Regardless of the direction, scale and type of activity that an entrepreneur chooses to open his own business, the question may arise: “Is an individual entrepreneur a legal entity or an individual?”

Various legislative acts provide an answer to this question, but for people who are not qualified as lawyers, it is difficult to get an answer to this question. A clear understanding of the concepts of an individual and a legal entity will help you understand its essence.

What is a legal entity

A legal entity is an organization, which owns property and is liable for existing obligations, can be present in court as a defendant or plaintiff and receive personal non-property and property rights on its own behalf.

The concept of “legal entity” can be defined as a formalized association of people who are connected by common interests, tasks and missions. Consequently, a legal entity is characterized by organizational unity.

The unity of the organization also means the presence of its own management system, represented by management bodies with a hierarchical structure. However, unity and integrity are not the only characteristic features of a legal entity; the main features are also:

Property isolation;
Having your own name;
Liability for property.

Property isolation implies ownership by a legal entity of property isolated from the property of other persons, who may be the founders or members of the organization. This property can be assigned to various rights. Legal entities bear property liability only to the extent of the amount invested in the authorized capital.

Besides, a legal entity is required by law to have a current account and its own seal. A legal entity is subject to restrictions on the transfer of cash to other organizations: it is allowed to transfer no more than 100 thousand rubles. Possession of a charter as a constituent document is another necessary condition for conducting the activities of legal entities.

What is an individual

An individual is a person who has certain duties and rights and is their bearer. Such a right of an individual is the opportunity to participate in economic activities in which he has equal rights along with other participants. Areas of such activity include:

Transport
Trading
Production
Exchange
etc.

Individuals can personally conduct various business transactions, enter into contracts, agreements and transactions. In addition, individuals have the right to be in economic relations with legal entities and regulate these relations. Individuals have the opportunity to perform such actions on their own behalf without forming a company or organization.

Is an individual entrepreneur a legal entity or an individual?

Doubts related to this issue are related to the fact that every individual entrepreneur has the opportunity to carry out activities that are available to legal entities, that is, an individual entrepreneur has the rights and powers characteristic of a legal entity.

However, it is absolutely wrong to believe that entrepreneurs have the status of a legal entity, because the Civil Code of the Russian Federation provides information that an individual entrepreneur is an individual who has the right to conduct business activities.

Moreover, the equivalent of the concept is the term “entrepreneur without the formation of a legal entity,” which was used in all legislative acts at the beginning of the current century.

Each person can start carrying out entrepreneurial activities and obtain the status of an individual entrepreneur, and for this he does not need to own an office, and the place of registration of the entrepreneur can be his place of residence.

Even if you are not registered in the prescribed manner and within the established time frame as an individual entrepreneur, but are engaged in business activities, then in this case you are also considered an individual entrepreneur, as stated in paragraph 2 of Art. 11 part 1 of the Tax Code of the Russian Federation.

Entrepreneurial activity is characterized by the absence of certain limits on making payments in cash.

Unlike an individual entrepreneur from a legal entity, his obligations do not include the production of a seal, while this is considered a mandatory condition of existence for a legal entity.

Another difference, which at the same time is an advantage, can be considered the absence of the requirement to have constituent documents.

- this is invariably the only person who owns all the rights and the income received.

Thus, solution to the dilemma “is an individual entrepreneur a legal entity or not?” quite obvious: NO. However, when carrying out business activities, in no case should one ignore the fact that the individual entrepreneur has the powers of a legal entity.

Video: who is an individual entrepreneur

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Discussion (16)

Of course, an Individual Entrepreneur is an individual engaged in economic activity and entrepreneurship. It cannot be a legal entity, since it does not have the necessary attributes of a legal entity, these are: separate property, balance sheet, name and not full name. and etc.

I have a question in connection with the article. I, an individual entrepreneur, entered into an agreement with a lawyer to represent his interests in court and provide legal assistance, does he pay me using the details of the individual entrepreneur in accordance with this agreement, and does the lawyer issue a power of attorney to the court to me as a physicist? That's right?

