How to open an IP in 2019, and how it threatens: basic questions and answers
The opening of an IP is often associated with fears of bureaucracy and hassle, but there is nothing wrong with the procedure for registering an IP: it will take you no more than 10 minutes to fill out an application, and its consideration will not exceed 3 days.
Opening an IP is a simple matter and will not require you a lot of money, nor time, nor nerves. Today, the procedure for registering IP in Russia has become as simple and automated as possible. If you doubt the feasibility of opening a private entrepreneur or have not answered any questions about starting a business, read on.
What is IP
IP is an individual entrepreneur. From the point of view of the law, an individual entrepreneur is an individual registered in the established manner and entitled to conduct business without forming a legal entity (LLC, ZAO, etc.). In other words, an individual entrepreneur is the same individual who has legal rights to business. The logic of the law is this: if you are constantly engaged in some kind of commercial activity, receiving income from it, then this is probably an enterprise. But in order to do business legally and to avoid fines, you need to go through the registration procedure, having received the status of IP or opening a company.
Why is it better to start a private entrepreneur than LLC
IP registration is the easiest way to register a business for those who want to do something in person or with employees, but without partners. An alternative option for opening an IP is the registration of an LLC (limited liability company). With this legal form, you create a legal entity, but as an individual you can act as the sole founder. In practice, about 75% of limited liability companies are LLCs created by just one individual.
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As a rule, LLC format is chosen for larger projects. LLC registration is more appropriate when you plan to take large loans from banks or other funds, there are high risks to burn out and stay with debts. Otherwise, IP is more suitable. The main benefits of IP include simple registration and termination procedures, understandability of accounting and less reporting, more profitable taxation.
At the same time, IP compared with LLC has one significant drawback. An individual entrepreneur is liable to his creditors and for all obligations with all his property, even if it is not used in entrepreneurial activity. An exception is the list of property for which it is impossible to recover, for example, the only housing.
In comparison with an individual entrepreneur, an LLC has a risk zone outlined by the amount of funds and property that are on the company’s balance sheet. At the same time, if the actions of the participant led to the bankruptcy of the organization, he may be brought to additional responsibility by the court and will be obliged to repay debts from his personal property.
Who can become an IP
Become an individual entrepreneur in Russia can:
any competent citizens of the Russian Federation who have reached the age of majority;
minor citizens who are over 16 years old and who are declared to be fully capable of decisions in the guardianship and guardianship authorities or the court;
minor citizens over the age of 14, subject to the consent of the parents or guardians;
citizens or persons of other countries in the presence of temporary or permanent registration in any locality of the country.
Who is forbidden to open IP in Russia:
state and municipal employees;
security officers and prosecutors;
lawyers and judges;
those who previously had an IP, but did not remove it from the register;
citizens who have been deprived of the right to engage in entrepreneurial activity by a court verdict, but this ban has not yet expired;
to citizens who have already been engaged in business and who were declared bankrupt in connection with this activity, and a year has not yet elapsed from the day of bankruptcy.
What you need to do before registering IP
1. Choose type of activity
If you decide to open an IP, you probably have an idea of what kind of entrepreneurial activity you will be engaged in. From the point of view of the law, any commercial activity is fixed by a special code and name. The list of such codes is called the All-Russian Classifier of Economic Activities (OKVED). In 2019, the OKVED-2 classifier is valid in Russia.
You will need the activity code when registering the IP: you will need to indicate what activities you plan to engage in. For this, one main activity code and an almost unlimited number of additional codes are indicated. If the main code will denote your main type of business, do as additional indicate the related areas of business or even proposed activities.