Often mistakes are made when concluding an agreement with individual entrepreneurs. Namely, in the header of the document, where you need to indicate on what basis the individual entrepreneur acts: either they indicate that the individual entrepreneur acts on the basis of the charter, or they do not indicate the status of the entrepreneur. In both cases this is an error. In the first - because the entrepreneur does not have a charter. In the second, the tax authorities can decide that the entrepreneur is acting as an individual and fine the company for failure to pay personal income tax on payments under the contract.
In addition, the wording in the agreement on the basis on which the individual entrepreneur operates will depend on the date of registration of the individual as an entrepreneur, and on who exactly enters into the contract. We'll tell you how to correctly compose a document.
IP status
The status of an individual entrepreneur is the right given to a citizen (or a foreigner, or a stateless person, in general, an individual) by the state to legally engage in business activities, make a profit, at his own peril and risk, and, most importantly, to pay taxes on this (in fact, the status is for this and there is).
The status of an individual entrepreneur is recorded in the Certificate issued to him upon registration in the Unified State Register of Individual Entrepreneurs (USRIP). In fact, he is given a certain number under which he is in this register.
If the individual entrepreneur hired a director
By law, any entrepreneur can hire a director and entrust him with part of his affairs. But in order for him to be able to conclude contracts and carry out other actions in the interests of the individual entrepreneur, it is necessary to draw up and notarize a general power of attorney.
The director, unlike the individual entrepreneur, must indicate in the contract on what basis he is acting . Example wording: “Director Khryakin Mikhail Zuevich, acting in the interests of an individual entrepreneur on the basis of power of attorney No. 777/77 dated 12/15/17...”.
Even if the director signs the agreement instead of a private entrepreneur, he does not bear any responsibility under it. The business entity itself will be responsible for unfulfilled obligations and other omissions.
There is something else you need to know: even if an entrepreneur works independently, he is not a director. An individual holding the position of director, even in his own company and for personal interests, must pay additional contributions to pension, medical and social insurance.
On what basis does the IP operate?
An individual entrepreneur acts on the basis of the status given to him by the state. The basis for assigning this status will be the document on the basis of which it acts. This is a Certificate of state registration as an individual entrepreneur. But - only those issued before January 1, 2017. From this date, the Certificate is not issued, according to Order of the Federal Tax Service of Russia dated September 12, 2016 N ММВ-7-14 / [email protected] Instead, a Record Sheet in the Unified State Register of Individual Entrepreneurs is issued, which is the basis for the activities of the individual entrepreneur.
If it is lost, you can obtain from the territorial inspection a Notification of registration as an individual entrepreneur:
Results
So, when concluding contracts, an individual entrepreneur, unlike a representative of a legal entity, acts on his own behalf, therefore, it is not necessary to draw up documents allowing him to represent the interests of his own business.
A power of attorney will have to be prepared only if a third party representing his interests acts on behalf of the individual entrepreneur. The individual entrepreneur does not have statutory documents, so their presence is not necessary to successfully conclude an agreement with the counterparty. The documents presented to the future partner do not have the status of statutory documents, but at the same time they confirm the right of the businessman to enter into contracts as an individual entrepreneur. You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.
Constituent documents of an individual entrepreneur
As such, individual entrepreneurs do not have constituent documents, since only legal entities have them. There are a number of documents that are mistakenly considered constituent documents, although they can be called registration or corporate:
OGRNIP
As already mentioned, the Certificate of assignment of OGRNIP (state registration as an individual entrepreneur) is not issued from January 1, 2021. OGRNIP can be found from the Record Sheet, or from the Unified State Register of Individual Entrepreneurs.
Technically, OGRNIP is a unique (at least it should be) 15-digit number containing the subject code, tax number, serial number and checksum.
TIN
The TIN can also be found from the Record Sheet, or from the Certificate, if the individual received the TIN before registration. This is a 13-digit number, similar in logic to OGRNIP.
Extract from the Unified State Register of Individual Entrepreneurs
At the moment, the practice is that only an extract from the Unified State Register of Individual Entrepreneurs is sufficient as a basis for confirming the activities of an individual entrepreneur. Or the Record Sheet, which is essentially the same thing.
In the same way, it is not a constituent document, but rather a legal document, like all those listed above.
How to enter into an agreement as an individual entrepreneur
It is also worth mentioning what kind of agreements an individual entrepreneur must conclude in order for them to be recognized. These include agreements for the provision of services, contracts, leases, and purchase and sale. An individual entrepreneur enters into contracts with other individual entrepreneurs, with LLCs or individuals, and the individual entrepreneur has the right to act as both a customer and a contractor.
Draw up any agreement for free using a special agreement designer from ConsultantPlus.
Drawing up an agreement with an individual entrepreneur
Here we come to the issue of correct execution of the contract. There are several opinions, we will try to highlight them:
- Indicate “Individual Full Name, acting on the basis of state registration dated [date], OGRNIP number ________________.” Here, in our opinion, the basis for the activities of an individual entrepreneur and its difference from a simple individual are most correctly reflected.
- Indicate “Individual Full Name, acting on his own behalf.” In any case, at the end of the contract its full details will be given. Disadvantages - a number of counterparties may refuse to accept this form. But to avoid overloading the contract, this is possible.
- You can simply “IP Full Name, OGRN ____________”. The text is even less overloaded, but all the distinctive features are there, although some counterparties may again object. But they can also require a checkpoint for individual entrepreneurs.
