Many citizens who decide to enter the category of self-employed people most often begin to develop a small-scale business that requires small investments at the start. Of course, they are interested in advance in the various legal norms that accompany their work, since in modern society legality in conducting business should be paramount. One of the questions that interests future owners profitable business, is the following: individual entrepreneur is it physical or entity? If you, like them, do not know the answer to the question you are looking for, we advise you to read the material presented.
An individual entrepreneur is an individual or legal entity
We present the answer to the question for which we compiled the required material, and you decided to read it: an individual entrepreneur is a representative of the category of individuals, and has nothing to do with a legal entity. All the experts who convinced you otherwise made a grave mistake. However, they did this, perhaps unintentionally, by confusing the two groups of people represented.
So that you do not make such mistakes in the future, and, not being a specialist, have the opportunity to explain to those who are mistaken the real state of affairs, consider the following table of differences and similarities between individual entrepreneurs and a legal entity.
Table 1. Differences and similarities between individual entrepreneurs and legal entities
| Similarities | Differences |
|---|---|
1. Both an individual entrepreneur and a company, organizational form which is a legal entity, are obliged to maintain: 2. Mandatory official registration of the registration procedure, in addition, registration of relevant needs, for example: 3. Increased responsibility, compared to ordinary citizens, for administrative offenses committed. | 1. Legal entity is a subject that manages independently, having the right to acquire various obligations and rights not on behalf of the person who founded it, but on behalf of own name, while an individual entrepreneur always acts on behalf of the entrepreneur himself. 2. The individual entrepreneur manages the circulation of all documentation involved in the work according to a simplified procedure. 3. The legal entity has limited liability, while the individual entrepreneur in the event of any trouble will have to face the full power of the consequences and deal with them according to the law on their own. 4. Despite the fact that the law establishes certain limits of liability, an individual entrepreneur, in the event of any legal situation arising, is liable with all the property that he, in principle, has. |
Video - Who is an individual entrepreneur
Why can’t individual entrepreneurs be classified as legal entities?
In fact, in our opinion, individual entrepreneurs should not initially be classified as individuals, despite the fact that its characteristics are applicable to this phenomenon; the same can be said, by the way, about the category of legal entities. None of them can be 100% correct, since, in essence, an entrepreneur is a certain subject of a huge economic system, conducting separate activities.
Let us consider successively abbreviated definitions of the categories of interest to us, which are given officially.
Thus, a legal entity is any organization passed the official procedure state registration, in accordance with the procedure established at the legislative level. A legal entity may have the following orientation:
- commercial;
- non-profit.
At the same time, the form of existence of an organization from the category under consideration may be:
- by company;
- company, etc.
A legal entity also:
- owns or manages any property;
- responds with the required property for obligations;
- has the right in his own name to purchase something or sell of various nature rights;
- can act in court as a defendant or plaintiff;
- bears responsibilities to society, etc.
An individual is any citizen in our case, Russian Federation, but may also belong to another state or have no citizenship at all.
Any individual, no matter whether he has citizenship or not, has from birth specific rights and responsibilities simply by virtue of his existence, enters into various legal relations in the role of their subject.
As for the well-known term, legal capacity, it occurs due to the achievement of a certain age period, in Russia equal to 18 years from the day of birth.
Each individual has a certain set of so-called characteristics and properties that determine his individuality and also influence his position regarding rights and obligations. This is about:
- name;
- surnames;
- patronymic;
- citizenship;
- marital status;
- gender
It is also common for each individual to have different legal statuses, which in some cases are mixed. Here are some of them:
- citizen;
- foreign citizen;
- a person who does not have nationality in relation to any state;
- refugees.
One of the rights of an individual is as follows. It can create:
An individual entrepreneur is included in the category of individuals. When registering as an individual entrepreneur, a citizen registers a corresponding entity that has nothing to do with the legal entity. Registration of an individual entrepreneur also takes place officially, since his responsibilities to society are as large-scale as those of a legal entity.
To obtain the status in question, a person who wants to start his own business must have the following characteristics of a full-fledged subject of civil law:
- have civil rights, as well as bear responsibilities to other persons;
- have the ability to personally receive and also exercise civil rights (in other words, to be legally capable);
- have a permanent registration address (place of residence).
In addition, in order for an individual to become an individual entrepreneur, it is necessary to pass official procedure state registration.
