REGISTRATION OF THE NATURAL PERSON OF THE ENTREPRENEUR. ADVANTAGES OF THE INDIVIDUAL OF THE ENTREPRENEUR AND THE MAIN DISADVANTAGES

 Individuals wishing to conduct business (trade, services, etc.) without forming a separate legal entity may carry out such activities by registering as a private entrepreneur. The form of business is easy to register and maintain and, in addition, can offer good tax savings through a simplified tax regime for such a structure.

 The key disadvantage is the lack of limited liability, as in this case the individual is personally liable for any business obligations. Therefore, doing business through a private entrepreneurial structure makes sense only when this type of business does not carry any serious risks.

 Most Ukrainian freelancers are registered as private entrepreneurs. In addition, in Ukraine, the private entrepreneur is also a widespread alternative to employment, as the amount of taxes accrued on the income of a private entrepreneur (due to the simplified tax regime) is much lower than the amount of taxes accrued on employees' salaries.

 This article contains information about the advantages and disadvantages of using such a business structure by individuals, an overview of the rules of registration, taxation and current compliance procedures for private entrepreneurs

 Individuals in Ukraine who engage in entrepreneurial activity with minimal risk may find the type of business registration of a private entrepreneur (hereinafter - PE) a good option for their simple needs. This form of business structure is easy to register and maintain and, in addition, can offer significant tax savings due to the simplified tax regime available to such a structure subject to personal income tax conditions. For these reasons, registering a private entrepreneur is a popular option for Ukrainian freelancers and can be a good alternative to employment with Ukrainian companies, as described later in the following sections of this article.

 It should be noted that both citizens of Ukraine and foreign individuals can be registered as private entrepreneurs in Ukraine, as well as use the simplified tax regime (under the personal conditions described below in the section on tax regime). To register as a private entrepreneur, a foreign individual must obtain a tax number and provide information about the address in Ukraine (however, for the registration of PE by foreign nationals, a residence permit and address registration are not required).

 However, foreign nationals who would like to work as a sole proprietor in Ukraine should consider the following:

• registration as a PE cannot be used as a basis for obtaining a temporary residence permit in Ukraine;
• according to the Tax Code of Ukraine, if a foreign citizen is registered as a private individual, he becomes a tax resident of Ukraine;
• according to the banking legislation of Ukraine, if a foreign citizen registers as a private individual, he will be subject to the same banking rules as citizens of Ukraine.

 Key feature

Only an individual (not a legal entity) can register as a private entrepreneur. Registration is carried out in the state register of legal entities, individual entrepreneurs and public associations (hereinafter - the Register of Companies).

The owner personally bears full personal responsibility for all business risks.

A business entity of a private entrepreneur may open bank accounts, carry out business activities and hire employees.

In case of insolvency, the PE may be declared bankrupt (as well as a legal entity);

If the annual income of a private entrepreneur does not exceed UAH 7 million, he can use the so-called "simplified tax regime" (for more information on delays, see the tax regime section below).

 According to Ukrainian law, all property acquired in marriage is the joint property of the spouses. Disposal of joint property may be carried out only by mutual consent of both parties. Since the property of a private entrepreneur is equated to the property of a natural person, it will be necessary for the sole proprietor to make sure that the owner has obtained the consent of his / her spouse to dispose of such property.

Key FOP advantage

 The business structure of a private entrepreneur has the following sole proprietorship advantages of a sole proprietor over a legal entity such as the Ukrainian Limited Liability Company:

• easier to register;
• easier to maintain;
• less expensive;
• offers attractive tax savings through a simplified tax regime.

The main disadvantages

• The owner personally assumes all debts and obligations related to the business activities of the PE.
• The sports business does not have a permanent existence. He lives or dies with his master.
• Your business will have a weak perception among customers, suppliers, bankers and employees.
• Selling such a business will not be easy.