It gets ridiculous when a person comes to the tax office and wonders whether he is a legal entity or an individual. There are constituent documents, you receive income jointly - a legal entity, there are no constituent documents, meetings of founders, the income is only for yourself - an individual entrepreneur.

When choosing a form of business, you need to remember one nuance. So, if you conduct business as an individual entrepreneur, then you are liable for your debts with all your property, including personal property included in the list of property subject to seizure for your debts. When creating an LLC, you are responsible only for the separate property of this legal entity, within the limits of your share. Limited liability.

If we compare individual entrepreneurs and LLCs, then both cases have their pros and cons.
If you want to do business alone, then open an individual entrepreneur, and if with someone, then open an LLC.

I registered an LLC for business twice, and now I was thinking about registering an individual entrepreneur, because... at first glance it looked much simpler.
But after much thought and calculation, I realized that this was not so. The only advantage is a quick withdrawal of money from the business, and as a rule, this is not very necessary if you are planning further development.
Incl. I don't recommend it.
If anyone has counterarguments, please share. It will be interesting to know your opinion.

Please answer my question. I am employed because... this allows me to have a small but constant income. I really want to try to open my own business. But in our country (at least it was so before) you cannot register your individual entrepreneur if you are employed. Has anything changed in our legislation? Why is it that in other countries (for example, in Slovakia) it is officially allowed to have your own business, regardless of whether you are employed or not.
I also had my own small trading business. When I registered as an individual entrepreneur, I did not take into account the fact that pension contributions would have to be paid, regardless of whether there was a trade turnover or not. As a result, the business did not take off, and pension payments had to be made. I think this is unfair.

In my opinion, it is better to register as a legal entity in the form of an LLC. Because, in case of problems, you bear responsibility only in the amount of the authorized contribution, and not full, like an individual entrepreneur.

In many areas of business, remaining an entrepreneur is much more convenient than creating a legal entity. if the business is serious enough, for example. transportation, trade, then individual entrepreneurs will be a much more profitable form of work in terms of taxes. Another thing is that for those individual entrepreneurs whose business is very small, the tax often turns out to be unaffordable. It’s probably time to introduce some kind of concept of “Small Individual Entrepreneur” into law. The transition from an individual entrepreneur to a legal entity is advisable when the volumes and risks increase so much that it is better to distinguish between the responsibilities of the company and its director personally. That is, the majority of small businesses in the consumer sector can be run as individual entrepreneurs.

Individual entrepreneurship is, indeed, in some cases a more convenient form of organizing property. On the one hand, there is the opportunity to run almost any business without opening a bank account and printing, but on the other hand, there is a higher form of responsibility compared to an LLC. It is no secret that an individual entrepreneur, being an individual who does not have authorized capital, is responsible to his creditors with all his movable and immovable property. Thus, as a result of an unsuccessful investment in a certain area of business, you can lose not only it, but also what you owned before. The bankruptcy procedure for an individual is also much more difficult than for a legal entity. If the latter only needs to declare his insolvency to the tax authorities, who will appoint a crisis manager to represent the company’s affairs in court, then the individual entrepreneur will have to clear the threshold himself or hire a manager at his own expense, and this is expensive. Another minus of individual entrepreneurs is a form of pension insurance, which only last year increased significantly and resulted in the closure of many small businesses.

Please tell me whether a legal entity can enter into a contract for the purchase and sale of furniture with an individual - the buyer is a legal entity, and the seller is an individual (not an individual entrepreneur). What tax risks does this transaction have?

A legal entity has the right to buy necessary items from an individual, since neither tax nor civil legislation establishes any restrictions on transactions with citizens. Also, the transaction does not carry tax risks if the buyer has all the necessary documents confirming the expenses.

The rationale for this position is given below in the materials of the Glavbukh System

Article:Purchasing goods from the public

When purchasing goods from individuals who are not registered as entrepreneurs, a purchase and sale agreement must be concluded in writing. The seller's details include the last name, first name, patronymic of an individual, name and details of an identity document, place of residence, Taxpayer Identification Number (if any), bank account details (in case of non-cash payments).

