What is individual entrepreneurship? Development of individual entrepreneurship
It is no secret that most often those who, due to psychological characteristics, are unable to work “for an uncle”, day after day, follow the instructions of a higher manager and do not fully feel the final result of their work, organize their business. Therefore, an individual entrepreneur will always find his own niche. This way of doing business is always in demand, because there are many 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 ago and has a rich history. Indeed, one of the main activities of the Slavic peoples was just trade. Under Peter the First, for example,Russian merchants were well known far beyond the borders of Russia, and “businessmen” came from traditional places of the great power to traditional fairs. The further development of individual entrepreneurship during the reign of Catherine the Second was due to the complete abolition of monopolies and maximum freedom of trade. It should be especially noted that during this period even the peasants were allowed to carry out entrepreneurial activities, and after the reforms of Alexander II and the abolition of serfdom, they did get unprecedented opportunities for doing business.
Unfortunately, after the 1917 revolution, a “black period” began in the history of private entrepreneurship, which lasted nearly 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 restructuring, the law “On self-employment” was adopted, which marked the beginning of the revival of business in Russia.
So who is he?
An individual entrepreneur is considered by law as an individual who carries out entrepreneurial activity in the prescribed manner without forming a legal entity.The right to carry out such activities are:
- Citizens of the Russian Federation who have reached the age of 18, if their capacity has not been limited in court;
- underage: in case of marriage; permission of parents, guardians, adoptive parents to conduct business; on the basis of a court decision on full legal capacity; the announcement by the guardianship and custody authorities that the person is recognized as fully capable;
- stateless persons, as well as foreigners: in the event that they temporarily or permanently reside in the territory of the country.
However, such type of activity as individual entrepreneurship cannot be registered by municipal employees and civil servants.
Duties and Responsibilities
The SP, in the same way as a commercial legal entity, conducts business activities at its discretion and bears full personal and material liability within the limits of the current legislation. Moreover, an entrepreneur who has not fulfilled his obligations is responsible, regardless of fault. Like the legal entity, they are subject to inspections by the tax inspectorate and other regulatory agencies.If a private owner has employees, he is obliged to enter into an employment contract and pay all taxes and fees in the same way as a commercial legal entity.
The main differences between IP and commercial legal entity
Despite the fact that these forms of business are quite similar, the differences still exist. For example, individual entrepreneurs can use the income from running a business at their discretion and in full, while a commercial organization can only rely on quarterly dividends.
Individual form of doing business does not imply compulsory accounting, it is enough to keep a cash book. Also, for registration of individual entrepreneurs, start-up capital is not needed, it is enough to pay the state duty, and in general, it is necessary to issue a much smaller set of documents. To conduct an individual business, it is not at all necessary to open a current account and register the company's seal, although this is not prohibited, but there are no restrictions on cash payments.
Features of taxation
Activity and physical,and legal entities are governed by the provisions of the Tax Code, so the IP is obliged to register as a taxpayer and independently transfer all due deductions. However, an individual entrepreneur is a small business entity, and therefore he has the opportunity to choose a taxation and reporting system. And the choice is quite wide. One of the three systems is most commonly used:
- ordinary taxation system (CAPD) - provides for the payment of VAT, income tax physical. persons and the unified social tax;
- Simplified System (USN) - in the event that the SP does not have employees and performs only one type of business activity;
- single tax on imputed income (UTII) - the activity itself is taxed, but not the business entity, it is charged based on the provisions of local legislation and within the limits of the list regulated by Article 346.26 of the Tax Code.
As you know, everything that is not prohibited by law is allowed. Therefore, the IP can do anything, if it is not against the law. Depending on the occupation, types of individual entrepreneurship can be divided into:
- Licensed: requiring a special permit from the relevant authorities - a license that is issued by the competent authority after certain requirements are met. These include, for example, detective, pharmaceutical, geodesic, cartographic activities and much more.
- Requiring special coordination - for the implementation of 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, alcoholic beverages, the sale of electricity and more.
Activities that can be carried out immediately after the registration of the IP certificate is classified as normal (not licensed). The main criterion for classification in this category is the absence of harm from it and a threat to the life and health of citizens.
Exploring and analyzing individual entrepreneurship, there are several indisputable advantages:
- high adaptation to local market conditions;
- wide opportunities in the implementation of business ideas;
- fairly low costs of managing and conducting business;
- simplified accounting;
- concentration of profits in the same hands;
- a higher rate of capital turnover;
- the ability to operate with relatively small capital;
- high ability to make changes in goods and services, adapting to the needs of the market.
Well, as without flaws
Of course, like any other type of business, individual entrepreneurship cannot consist only of advantages. The disadvantages of this form of doing business include:
- high level of risk, unsustainable market position;
- high probability of inadequate management 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, property liability also applies to the personal property of the owner.
Nevertheless, the individual form of entrepreneurship is becoming increasingly popular and in demand.