IP - an individual or a legal entity? Is the IP a legal entity?

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

Nowadays, everyone knows the abbreviation IP - an individual entrepreneur. But not everyone imagines the legal status of this IP. The question is often asked: "IP - an individual or a legal entity?". Let's try to figure it out.

Who can do business?

According to the law, any commercial activity can be carried out with confirmation of one's own legal status in accordance with legislative acts. As you know, entrepreneurial activity includes any kind of it aimed at making a profit. In Russia, legal entities and individuals can engage in it.

As you know, the forms of legal entities are state (as well as municipal unitary) enterprises and commercial organizations. Another category that is allowed this very commercial activity is individual entrepreneurs. The Civil Code states in black and white: "An individual entrepreneur (IP) carries out his activities without forming a legal entity (legal entity)." But why, in this case, the question is increasingly heard: "IP - an individual or a legal entity?". Is it really all about our egregiouslegal illiteracy?

On problems and confusion

It turns out that it's not so simple. The reason for the emergence of such doubts is that the same Civil Code, after determining an individual entrepreneur, almost immediately reports that the same provisions and rules that regulate the activities of legal entities apply to its activities. Often, tax authorities impose requirements on entrepreneurs that are similar to those on commercial organizations. This is where confusion arises, in which both the individual entrepreneurs themselves and the regulatory bodies to which they are accountable are confused in the numerous types and forms of reporting required from legal entities and entrepreneurs.

Individual entrepreneurs have to defend their rights in the tax office through long complaints and proceedings. Some confusion also reigns in the activities of banks related to individual entrepreneurs. Not all banks clearly understand themselves: is an individual entrepreneur an individual or a legal entity? What guidelines apply to entrepreneurs? Because of this, individual entrepreneurs are forced to make mountains of unnecessary reports, constantly defend their rights and try to change the bank to a more loyal one.

Compare individual entrepreneurs and legal entities

Maybe, nevertheless, an individual entrepreneur is a legal entity? Let's see what exactly brings individual entrepreneurs closer to legal entities. Mainly, these are questions of financial discipline. Today, registering an individual entrepreneur implies the obligation to keep cash books with a clear indication of income and expenditure.funds in the same way as legal entities. They are required to file tax returns. If a citizen registered as an individual entrepreneur receives income as an individual (for example, from renting or selling housing), he will have to submit two declarations - one as an individual, the other as an individual entrepreneur, indicating income from entrepreneurial activity.

The tax office checks individual entrepreneurs in the same way as legal entities. The same applies to other regulatory bodies. An individual entrepreneur reports to the labor and fire inspectorates, the Committee for the Protection of Consumer Rights and numerous other authorities.

About wage labor

An individual entrepreneur has the right to hire employees, to make entries in work books. It does not matter to working citizens whether an individual entrepreneur is a legal entity or not. The Civil Code of the Russian Federation declares equal rights for all employees in the field of labor legislation, regardless of the organizational form of the employer. In order to respect the rights of employees, an individual entrepreneur is obliged to conclude official labor contracts, pay contributions to all off-budget funds and pay taxes for his employees.

By the way, an individual entrepreneur has the right to choose the taxation system that is most beneficial for him, which also makes him related to a legal entity.

Compare an individual entrepreneur and an individual

Is there any difference between an individual entrepreneur and a legal entity? There is, and not just one. An individual entrepreneur has a lot in common with an individual. ATin particular, all income of the IP can be used at its own discretion and at any time, without reporting to anyone. As you know, in a commercial organization, income is paid only once a quarter in the form of dividends. In this important issue, the IP, without any doubt, enjoys much more freedom compared to the legal entity.

From a legal point of view, the registration of an individual entrepreneur does not oblige him to keep accounting records and without fail to open a bank account for doing business. Such an entrepreneur can settle in cash (of course, observing all legal norms). Although in practice this almost never happens these days.

About fines and printing

Another important difference relates to the amount of fines that inevitably occur due to errors in the maintenance and official execution of business documents. Pen alties for such violations, voluntary or involuntary, are quite hefty. Pen alties for legal entities are an order of magnitude greater than for individuals, to which IP refers in this matter.

Like any individual, an entrepreneur is not required to have a seal, unlike an organization. According to the law, a signature is enough to certify documents. But it should be noted that in practice, most partners of individual entrepreneurs are distrustful of this form of registration of contracts. Most individual entrepreneurs sooner or later start their own seal. Thus, this difference can be considered rather conditional.

Other details

Recently, only legal entities can trade in alcoholic beverages, so many entrepreneurs had to urgently register an LLC or other forms of legal entities. Despite the right to have employees, the entrepreneur must personally run his own business and all documents must bear his own signature. Another person has the right to sign any documents for IP only by proxy. Thus, the position of a director or general director in the staff of an individual entrepreneur is an absolute fiction, because according to the law, these persons have the right to sign responsible documents without a power of attorney.

The entrepreneur retains his status in the event of an official termination of activity. Thus, he must constantly pay contributions to the PF (Pension Fund) regardless of the availability of income, while a legal entity in the absence of activity and income has the right to dismiss the entire staff or send them on unpaid leave (and not pay any contributions).

So, is the individual entrepreneur an individual or a legal entity?

From all of the above, it becomes clear that with all the contradictory and controversial points of our legislation, an individual entrepreneur is still an individual, and not a legal entity, which is emphasized by the Civil Code, but in his activities this person is obliged to accept most of the regulations and requirements, regulating the activities of organizations, unless there are express indications of exceptions to the rules forIP.