The fact of the transfer of goods by individuals is confirmed by the execution of a procurement act in form No. OP-5, approved by Resolution of the State Statistics Committee of Russia dated December 25, 1998 No. 132. Also, a merchant can use an independently developed act containing all the necessary details provided for by Federal Law No. 129-FZ of November 21, 1996. However, using a unified form will avoid disagreements with inspectors. The execution of this act will prove the reality of the expenses incurred by the entrepreneur (Resolution of the Federal Antimonopoly Service of the East Siberian District dated December 15, 2010 No. A78-7669/2009), despite the fact that he does not take them into account when calculating the tax according to the simplified tax system. As you can see, we are not talking about either sales or cash receipts here. Hence the conclusion that an individual entrepreneur has the right to buy goods for cash without sales and cash receipts and sell them by bank transfer.

Article:You can accept goods from the founder without documents by registering it as a purchase from an individual

The unified form of procurement act No. OP-5 has been approved. However, this form is intended only for the purchase of agricultural products from citizens.

If the organization purchases other goods, it should independently develop a form of the purchase act. The easiest way is to take the procurement act in form No. OP-5 as a basis. It is important to remember that the document must contain all the mandatory details that are established by paragraph 2 of Article 9 of the Federal Law of November 21, 1996 No. 129-FZ “On Accounting”. In addition to the required details, the act should indicate information about the citizen from whom the goods are purchased (passport details, TIN). And provide a column where this individual will sign when receiving money for the goods sold.

Only if the act meets all established requirements can the company register the received goods.

It should be borne in mind that when purchasing goods from the founder, the price of this transaction will most likely fall under the control of the tax authorities (Clause 2 of Article 40 of the Tax Code of the Russian Federation). Therefore, it is necessary that the price of the product corresponds to the market level.

Please note that when purchasing goods from an individual, the organization does not become a tax agent. That is, you do not need to withhold tax on the founder’s income and submit information about this income to the Federal Tax Service. In this situation, the citizen is obliged to independently report on personal income tax (subclause 2, clause 1, clause and article 228 of the Tax Code of the Russian Federation).

Article:When purchasing property from an individual, personal income tax does not need to be withheld

If an organization acquires property belonging to him from an individual, it should not withhold from his income and transfer personal income tax to the budget. In this case, the property seller himself calculates the tax and pays it to the budget. This clarification was given by the Russian Ministry of Finance in its letter. In general, organizations paying income to individuals must fulfill the duties of tax agents and withhold tax (clause 1 of Article 226 of the Tax Code of the Russian Federation). However, there are exceptions to this rule. Thus, subparagraph 2 of paragraph 1 of Article 228 of the Tax Code of the Russian Federation states that individuals who receive income from the sale of property owned by them pay personal income tax on their own.

Article:An act that will confirm the costs of purchasing goods from “physicists”

Why this document is important: Without a certificate, tax authorities do not recognize expenses for the purchase of goods.
What people often get wrong: They buy goods without filling out any documents. Or they do not reflect all the details specified by law.

When the document is required: If your company is “simplified”

Both companies using the general regime and those using the simplified system can use the sample procurement act we provided.

Let's say you decide to buy property for cash from a person who is not registered as an entrepreneur. To take expenses into account for profit tax purposes, they must be documented. To do this, you can develop a special document yourself. For example, a procurement act.

What are the rules for drawing up a procurement act?

In general, when purchasing food products from citizens, you can use the standard form OP-5 “Purchasing Act”, which was approved by Resolution of the State Statistics Committee of Russia dated December 25, 1998 No. 132. It is mandatory for companies providing catering services to purchase products from the population. This document is drawn up by a representative of the organization in two copies at the moment when it purchases agricultural products from the population. It is signed by the company representative and the seller. Then it is approved by the head of the organization. One copy of the purchase act is given to the seller, the second remains with the buyer.

At the same time, if a company purchases other goods rather than products, it is more convenient to develop its own form of act. The main thing is that there are all the details that are provided for in Article 9 of the Federal Law of November 21, 1996 No. 129-FZ “On Accounting” (see inset below). Catering companies can also use their own form of act when they purchase goods other than food.