Let's sum it up
We hope that the presented article answered your question fully. Now that you know which category of person a sole proprietor belongs to, you can make an informed business decision.
The emergence of this question is associated with a dual interpretation of the above concepts. People may be confused about how an individual entrepreneur, being an individual, enjoys the rights and performs the duties of a legal entity. In this article we will understand whether an individual or a legal entity is an individual entrepreneur, and we will clearly distinguish between these concepts.
What is IP
In Article 11 The Tax Code defines the term individual entrepreneurs. These include individuals who are registered in in the prescribed manner and carry out entrepreneurial activities without forming a legal entity. Already in this legal act a clear answer is given to asked question. It is also confirmed by the following norms.
Article 23 of the Civil Code of the Russian Federation practically duplicates this norm. A clear distinction is made in the following definitions specified in the law “On State Registration...” of 08.08.2001.
That is, for the legislation of the Russian Federation there are no problems with distinguishing these concepts. Let's try to further understand all the subtleties and nuances.
The fact that an individual carries out entrepreneurial activity is evidenced by the following:
- A person carries out a certain type of activity to make a profit (exclusively for himself).
- Property is also manufactured and acquired for the purpose of generating income.
- Records of business transactions are maintained. To do this, under any taxation regime that the individual entrepreneur has chosen, he keeps a book of income and expenses. It contains entries in chronological order and information about primary documents, confirming the implementation of transactions.
- Contacts have been established with suppliers, buyers and other contractors.
- The activity is carried out at the businessman’s own risk, and he also bears any responsibility personally and with all his property.
An interesting rule is that establishes the possibility of applying legal norms that regulate legal relations related to the activities of legal entities to entrepreneurial activity individuals. But certain conditions are provided here: otherwise should not follow from laws, regulations or the very essence of legal relations. It is this provision, enshrined in the Civil Code of the Russian Federation, that raises questions.
We also note that an individual entrepreneur and individual is a specific person who is endowed with the necessary amount of legal capacity and capacity.
The legal capacity of a subject is the ability to have rights and bear responsibilities. According to the provisions of the Civil Code, citizens can either independently engage in entrepreneurial activity or create legal entities. This list also includes the ability to make transactions within the framework of the law, have property and non-property rights, and more.
Legal capacity is the ability to manage rights and responsibilities, which is acquired from the moment of adulthood, i.e. from 18 years of age. But the legislation also provides for cases in which legal capacity may arise at 16 years of age.
An individual entrepreneur acquires its status from the moment of state registration.
To understand that an individual entrepreneur is an individual or legal entity, it is necessary to analyze what is common and different between these terms.
What the individual entrepreneur has in common with the physical Faces
Individuals- these are citizens of the Russian Federation, Foreign citizens and stateless persons. But in order for them to become subjects of economic legal relations, they need to have a sufficient amount of legal capacity and capacity. This is not required for legal entities; simply state registration is sufficient.
An individual may carry out one of the following types of activities:
- Work under an employment contract.
- Provide services under a civil contract.
- Be a private, self-employed person. This activity is similar to entrepreneurial activity, but differs in its social orientation (lawyers, notaries, private security guards, private detectives).
- Individual entrepreneurs.
What an individual entrepreneur and an individual have in common is the following:
- Legal norms equate these two terms with each other.
- This is a specific person who has a last name, first name, patronymic, and identification number.
- They have a specific place of residence where they live and are registered as individual entrepreneurs.
- Endowed with the necessary scope of rights and legal capacity.
- A business entity registered as an individual entrepreneur can act both as an entrepreneur and as a citizen. In the Russian Federation This is not prohibited, but is directly provided for by law.
- Have the right to conduct various business transactions, enter into contracts and make transactions.
- They can also be in economic relations with legal entities and perform legally significant actions on their own behalf.
- When debts arise, they are liable with all their property, except for that which cannot be levied by law. By decision of the arbitration court, a citizen who is unable to satisfy demands for monetary obligations may be declared bankrupt.
In order to avoid all kinds of risks when implementing and running a business, an individual entrepreneur needs to find out all the nuances for himself even before registration. In particular, what type of activity will be chosen, whether it is subject to licensing, what method of taxation will be used, whether current accounts will be opened in banks, etc. These factors also influence the success of business.
What is common between individual entrepreneurs and legal entities. persons
According to the legislation of the Russian Federation, a legal entity is:
- organization (LLC, CJSC, etc.)
