It's no secret that your business is most often organized by those who, due to psychological characteristics, are unable to work "on their uncle", day after day to follow the instructions of a superior leader and not to fully experience the final result of labor. Therefore, an individual entrepreneur will always find his own niche. This way of doing business is always in demand, because there are a lot of branches of economic activity where large business entities are simply not needed.
A bit of history
Individual entrepreneurship in Russia began to develop quite a long time and has a rich history. Indeed, trade was one of the main activities of the Slavic peoples. Under Peter the Great, for example, Russian merchants were well known far beyond Russia, and "businessmen" from all corners of the great power gathered at traditional fairs. The further development of individual entrepreneurship during the reign of Catherine II was due to the complete abolition of monopolies and the maximum freedom of trade. It should be especially noted that during this period even peasants were allowed to carry out entrepreneurial activities, and after the reforms of Alexander II and the abolition of serfdom they completely got unprecedented opportunities for doing business.
Unfortunately, after the 1917 revolution in the history of private entrepreneurship, a "black period" began, which lasted almost 70 years. In the Soviet Union, entrepreneurs were considered speculators and brought to justice. But already in 1987, in the light of the changes and the coming period of perestroika, the law "On individual labor activity" was adopted, which laid the foundation for the revival of business in Russia.
So who is he?
An individual entrepreneur is considered by law as an individual who carries out entrepreneurial activities in accordance with the established procedure without the formation of a legal entity.The right to carry out such activities has:
- citizens of the Russian Federation who have reached the age of 18, if their legal capacity has not been limited by a judicial procedure;
- not reaching adulthood: in the case of marriage; the presence of permission of parents, guardians, adoptive parents to conduct business; on the basis of a judicial decision on full legal capacity; announcements by the guardianship and trusteeship agencies that the person is recognized as fully capable;
- stateless persons, as well as foreigners: in the event that they temporarily or permanently reside on the territory of the country.
However, municipal employees and civil servants can not register such activities as individual entrepreneurship.
Responsibilities and responsibilities
IP, just like a commercial legal entity, conducts economic activities at its discretion and bears full personal and material responsibility within the limits of the current legislation. Moreover, an entrepreneur who has not fulfilled his obligations is liable regardless of guilt. Like the legal entity, they are subject to inspections of the tax inspection and other regulatory bodies. If a private trader has employees, he must conclude an employment contract and pay all taxes and fees in the same way as a commercial legal entity.
The main differences between PI and commercial legal entity
Despite the fact that these forms of economic activity are quite similar, differences do exist. For example, individual businesses can use the profits from doing business at its discretion and in full, while a commercial organization can only rely on quarterly dividends.
The individual form of doing business does not require compulsory accounting, it is sufficient to maintain a cash book. Also, IP registration does not require starting capital, it is enough to pay state duty, and in general, it is necessary to issue a much smaller package of documents. To conduct an individual business, it is not necessary to open a settlement account and register the company's seal, although this is not prohibited, but there are no restrictions on cash settlement.
Features of taxation
The activities of both individuals and legal entities are governed by one of the provisions of the Tax Code, so the IP must register as a taxpayer and independently list all the due deductions. However, an individual entrepreneur is a subject of small business, and therefore he has the opportunity to choose a system of taxation and reporting. And the choice is quite wide. Most often, one of three systems is used:
- the usual system of taxation (OCO) - provides for the payment of VAT, income tax, nat. persons and the unified social tax;
- simplified system (USN) - in the event that the IP does not have employees and carries out only one type of entrepreneurial activity;
- unified tax on imputed income (UTII) is subject to the activity itself, not the subject of entrepreneurship, it is calculated based on the provisions of local legislation and within the list regulated by article 346.26 of the Tax code.
As you know, everything that is not prohibited by law is allowed. Therefore IP can do anything, if it does not contradict the legislation. Depending on the occupation, the types of individual entrepreneurship can be divided into:
- Licensed: requires special permission from the appropriate authorities — licenses issued by the competent authority after fulfilling certain requirements. These include, for example, detective, pharmaceutical, geophysical, mapping activities and much more.
- Requiring special approval - to carry out such activities, a license is not required, but it needs to be coordinated, for example, with the sanitary service or obtain permission from the Ministry of Emergency Situations.
In addition, there is a list of activities that individual entrepreneurship completely excludes, for example, the production, utilization and repair of military equipment and weapons, pyrotechnic products, the manufacture of medicines, alcohol products, electricity sales and others.
Activities that can be carried out immediately after the registration of the PI certificate are classified as ordinary (not licensed). The main criterion for referring to this category is the absence from it of harm and a threat to the life and health of citizens.
Benefits of IP
Investigating and analyzing individual entrepreneurship, there are several undeniable advantages:
- high adaptation to local market conditions;
- wide opportunities in the implementation of business ideas;
- fairly low costs for management and conduct of economic activities;
- simplified accounting;
- the concentration of profit in one hand;
- higher speed of capital turnover;
- possibility to operate with relatively small capital;
- high ability to make a change in goods and services, adapting to the needs of the market.
Well, as without flaws
Of course, like any other kind of management, individual entrepreneurship can not consist only of advantages. The shortcomings of this form of doing business include:
- high level of risk, unstable position in the market;
- a high likelihood of inadequate managerial competence;
- difficulties in attracting third-party funds, probable complications in obtaining a loan;
- increased risks in contracting;
- dependence on larger companies, low competitiveness;
- in case of failure, the property liability extends, among other things, to the personal property of the owner.
Nevertheless, the individual form of entrepreneurship is becoming increasingly popular and in demand.