Details that must be in the procurement act

1. Name of the document.

2. Date of compilation.

3. Name of the organization on whose behalf the procurement act was drawn up.

5. Measurements of business transactions in physical and monetary terms.

6. The title of the position of the employee who purchased the goods, as well as the last name, first name, patronymic of the seller and his passport details.

7. Personal signatures of the parties.

Example

Senior purchasing manager of Three Bears LLC A.N. Volkov purchased a used Fujitsu Siemens AMILO Pro V2065 laptop from citizen S. S. Lisitsyn for 10,000 rubles to work for the company. Previously, he took money from the organization's cash desk for reporting. Volkov filled out the purchase act as shown below.

How to reflect a purchase in accounting

The employee must submit an advance report of the money spent on the purchase. The company receives the purchased goods by debiting the corresponding account. If these are materials, then count 10. If the goods are purchased for resale, then to account 41. And if you purchased a fixed asset, then take into account the costs of its acquisition on account 08. With a loan, purchases are usually reflected in account 71. Since an employee usually purchases goods by spending funds that he took from the company’s cash register on account.

Please note: you can pay any amount in cash to a citizen who is not an entrepreneur. Limit of 100,000 rubles. under one agreement, which was established by the instruction of the Bank of Russia dated June 20, 2007 No. 1843-U, is not valid in this case.

How to take into account a purchase when calculating taxes and contributions

Purchase expenses are taken into account in the usual manner for income tax purposes. That is, as material expenses, or as the cost of purchasing goods, or through depreciation.

Important detail

There is no need to withhold personal income tax from the seller’s income.

There is no need to withhold personal income tax from the seller’s income. He himself will declare income if this is required by law (Art. , Tax Code of the Russian Federation). In this case, the company is not a tax agent (Article 24 of the Tax Code of the Russian Federation). This means that you will not have to submit information to the inspectorate about the seller’s income (Article 230 of the Tax Code of the Russian Federation).

There is also no need to pay insurance premiums to extra-budgetary funds from the seller’s income (Part, Article 7 of the Federal Law of July 24, 2009 No. 212-FZ, Article 20.1 of the Federal Law of July 24, 1998 No. 125-FZ).

Article:Purchasing vegetables and honey from the population

If a trading company practices purchasing grown products from the population, it should be borne in mind that from the new year, subject to a number of conditions, an individual’s income from the sale of products will not be subject to personal income tax. Read more about this and current standards in the article.

Documentation of purchase and sale

It needs to enter into a sales contract with the citizen from whom the organization buys products. It must indicate the surname, name, patronymic of the individual, name and details of his identity document (passport), address of residence, Taxpayer Identification Number (INN), bank account details (in case of non-cash payments).

There is another opinion, according to which, when selling processed agricultural products, VAT can be calculated from the inter-price difference (resolution of the Federal Antimonopoly Service of the Ural District dated May 8, 2009 No. Ф09-2751/09-С2, FAS North Caucasus District dated January 16, 2007 No. Ф08-6441/06-2826А).

Do I need to withhold personal income tax?

L.G. Lagutina

Is an individual entrepreneur an individual or a legal entity?

The status of an entrepreneur often raises the question of whether an individual entrepreneur is an individual or a legal entity, including among entrepreneurs themselves who are going to “sell an individual entrepreneur” or “buy an individual entrepreneur” and perform other actions that can only be carried out if the business is conducted by a legal entity face.

Registration as an entrepreneur

That is, registration as an entrepreneur means for a citizen not only the right to engage in entrepreneurial activity, but also the presence of many responsibilities that a non-entrepreneur citizen does not have. However, if a citizen decides to conduct business, then it is necessary to either establish a legal entity, usually an LLC, or register as an entrepreneur himself.

The status of an individual entrepreneur in comparison with an LLC is attractive because:

it’s easier and cheaper to register as an individual entrepreneur and cease activities;
there are a number of advantages from a tax point of view;
no need to keep accounting records;
income from business activities is the income of an individual;
penalties for administrative violations are often lower.