How to conclude contracts
As soon as the individual entrepreneur is registered and collects the necessary package of documents, he has the right to begin concluding transactions and executing contracts with counterparties. The role of the latter can be played by both organizations and other individual entrepreneurs.
An agreement between two parties may relate to the supply of goods, provision of services or performance of work and must contain all the details of the two parties, as well as disclose the main points that may arise in the course of fulfilling obligations:
- a detailed description of the essence of the agreement;
- question and payment procedure;
- liability of the parties for failure to fulfill obligations.
It is better to sign important contracts after consultation with a lawyer who will evaluate the document on a professional level and point out all its shortcomings and pitfalls that an individual entrepreneur may stumble upon in the event of unforeseen circumstances.
Is an individual entrepreneur a bearer of rights and obligations that are not typical for an individual?
An individual entrepreneur is a unique legal entity that has the characteristics of both an individual and a legal entity. However, an individual entrepreneur is not a legal entity and, accordingly, does not have all the characteristics inherent in organizations. Next, we will analyze the differences between the status of an individual entrepreneur and the status of a legal entity, and now we will consider in more detail the features of legal entities that are also characteristic of individual entrepreneurs.
Common features of individual entrepreneurs and legal entities are:
- the obligation to pay tax payments and insurance premiums (for oneself, and if there are employees, for them);
- obligation to keep records and submit current reports;
- the right to employ workers as an employer;
- the right to create a seal to confirm the originality of documents.
Entity
Entity:
- This is an organization that is registered, has the right to do business and has certain property.
- Has its own separate name and registration address (the registration address cannot be the business registration address)
- Bears separate responsibility.
- Required to keep accounting records, submit reports to the Federal Tax Service, as well as other funds.
- Has the right to obtain certain business licenses that are not available to individual entrepreneurs.
- Must have a stamp and bank account.
What is important is that a legal entity operates in the form of a certain team, in which there are managers and subordinates (each has their own responsibilities and rights).
Upon registration, the organizers of a legal entity invest part of the authorized capital into the “common piggy bank” of the business.
Pros and cons of IP
Advantages of IP:
- Easy registration
- Complete management of your income
- Simple reporting
- Office, seal and current account are not required
- Fines are less than for a legal entity
Disadvantages of IP:
- Personal property liability
- Some activities are prohibited
- A biased attitude on the part of large companies that will refuse to work with you because they do not trust small individual entrepreneurs.
- You will still have to pay to the Pension Fund. Even if you don't do anything.
Differences between an individual entrepreneur and a legal entity
As we have already found out, the statement that an individual entrepreneur is a legal entity is not true. In addition, there are other differences between the considered organizational and legal forms of running one’s own business, which only confirm the fact that it is unacceptable to equate an individual entrepreneur with a legal entity:
- Legal entities do not have the right to use certain special tax regimes (for example, an individual entrepreneur can operate on the basis of a patent, but a legal entity cannot).
- Obligation to pay insurance premiums. The legal entity pays only for those employees who were employed during the reporting period. The individual entrepreneur pays contributions for himself even when no business activity was carried out and there was no income.
- The presence of restrictions on certain types of activities. For example, an individual entrepreneur cannot sell strong alcohol, while legal entities can work in any direction provided they have a license (if required by the legislator).
- Restriction on the circulation of funds. The founder of a legal entity cannot freely use the company’s money; it is impossible to withdraw funds from the organization’s account for personal needs. At the same time, he has the right to dispose of profits, for example through dividends. There are no such restrictions for individual entrepreneurs - he can withdraw the required amount from circulation at any time and spend it at his own discretion.
- Possibility of selling a business. An individual entrepreneur cannot do this - the business will have to be officially closed, and the property that was used for the business will have to be sold to another person - an ordinary citizen, or a person who has registered a business, or who plans to do so in the future. A legal entity can be sold without closing it - it is enough to document the replacement of its founders.
Sample filling
To correctly fill out the document, the easiest way is to use a standard agreement as a template. A sample can be easily found online. It is best if it is dated 2021, as outdated forms may not take into account recent changes in the law.
Important! If the contract provides for the conclusion of a particularly important transaction, you can hire a professional lawyer who will fill out the document taking into account all the nuances.
DOC file
What IP details should I provide?
There is no single form for how to indicate an individual entrepreneur in a contract, so some entrepreneurs take LLC documents as a model, and then a problem arises in drawing up the preamble of the document.
In fact, it is not necessary to fully indicate in the header of the form the basis on which the contract is concluded; this information is indicated in the details of the parties. Here the individual entrepreneur must enter his full name, registration address, TIN, OGRNIP or data from the Unified State Register of Individual Entrepreneurs. Additionally, if available, bank details, telephone number and email, OKVED numbers are indicated. Then another question arises: in what form does an individual entrepreneur write about himself in the contract? In the status of an individual entrepreneur, a citizen exercises his own rights independently, and to mention that he acts “on behalf of someone” is not entirely correct. It would be more correct to write: “individual entrepreneur Ivan Ivanovich Ivanov, acting on the basis of a certificate,” etc. The construction “in person” is used when a transaction by proxy is concluded by your representative.
To understand how to register an individual entrepreneur in a contract, rely on a standard template, which is drawn up as follows:
- preamble: the number and name of the agreement, date and place, parties involved are indicated;
- subject of the agreement: the essence of the contract, its subject, and the intentions of the parties are clearly stated;
- mutual rights and obligations of participants;
- amount and payment procedure, bank details;
- validity periods;
- the procedure for the validity of the contract, the procedure for its termination, force majeure circumstances, controversial issues.