- which has separate property (is on the balance sheet and is used in work)
- may be liable for obligations within the limits of only the above-mentioned property (personal property is not included here)
- can enjoy all rights and obligations (conclude transactions, pay taxes)
- When considering legal disputes, it can act as a plaintiff and defendant.
To understand what common for an individual entrepreneur and a legal entity, it is necessary to clearly understand, first of all, what their differences are.
- A legal entity is an organization, an individual entrepreneur is a specific person. Those. V the latter case- this is a really existing subject, and in the first one it is an organized society (which, just as it appeared, can disappear at one moment).
- Registration of an individual entrepreneur is carried out at the place of residence, and a legal entity - at the legal address.
- Characterized by organizational unity, which means own system management. An individual entrepreneur operates independently, but can also act as an employer when using hired employees.
- Property separation and responsibility. This term refers to property that the organization has separately, and the founders or members of the organization have separate property. And these concepts must be distinguished and not confused. Since the organization bears property liability only within the amount (property) of the authorized capital, and an individual entrepreneur is liable for obligations with all of his own property. This is considered the most important difference.
- Availability own name, in contrast to an individual entrepreneur, which is registered only under the full name;
- A legal entity must have a current account and its own seal. For an individual, this obligation is voluntary and advisory.
- The presence of a charter, which is a constituent document, is another necessary condition for the activities of legal entities.
- Organizations can carry out any type of activity in any field; there are restrictions for businessmen.
The general idea is as follows:
- They are created exclusively for business activities and have the goal of making a profit.
- Personal property and non-property rights are exercised in one’s own name.
- In order to become a full participant in economic legal relations, it is necessary to carry out state registration with the relevant authorities.
- Tax systems such as simplified tax system and single tax for imputed income may be the same.
- Reception of employees is carried out in the same way. Everyone makes an entry in the work book. Necessary deductions are made for employees Pension Fund and tax is withheld from personal income.
- May have a current account. Although, as stated above, this is an obligation for organizations, but not for individual entrepreneurs. For banks, an individual entrepreneur is a legal entity when making non-cash transactions. That is, look for tariffs for various services in the sections intended for organizations.
- In court they can act as plaintiff and defendant.
Individual entrepreneur status, namely physical. is it a person or a legal entity? a person must be understood before state registration is carried out. Since in the process of doing business you will understand all the pros and cons, that is, all the advantages can be used in your activities.
ADVERTISINGThe abbreviation IP is well known today. However, the legal status of a sole proprietor is unclear to many people. Legislative acts contain an answer to the question formulated in the title of this article, but understanding them without legal training pretty hard.
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 leads to tax authorities have the same requirements. There is confusion in numerous types (forms) of reporting. As a result, complaints and long disputes arise. Not better position with banks, where the individual entrepreneur makes the 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. IN tax office two declarations must be submitted:
- 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 them 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. To the legal entity this requirement not applicable.
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.
The legal status of an individual entrepreneur raises many questions. First of all, it is not clear to many that an individual or legal entity from the point of view of legislation is an individual entrepreneur.
We will tell you in the article what the tax office thinks about this and how individual entrepreneurship is characterized by law.
○ The concept of an individual entrepreneur.
From the point of view of legislation, an individual entrepreneur is not a legal entity. This follows from the definition.
Art. 11 Tax Code of the Russian Federation:
Individual entrepreneurs are individuals registered in the prescribed manner and carrying out entrepreneurial activities without forming a legal entity, heads of peasant (farm) households. Individuals carrying out entrepreneurial activities without forming a legal entity, but who have not registered as individual entrepreneurs in violation of civil law requirementslegislation of the Russian Federation, when performing the duties assigned to them by this Code, do not have the right to refer to the fact that they are not individual entrepreneurs.
In accordance with this text of legislation, an individual entrepreneur is an individual who conducts commercial activities. This is quite clear. However, the legal status of an individual entrepreneur implies some similarity with the status of a legal entity. Let us further understand the similarities and differences between these concepts.
○ Signs of individuals and legal entities.
An individual is a person who has rights and obligations within the framework of the legal regulation of the state. An individual has certain characteristics:
- Identification is carried out by full name.
- There is no need to undergo additional registration, except for obtaining a birth certificate and a general passport.
- Availability of the right to carry out economic transactions with other persons and organizations.
A legal entity is an organization registered in the register and having separate property to which it is liable for its obligations.