But the status of an individual entrepreneur has one significant disadvantage in comparison with an LLC. A citizen is responsible with all his property (Article 24 of the Civil Code of the Russian Federation). And since the answer to the question, an individual entrepreneur is an individual or a legal entity, is unambiguous, then the citizen is also responsible for entrepreneurial activities with all his property.

This means that even after the completion of business activities, claims may be brought against an individual, including by tax authorities.

All these points need to be considered by an individual before he decides to register.

Advantages of individual entrepreneur status for taxation and income generation

What is the benefit of registering as an individual entrepreneur? From a tax point of view, there is an undoubted advantage - only entrepreneurs can apply the patent taxation system, which is characterized by the fact that only with a patent there is no need to submit reports and calculate the tax yourself. This will be indicated in the patent - the amount of tax and the deadline for payment. But the main thing is that the tax amount can be found out in advance by calculating it on the Federal Tax Service website https://patent.nalog.ru/info/, and often the tax on a patent is lower than on another taxation system.

Another significant difference when considering the question of whether an individual entrepreneur is a legal entity is the right to dispose of income from business activities. In an LLC, funds are the income of a legal entity; the founder can receive them only in the form of dividends, which can be distributed upon receipt of profit. In addition, income tax must be withheld from dividends.

An entrepreneur, unlike a legal entity, does not have to report on the distribution of income received. All income from business activities is his personal income, which he has the right to transfer from his current account to his personal account and spend at his own discretion. Of course, it is necessary to pay tax on the income received in accordance with the chosen taxation system. But, for example, if an individual entrepreneur applies a patent and fulfills all the requirements established by Art. 346.43 of the Tax Code of the Russian Federation, then he knows the amount of tax in advance and can pay it immediately. All income that goes to the individual entrepreneur’s account will be at his disposal and no additional actions will be required to register and distribute it.

Disadvantages of individual entrepreneur status

In addition to the mentioned liability with all property, registration as an individual entrepreneur entails the need to pay insurance premiums. Due to the fact that the individual entrepreneur pays for himself, low income, loss or lack of activity does not exempt him from paying contributions in a fixed amount, which is at least 27,990 rubles in 2017.

In addition, it is impossible to buy or sell an individual entrepreneur’s business. If we talk about whether an entrepreneur is an individual or a legal entity, then unlike an LLC, where you can sell a 100% share in the company and the business will pass to another person, you can only sell the property of an individual entrepreneur, precisely because the entrepreneur himself is an individual .

When designating persons who are engaged in business, it is necessary to distinguish between what they do, from how exactly they carry out their activities, in what organizational and legal form.

A businessman is an entrepreneur in terms of employment. But it is not at all necessary that he be an individual entrepreneur. This concept denotes the organizational and legal form of an enterprise.

PJSC - public joint stock companies (formerly OJSC).
JSC - non-public joint stock companies (formerly CJSC).

That is, any businessman or entrepreneur can engage in entrepreneurial activity through any of these four organizational and legal forms, including through an individual entrepreneur.

All these forms are divided into individuals and legal entities. The former can only be individual entrepreneurs, and the latter - LLC, PJSC and JSC. But even here there is a small catch that is misleading.

For example, you may hear that there is an entrepreneur I know who has registered a legal entity in which he is one owner. This leads to the incorrect conclusion that an individual entrepreneur can be a legal entity.

Let's return to what was said above. An individual entrepreneur is one type of organizational and legal form, and a legal entity (LLC, PJSC or JSC) is another type. Another thing is that the founder of a legal entity can only be one person. When registering an organization, it is not at all necessary to submit the minutes of the meeting of founders in the package of documents. If there is only one owner, a decision on establishment is submitted.

As a result, it turns out that the entrepreneur is the sole owner of the legal entity. The law limits the sole registration of a company if the founder is a legal entity with one owner.

An individual entrepreneur can be a legal entity.

And yet there are situations when an individual entrepreneur can be a legal entity. This is possible if the founder of the legal entity is already an individual entrepreneur. This is permitted by law:

When registering an organization and filling out form P11001, there is no need to enter information about a previously registered individual entrepreneur.
Participants in companies can be both legal entities and individuals. Individual entrepreneur is an individual.
Civil legislation does not limit the rights of individual entrepreneurs as individuals.

