What is the difference between LLC and CJSC? What's better?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Many novice businessmen are interested in the question of how an LLC differs from a CJSC. These organizational and legal forms of commercial property are most often found in business practice. Those who are going to start their own business in the field of small or medium-sized businesses should be able to distinguish between these concepts.

Key differences

Even experienced entrepreneurs are not always able to immediately decide on the form of ownership. And they are not always able to advise others which is better - CJSC or LLC. The differences lie in such criteria as the peculiarity of the creation of the authorized capital and its size, the number of founders, contributions and much more.

What is an OJSC?

This form of organizational structure for future business is also often chosen. What is the difference between LLC, OJSC, CJSC?

So, a Limited Liability Company is the most attractive option, most suitable for small and medium-sized enterprises. It can include a maximum of 50 people, and the founders can be both individuals and legal entities.

But OJSC is a more complex form, it has many nuances that can be for the owner asacceptable as well as negative. The key difference from an LLC is that the authorized capital is divided not into shares of its participants, but into shares. There is also no limit on the number of people who can be owners on this form.

The concept of CJSC

This form of ownership is a commercial structure, where the authorized capital depends on the agreed number of shares. They are distributed among the founders and other persons, but cannot be sold on exchanges.

Before you know how an LLC differs from a CJSC, you need to know all the features of the last form:

• shareholder cannot be excluded;
• no need to pay authorized capital for registration;
• have the right to freely alienate shares;
• unanimous decision of all participants is not required for the purpose of making decisions;
• shareholders do not need to contribute finance to the property of the structure;
• in order to create an authorized capital, state registration of the issue of securities is required;
• when paying with non-monetary funds, the services of an appraiser from the outside are needed;
• may have new members;
• the need for mandatory regular reporting on the activities of the structure.

LLC: advantages and disadvantages

You need to know the key features of this form of ownership. This will help you better understand the difference between an LLC and a CJSC. What is the difference between them you will understand on your own, having studied the main advantages of this type of organization.

Here everything is much easier in terms of registration and subsequent work, in particular:

• the state registration procedure is very simple, there is no need to record information about securities, as in the previous case;
• if the capital is formed from non-monetary funds, an independent appraiser is not required, all work is carried out by the founders themselves, but only if their equivalent does not exceed 20,000 rubles;
• participant can always leave the structure;
• acceptance of new and alienation of old members is limited according to the Charter of the company;
• data on the company's activities, unlike a CJSC, do not need to be disclosed.

Disadvantages of the simplest form

As you can see, the main answer to the question "What is the difference between an LLC and a CJSC?" is the ease of doing business at first sight. However, a limited liability company has its drawbacks, despite the huge number of advantages for owners of small commercial structures:

• in order to carry out the state registration procedure, you need to pay at least half of the authorized capital. It is paid in cash only, and participants must open temporary accounts before this begins;
• to change the composition of an LLC, a very lengthy and complicated procedure is required, including changes in the Unified State Register of Legal Entities and registration of share alienation through a notary;
• when at least one member leaves, the structure may lose property;
• in order to make a decision, the unanimous confirmation of all participants is required.

Based on this, you can certainly decide on the dilemma of which form of ownership to prefer. Then choose for yourself: LLC or CJSC.

OJSC: main differences

When registering this form of ownership, it is not required to indicate the personal data of the founders. But when registering an LLC, this is a mandatory procedure.

If the structure of the company will provide for an unlimited number of participants, then it is the JSC that should be chosen. And even if you have the right to pre-emption of securities, you can give them or transfer them to relatives by inheritance.

Other features of this structure are:

• impossibility to exclude a participant from the society through the court;
• when making important decisions, votes are counted not by the number of equity holders, but by shares;
• the capital of the company is divided into shares;
• authorized capital must be at least 100 thousand rubles;
• need to pass annual audit.

How to make the right choice?

Before starting your own business, you should carefully study the features of each form of entrepreneurship. So you will find out how an LLC differs from a CJSC and an OJSC. The last option is the most difficult, and is suitable for those enterprises that plan to enlist the support of large investors and have large-scale plans. But if we are talking about a small friendly or family business, then it is better to choose an LLC, because it is much moreeasier.

Visual comparison

Above we figured out what are the features of OJSC. And below we will clearly understand how an LLC differs from a CJSC thanks to a brief description.

Depending on the characteristics of the activity, the characteristics are as follows:

• In an LLC, the authorized capital is the contributions of its members, in a CJSC - for shares, its maximum amount in both cases is ten thousand rubles.
• Capital in two cases is paid in the form of securities, money or other property that can be valued. But in an LLC, in order to register, you need to pay at least half of its cost, and the rest within a year. And within three months, at least 50 percent of the shares distributed during the creation of the structure must be contributed to the CJSC. The rest is paid in stages. And from the moment of registration, a package of documents must be submitted within a month in order to obtain permission to issue shares.
• If capital in an LLC is paid in cash, then the founder needs to open a special savings bank account and deposit funds into this account.
• In a CJSC, unlike an LLC, it is possible to increase the authorized capital by increasing the par value of shares and attracting new ones.

Rights of structure members

The form of ownership of a commercial organization directly affects what rights its founders and owners have. In a little and differs LLC from CJSC. What is the difference and list below:

• Limitedresponsibility can consist of a maximum of 50 participants, and in a closed joint-stock company the same figure means not only the number of persons, but also shareholders. If there are more of them, then you need to reorganize into an open joint-stock company within 12 months.
• In the first case, participants can leave the membership of the structure at their own will, and in the second they do not have this right.
• If we are talking about the alienation of a share (LLC) or a share (CJSC), then in the first structure, participants have the right to do so, transferring it to third parties, if this does not contradict the Charter. Other participants or the society itself do not participate in the discussion of this issue. In a CJSC, shareholders also have this right, and the consent of others is also not required.
• All decisions are made in both structures on the basis of a general meeting of participants or shareholders of the company.
• In a CJSC, shareholders do not have the right to make contributions to the company's property, and in an LLC, contributions must be made by all participants, depending on their share according to the authorized capital.
• As for the payment of dividends and profits of the company, then in LLC it is divided between the participants, depending on one or another share, which is provided for each by the authorized capital. And in the second structure, dividends are paid to shareholders on their securities of one type or another. Payments can be made both in cash and in other equivalents.

It's safe to say that CJSC and LLC are somewhat similar to each other, but differ from OJSC. Both organizational forms of business are able to guarantee the limited liability of their organizers, depending on theirobligations. Their differences lie in the management structure and are not so significant.