of the specified nature for the provision of services, contracts, purchase and sale, royalties and a number of others. They (agreements) can be one-time or focused on long period. The main thing in these cases is to report your income and pay taxes due as an individual.
For those who carefully engage in dropshipping.
Those who perform intermediary functions.

The last two points have a lot of similar points that nullify all the charms of business beyond forms and statuses:

you need to look for partners, suppliers and buyers who will agree to a certain scheme, where the intermediary (dropshipper) does not participate as a unit in the chain of documents;
because similar systems do not imply the responsibility of an intermediary or dropshipper, you need to be absolutely confident in the quality of the product, the capabilities of suppliers or sellers with permission conflict situations with clients;
a person working under such schemes without an individual entrepreneur or legal entity is always dependent on his partners, their methods of doing business, as well as on how they will make payments.

As a result, in most situations, agency or intermediary due to all the costs of paying taxes may turn out to be less than when using an individual entrepreneur for the same transactions. Also, if you help someone with housework, work as a nurse, or sell your crafts or knitted hats via the Internet, then you absolutely do not need the status of an individual entrepreneur.

Let's sum it up

individual entrepreneur (IP) – a special status of an individual that gives him the opportunity to engage in commercial activities and does not limit other declared rights (for example, the same person can become a member of an LLC);
they show justified interest in individual entrepreneurs both at the start of entrepreneurial activity and in the future, this status has diversity in the possibilities for applying the taxation system, allocation of VAT, simplified accounting and the like;
the ease of closing an individual entrepreneur is a kind of bonus for those who are not confident in their business endeavors;
Individual entrepreneurs have many advantages for mini-projects that are designed for small profits, turnover and deadlines.

Registering an individual entrepreneur or LLC is your choice. The main thing is that the idea that was born and promises profit does not remain dead. Do it! Although this will not become a grandiose multi-million dollar project, it will bring joy from small results and confidence in the future.