There is no direct rule providing for or prohibiting the registration of a legal entity by an individual entrepreneur. And what is not prohibited by law is permitted. Thus, the same person can be both an individual entrepreneur and a legal entity in one of the organizational and legal forms.

What does this give?

For an individual, such a combination, apart from dividends from different enterprises, does not bring anything else:

The two forms of organizations do not intersect or add up to each other.
The possibility of using this fact to optimize taxes is excluded.
The individual entrepreneur still bears the obligation to answer to his obligations with all his property.

In practice, this means that the entrepreneur is forced to report to the Federal Tax Service in parallel under two organizational and legal forms:

For an individual - individual entrepreneur.
By legal entity - LLC, PJSC or JSC.

A person will be able to dispose of income received from the activities of an individual entrepreneur at his own discretion and in full. But the distribution of income received from a legal entity occurs in strict accordance with the law:

It is prohibited to withdraw unlimited funds.
It is necessary to distribute among the founders, even if there is only one.
Profit distribution is carried out once per reporting period.

Taxes for both enterprises are paid separately, depending on the chosen taxation system. In case of violations in the activities of one or another company, a fine is imposed on the company whose employees made the mistake. Accordingly, the size of the fine will be different.

For example, for a bounced check, the fine for an individual entrepreneur is from a quarter to half of the settlement amount, but not less than 10 thousand rubles, and for a legal entity for the same violation, you will have to pay 75-100% of the settlement amount, but not less than 30 thousand rubles. If a check for the amount of 500 rubles is not cleared, the individual entrepreneur will pay a fine of 10 thousand rubles, and the LLC - 30 thousand rubles.

Individual entrepreneur is the head of a legal entity.

Another situation is when an individual entrepreneur can be a legal entity if an agreement is concluded with him for the provision of services for the management of an LLC, PJSC or JSC. That is, the entrepreneur provides the services of a manager of a legal entity.

The advantage for the founders of the company in this approach:

Payment for IP services is written off as expenses.
There is no need to pay insurance premiums for the manager.

Law enforcement officials often refer to such schemes as an attempt to evade paying taxes.

But even more questions arise if such an individual entrepreneur is one of the founders of a legal entity. In this case, tax authorities use the term “interdependent persons,” agreements between which are very suspicious and attract attention from regulatory authorities.

What did we find out in the end?

Summarize. An individual entrepreneur is an individual.

And in professional slang, an individual is called a “physicist.” This concept should not be confused with a scientist involved in science - physics. Here, financiers, tax specialists and lawyers have developed such an expression to simplify and speed up understanding. Of course, we often hear this: “Let’s hold a seminar on taxation for the “physicists.” It should be understood that the slang “physicist” hides the whole mass of people, united not only by the status of an entrepreneur, but also by one of the types of organizational and legal form.

Having an individual entrepreneur does not at all exclude the right to open an LLC or other legal entity. The reasons why an entrepreneur would want to do this are different. But such a possibility exists.

In the professional environment of financiers, tax specialists and lawyers, legal entities have come up with their own slang - “jurik”. This concept should be understood and deciphered as a legal entity. This slang word greatly simplifies many aspects, because every time mentioning the type of legal entity can be very tedious, and when you say, for example: “Today, legal entities need to submit a report on the average number of employees,” then everything immediately becomes clear and simple to everyone.

Imagine what the same phrase would look like if there were no such slang solution: “Today LLC (limited liability company), JSC (non-public joint-stock company), PJSC (public joint-stock company), NP (non-profit partnership), MPO ( local religious organization), etc. must submit reports on the average number of employees."

It is also worth noting that running a business as a legal entity is much more difficult than as an individual.

Those reports and checks that an individual entrepreneur can easily bypass, a legal entity certainly will not.

With this article, we in no way encourage you to make some kind of quick decision on what to register - an LLC or an individual entrepreneur, if we are talking about one person (founder, participant), since it is almost impossible to register a PJSC or JSC with one founder.