 Given all the above, although the private entrepreneurial form of doing business is an excellent choice for individuals who carry out minimally risky business activities (IT professionals, etc.), this structure is not a suitable choice for companies and startups that plan to grow large or have higher business risks and contingent liabilities.

Confirmation of registration

 After successful registration of the PE, you can get an extract from the Register of Companies confirming the registration of the PE (through the Registration Portal, as mentioned above). If necessary, you will also receive a paper copy of this document. When registering a PE, the registrar of companies will notify the tax and sole proprietorship authorities of Ukraine. In the future, you and your business partners, as well as all other third parties can access information about the PE in the register of companies at: usr.minjust.gov.ua/ua/freesearch (you can search by name or tax number of the PE). The register of companies contains complete information about the state of emergency (ie information that was specified in the application for registration), such as the legal address of the state of emergency, contact details of business activities, etc. Some information will also be entered in the register of companies. decisions, etc. (For example, information on the state registration of PE by tax authorities, court decisions on the termination of business activities of PE, insolvency proceedings, etc.).

Control checklist after registration

≡ Tasks to be performed after the registration of a private entrepreneur

 After the successful registration of the PP, the following is a list of typical post-registration tasks that you should study:

ᐉ The seal is not mandatory in accordance with the current legislation of Ukraine, respectively, the PE can choose whether to use the seal or not, at its discretion. Currently, no special permits are required for printing. To order printing, specialized companies-manufacturers of seals will require a copy of the statement of registration of the software (or access code).

ᐉ Registration of sole proprietors in the tax authorities is carried out automatically when the sole proprietorship is registered in the register of companies and does not require the sole proprietor to submit any additional applications to the tax authorities. After completing such registration with the tax authorities, you can see the corresponding entry in the register of companies and an extract from the Register of Companies. Appendix B:

If a PE plans to become a VAT payer, it must submit a VAT payer's application to the tax authorities (if such an application has not already been submitted as part of the registration of the PE in the company register).

If the PE wishes to use the simplified tax regime, it must submit to the tax authorities an application of a single tax payer (if such an application has not been previously submitted within the registration of the PE in the register of companies).

ᐉ Private individual registration of social security tax does not need to submit any notifications to the tax authorities as a payer of social security tax (as this is done automatically when registering in the register of companies). However, if the PE employs an employee, the PE must notify the state tax authorities responsible for administering the social security tax no later than 1 day before the sole proprietorship on the second working day of each employee.

ᐉ Opening a bank account To open a bank account of a private entrepreneur you will need to submit a number of documents, including:

documents confirming the authority of the representative of the PE (ie the person who applies for a bank account), his passport and tax number;

signature card (certified by a bank official in the presence of all signatories);

copies of passports, tax numbers and documents confirming the authority of the persons indicated in the signature card;

 in addition, you will need to fill out and sign an application for opening an account, a questionnaire and other documents at the request of the bank.

≡ Taxation of a private entrepreneur

FOP can choose one of the following two tax schemes:

 Standard Tax Scheme. Under this scheme, standard taxes and tax rates on business income are applied. Such taxes include income tax, military tax, value added tax, etc.

 Simplified Taxation Scheme. Under this scheme, the PE pays a single tax (instead of different types of taxes), the rate of which depends on the amount of income, type of business and number of employees. A single tax rate is well below the standard tax rate and can lead to excellent tax savings. However, in order to qualify for a simplified taxation scheme, a PE must meet certain conditions.

≡ Results

 A private entrepreneur is a good option for self-employed professionals and small businesses who want to enjoy a preferential tax regime, a simplified reporting procedure and are engaged in non-risky business activities. This form of business registration is very popular in Ukraine among self-employed people and freelancers, such as IT professionals.

 Currently in Ukraine, many companies that hire highly paid professionals tend to enter into public service contracts instead of employment contracts. This allows you to significantly reduce the tax burden on employees' incomes, as personal income tax rates are much lower than those charged on the employee's salary.