Art. 48 Civil Code of the Russian Federation:
- A legal entity is an organization that has separate property and is responsible for its obligations, can, in its own name, acquire and exercise civil rights and bear civil obligations, and be a plaintiff and defendant in court.
- A legal entity must be registered in the Unified State Register of Legal Entities in one of the organizational and legal forms.
- Legal entities in whose property their founders have real rights include state and municipal unitary enterprises, as well as institutions.
Legal entities have the following characteristics:
- Availability of registration in a unified register.
- Certain property owned.
- Separate name and registered address.
- The presence of a structured team with managers and subordinates.
- The right to obtain licenses for certain types of activities that are not available to other forms.
- Mandatory presence of a stamp and a bank account.
A legal entity is responsible for conducting activities with the property belonging to it. This sign is identical to the responsibility of an individual and an individual entrepreneur.
○ Comparison of individual entrepreneurs and ordinary individuals.
In fact, an individual and an individual entrepreneur have many common characteristics. However, maintaining certain types entrepreneurial activity without registration is not allowed. Let us tell you what the similarities and differences are between an individual entrepreneur and an individual.
✔ General signs.
Common features include the following facts:
- Legally, an individual entrepreneur and an individual are equal.
- This is a specific person with a full name and identification number.
- The place of permanent registration is the same.
- An individual entrepreneur can act as a citizen when concluding transactions.
- Individuals and individual entrepreneurs have the right to conduct business transactions, enter into transactions, formalize Required documents and perform legally significant actions.
- In case of debt formation, individuals and individual entrepreneurs are liable with property in their ownership.
From the point of view of legislation, an individual entrepreneur is the status of an individual. However, there is still a difference between these concepts.
✔ Features.
The difference between an individual entrepreneur and an individual lies in the income tax system and the permissible scope of activity. For example, an individual with individual entrepreneur status cannot be employee and at the same time conduct business. A person, being an individual entrepreneur, can be an employee, but as an individual.
Many types of commercial activities are not available to an individual who does not have individual entrepreneur status. So, for example, he cannot open a pavilion and sell any goods there or provide household services to the population.
○ Comparison of individual entrepreneurs and legal entities.
Quite often you can find identification of the statuses of individual entrepreneurs and legal entities. This is not entirely correct from the point of view of legislation, but nevertheless there are certainly similarities between these statuses. Let's look at the similarities and differences.
✔ Community in activity.
The commonality of activities lies in the following factors:
- The purpose of creation is to conduct business and make a profit.
- The need to go through the state registration procedure.
- Availability of taxation systems - simplified tax system, UTII, etc.
- Possibility of employment of employees in accordance with the Labor Code of the Russian Federation.
- They may have a bank account (not required for individual entrepreneurs).
- In court there can be a plaintiff and a defendant.
This is where the similarity ends. Let's look at the differences between individual entrepreneurs and legal entities.
✔ Distinctive characteristics.
The main differences are as follows:
- An individual entrepreneur is a specific person, a legal entity is an organization.
- Registration of a person as an individual entrepreneur is carried out at the place of permanent residence, and a legal entity is registered at the legal address.
- An individual entrepreneur operates independently, a legal entity is a group of people (however, both of them can be employers).
- The property of the organization and its founders is separate from each other, the individual entrepreneur, in turn, is liable with all his property, as an individual.
- Individual entrepreneur does not have its own name.
- A legal entity is required to have a seal and a bank account; for individual entrepreneurs, both are advisory in nature.
- The activities of a legal entity are impossible without the presence of statutory documents.
Organizations have the right to conduct commercial activities in any area that does not contradict the law. There are certain restrictions for entrepreneurs.
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 an individual, but with expanded opportunities in the field of entrepreneurial activity, unlike an 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.
Legal entity means an organization with own capital with one or more founders. The interests of the company in different situations may be represented by 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, of course, remains an individual, but at the same time is automatically endowed with additional rights and obligations before the law. For example, everything that concerns controversial situations of a citizen as an entrepreneur is dealt with in the 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 - not required for individual entrepreneurs authorized capital and availability constituent documents, and 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 during the liquidation of the LLC practically no one bears responsibility (depending on the severity of the violation).
An individual entrepreneur, being an individual, even with the status of an individual entrepreneur, bears full financial liability before contractors and the law after the closure of a business. When answering the question, an individual entrepreneur is considered a legal entity or an individual; we should not forget about the responsibility of an entrepreneur as an individual.