A few words about the advantages and disadvantages between organizational and legal forms:

Table of comparisons of individual entrepreneurs with legal forms of enterprises.
ADVANTAGES
Entity
The most profitable lending from banks is available for fairly large amounts, including the opportunity to open lines of credit, as well as use some forms of financing that, from the point of view of banking security requirements, are simply not available to an individual entrepreneur. These forms include umbrella overdrafts, when a legal entity may have “subsidiaries” in the group that may allow the bank to overspend.	An individual entrepreneur has no requirements for the size of the authorized capital.
Legal entities interact much more easily with their counterparties in matters of obtaining deferments or installment plans for payments, or vice versa in the ability to defend their terms of debt repayment.
It is much easier for a legal entity to register its brand in order to become more recognizable on the market, since the presence of its own brand is a very significant argument in the success of the entire business.	An individual entrepreneur is exempt from a large amount of reporting, which must be submitted to various regulatory authorities for verification. A legal entity has much more of it.
Private investors will be able to participate in a business with a legal entity form. Over time, in the case of a successfully developed business model, the company, if it was an LLC, will become a joint stock company due to growth. And then everything can turn out so successfully that it’s not far from the world market.	The legislation stipulates that the amount of fines for similar violations of the law in most cases for an individual entrepreneur is significantly lower than for legal entities. This means that an individual entrepreneur is primarily an individual, who is initially less protected than a legal entity.
	Only an individual entrepreneur has the opportunity to apply the simplest form of taxation - patent. You bought a patent, and you are freed from many problems.
	Only an individual entrepreneur can count on benefits on insurance premiums. In the case of individual entrepreneurs, these are fixed amounts, and not “linking” the size of the contribution to the level of income, which is established for legal entities. Moreover, for individual entrepreneurs, the law establishes reduced tariffs for hired workers.
	The state registration procedure is much simplified. It requires a minimum of documents, practically only one - an application for state registration of individual entrepreneurs, since the rest are a document confirming payment of the state fee, as well as an identity document that everyone has. There is no need for a separate legal address. Its status will be determined by the address of your permanent registration (in some cases temporary registration). Moreover, the state registration fee is much less than that of a legal entity. For individual entrepreneurs it is 800 rubles, for legal entities it is 4000 rubles.
FLAWS
Entity	Individual entrepreneur
For a legal entity, the state registration procedure is much more complicated and the costs are quite impressive than for an individual entrepreneur. For example, the following will be necessary in this case: Charter of the legal entity, minutes of the general meeting of founders, agreement on the establishment of the legal entity, application for registration of the legal entity, letter of guarantee about the legal address (location of the permanent executive body of the legal entity), list of participants of the legal entity, etc. In addition, the state duty is quite high - 4,000 rubles.	An individual entrepreneur is liable for obligations with all his property, even if he does not participate in business activities.
For a legal entity, including when working on the simplified tax system, it is necessary to maintain full-fledged accounting records, although in some cases it is possible to combine the functions of a chief accountant with the sole head of a legal entity (if it is not a legal entity).	An individual entrepreneur has quite a large restriction in conducting certain types of business activities. For example, an individual entrepreneur cannot engage in banking activities and sell alcohol at retail.
The volume of reporting provided to regulatory authorities is much higher than that of an individual entrepreneur.	At the moment, there is a problem in the insufficient development of the legislative framework. This situation concerns the application of certain VAT benefits, as well as the accounting of certain expenses when calculating income tax.
The obligation of a legal entity to pay certain types of taxes from which individual entrepreneurs are exempt.	It is much more difficult for an individual entrepreneur to expand his business, as problems will arise with lending for large amounts, including preferential ones. In addition, it will be almost impossible for an individual entrepreneur to attract third-party investments into his business.

In fact, now you have a fairly extensive amount of information necessary to make a decision in choosing a legal form.

However, it seems to us that you should first try to feel like an individual entrepreneur by registering as such, expressing your desire, including the preparation of documents, including an application for state registration of an individual as an individual entrepreneur (form P21001 ) .

