Probably many of us, having reached a certain level of skill in our business, thought about opening our own business. And one of the first questions that a newly-made business man has: What to choose "IP" or "LLC"?
Probably many of us, having reached a certain level of skill in our business, thought about opening our own business. And one of the first questions that a newly-made business man has: What is better "IP" or "LLC"?
In order for everyone to have the opportunity to make the right decision for themselves, it is necessary to disclose the main differences between "IP" and "LLC".
So, to begin with, we will reveal these concepts:
An individual entrepreneur is an individual (individual entrepreneur) registered as an entrepreneur without forming a legal entity, while having all his rights.
LLC is a legal entity (limited liability company), where all participants (organizers) have responsibility within the limits of their authorized capital.
Five significant differences between an individual entrepreneur and an LLC:
1. SP is easier to open and close. An individual entrepreneur is responsible with all his property for all obligations, even after the closure of the IP. After the closure of the business, a lawsuit is filed against an individual who was an individual entrepreneur.
LLC is liable for its obligations only within the limits of the authorized capital. After the liquidation of the LLC, all obligations in relation to its debts are terminated, but criminal cases can be initiated against the founders of the LLC.
2. An individual entrepreneur is not obliged to make an accounting report.
LLCs are required to do accounting, regardless of the form of tax reporting.
3. If an entrepreneur does not have employed workers, then he is not obliged to report to the pension fund, to the social service and the tax service for employees.
LLC is obliged to report to all services on a quarterly basis.
4. It is more difficult for individual entrepreneurs to take a large loan from a bank, because it is difficult to track the financial situation of an entrepreneur. If the bank approves the loan, then on a large collateral.
Investors willingly cooperate with the LLC. Banks willingly issue loans secured by the LLC itself or its property.
5. The individual entrepreneur uses his funds immediately and for any needs, tk. income is not taken into account and is not indicated anywhere, nor does it pay a 13% tax on it.
LLC deducts 13% tax on its profits. The movement of money in the bank account must be recorded in the accounting report.
Let us conclude that everything is much easier with an individual entrepreneur than with an LLC, but for a higher income, it is better to register as an LLC.
