Are you going to start a business and do not know what to register and how to work: individual entrepreneur or LLC? An individual entrepreneur is an individual who has the right to engage in entrepreneurial activity.
A limited liability company, LLC, is a company founded by one or more legal entities or individuals and has a share capital. If you opt for an LLC, then you should look for the Best LLC Services that will help you set up this type of business model. Each of these models has its own advantages and disadvantages. Let’s have a look at them.
Pros of a Limited Liability Company (LLC)
Responsibility Within the Authorized Capital
Unlike an individual entrepreneur, the founders of a legal entity are liable only within the framework of the authorized capital. After liquidation, the obligations are terminated at least in part of the debts.
Investments and Loans
Investors consider legal entities more attractive for investments than individual entrepreneurs. In addition to reliability, transparent financial reporting, additional obligations can be prescribed in the Charter by making investors co-founders. And for banks, when lending, the LLC itself can act as collateral.
For many potential partner companies, working with an LLC is the only possible form of cooperation. This is especially true of state-owned companies: they only work with organizations.
Cons of an LLC
- Substantial fines. Organizations usually have higher fines.
- An LLC must take into account any equipment in the authorized capital.
- Accountability for employees
- Maintenance of accounting
- Liquidation of a Limited Liability Company is a complicated and often expensive process
Pros of an Individual Entrepreneur
Conveniently Manage Money
An individual entrepreneur can withdraw income and dispose of it as he wants without reporting to the state and paying an additional tax.
An entrepreneur maintains a simpler accounting record than an LLC, which significantly simplifies business for a manager.
No Reporting for Equipment
An individual entrepreneur should not be accountable for the equipment used, in contrast to an LLC, which is obliged to contribute it to the authorized capital.
Cons of an Individual Entrepreneur
- An individual entrepreneur as an individual is indeed responsible for the obligations of his property.
- Not solid
- Cannot be sold or reissued
- Activity restrictions
- Mandatory contributions
- Lower chances of acquiring a loan from lenders.
As you can see, there is a significant difference between an individual entrepreneur and an LLC. You should compare the pros and cons to choose a suitable model for your business.