Moreover, you have already been a “physics” since birth; all that remains is to further expand this concept to its interpretation in the economic, legal and financial environment.

As for “legal entities,” this is already a more powerful organizational and legal form that has absorbed financial, tax and legal status.

The status of “physicist” is enough for you to develop and promote your business – good. At least with him everything is much simpler and less rigid.

If you decide for yourself that you cannot do without the status of a “legal entity,” then register a legal entity. Notice the difference? One word, but different endings: register - if you are a “physicist” - an individual entrepreneur, or register, if you are a “legalist” - a legal entity.

The abbreviation IP is well known today. However, the legal status of a sole proprietor is unclear to many people. Legislative acts contain the answer to the question formulated in the title of this article, but it is quite difficult to understand them without legal training.

A clear knowledge of the nuances of the status of an individual entrepreneur and its common features with a legal entity and an individual will help to understand the essence of the problem.

Who is the IP?

Almost anyone can engage in entrepreneurial activity. But for this, according to the requirements of legislative acts, it is necessary to confirm your own legal status. Commercial activities can be carried out by both legal entities and individuals. There is another category - individual entrepreneur. This is the only person, only he owns all the rights and earned profits.

There is no need for an office. The place of registration may be the place of residence of the entrepreneur.

If a person is not registered as an individual entrepreneur, but is engaged in commercial activities, then he is also considered an individual entrepreneur.

The confusion that causes a lot of annoying trouble with banks and tax inspectorates is caused by the fact that every “individualist” is given the opportunity to carry out activities that are also available to a legal entity. But it would be wrong to assume that the entrepreneur has the status of a legal entity. Because the Civil Code “postulates” that The activities of an individual entrepreneur occur without the formation of a legal entity.

This legal paradox often results in tax authorities making the same requirements. There is confusion in numerous types (forms) of reporting. As a result, complaints and long disputes arise. The situation is no better with banks, where individual entrepreneurs make appropriate payments. Often in practice it is necessary to look for loyal institutions whose employees have the necessary information regarding “individualists”.

Similar features to legal entities. and physical persons

What brings an individual entrepreneur closer to a legal entity?

In first place is financial discipline. Let's give a simple example. The citizen is registered as an individual entrepreneur. He rents out (sells) housing, receiving income as an individual. Two declarations must be submitted to the tax office:

as a private person;
as an entrepreneur (income received as a result of business activities is indicated).

The tax inspectorate and other regulatory authorities check individual entrepreneurs and legal entities. faces are almost the same. The individual entrepreneur has the right, if necessary, to attract hired workers. He can also make entries in their work books. This imposes the following obligations:

conclusion of official employment contracts;
payment;
paying taxes for your employees.

Entrepreneurs have the right to choose a taxation system, which also brings them closer to a legal entity.

What does it have to do with an individual?

Firstly, it is the use of income in your own way and at your own discretion, regardless of time.
Secondly, it is the conduct of various business transactions, the conclusion of transactions and agreements in the manner of unity of command.

To learn about who an individual entrepreneur is, watch the following video:

Nuances of individual entrepreneur status

An individual entrepreneur is not required to have constituent documents. These requirements apply only to legal entities. The absence of a seal is conditional. There is a certain distrust of the entrepreneur’s signature, so he most often has to create one. Individual entrepreneurs have the right to make payments in cash. Although in practical reality such calculations are rare.

Official preparation of documents is rarely without mistakes, voluntary and involuntary. Such negligence is fined. The amount of fines for individual entrepreneurs is an order of magnitude lower than for legal entities. persons

If commercial activity is officially terminated, the individual entrepreneur status will still be retained. This means permanent. Even if there is no income, you will still have to pay contributions. This requirement does not apply to legal entities.

There are nuances regarding some products. For example, the sale of alcohol is permitted only to a legal entity.

Let's summarize. Our legislation is not without contradictory and controversial issues. Despite this, Individual entrepreneur is an individual. But its activities imply the adoption of regulations and requirements that apply to the activities of enterprises. Direct indications of exceptions to the rules for individual entrepreneurs should be taken into account.