How Do I Decide Between a Sole Proprietorship or Corporation?

A sole proprietorship refers to an enterprise invested and operated by one person. Sole proprietorship investors have unlimited liability for corporate debt. The person in charge of the enterprise is the investor himself. The name of the person in charge of the business must match the ID card, and no alias can be used. In accordance with the relevant provisions of China's current tax law, the production and operation income and other income obtained by privately-owned enterprises shall be subject to the payment of private personal income tax in accordance with the regulations. ^[1]

A sole proprietorship refers to an enterprise invested and operated by one person. Sole proprietorship investors have unlimited liability for corporate debt. The person in charge of the enterprise is the investor himself. The name of the person in charge of the business must match the ID card, and no alias can be used. In accordance with the relevant provisions of China's current tax law, the production and operation income and other income obtained by privately-owned enterprises shall be subject to the payment of private personal income tax in accordance with the regulations. ^[1]

A sole proprietorship refers to an enterprise that is funded by individuals, owned and controlled by individuals, who bear the business risks and enjoy the full operating income.

(1) The procedures for the establishment and dissolution of enterprises are simple.

(2) Flexible management.

Business management of sole proprietorship:

Investors can manage corporate affairs by themselves, or they can entrust or hire others to take charge of corporate affairs management.

1.Internal restrictions (restrictions of investors on the authority of the trustee)

(1)

Dissolution and liquidation of a sole proprietorship:

Cause of dissolution

(1) The investor decides to dissolve;

(2) The investor dies or is declared dead, and no heir or heir decides to abandon inheritance;

(3) The business license is revoked according to law;

(4) Other circumstances required by law.

Liquidator

Investors may liquidate by themselves or the creditors apply to the people's court to designate a liquidator for liquidation.

3.Declaration period of claims

Creditors shall, within 30 days of receiving the notice, and creditors who have not received the notice shall declare their claims to investors within "60 days" from the date of announcement.

4. Order of settlement of property

(1) Wages owed by employees and social insurance costs;

(2) taxes owed;

(3) Other debts.

If the property of a sole proprietorship is not enough to pay off the debt, the investor shall pay off with his other personal property.

5. Deregister

After the liquidation of a wholly-owned enterprise is completed, the investor or the liquidator designated by the people's court shall prepare a liquidation report and complete the cancellation of registration with the original registration authority within 15 days from the date of completion of the liquidation.

6. After the dissolution of the sole proprietorship, the original investor shall still be liable for repayment of the debts of the sole proprietorship during the existence of the sole proprietorship, but if the creditor fails to make a claim to the debtor within "5 years", the liability shall be eliminated.

1. Advantages of sole proprietorship

Sole proprietorship is

(1)

Documents submitted for application for establishment

(1) An application for the establishment of a sole proprietorship signed by the investor;

(2) Identification of the investor;

(3) Certificate of domicile of the enterprise;

(4) Other documents required by the State Administration for Industry and Commerce.

Those engaging in the business required by laws and administrative regulations to report to the relevant departments for approval shall submit the approval documents of the relevant departments.

When an agent is entrusted to apply for registration, the investor's power of attorney and the agent's identity certificate or qualification certificate shall be submitted. ^[2]

A sole proprietorship enterprise shall be dissolved under any of the following circumstances:

(1) the investor decides to dissolve;

(2) if the investor dies or is declared dead, no heir or heir decides to abandon inheritance;

(3) The business license has been revoked according to law;

(4) Other circumstances stipulated by laws and administrative regulations.

If a sole proprietorship is dissolved in accordance with Article 26 of the Sole Proprietorship Law, the investor or liquidator shall apply to the original registration authority for cancellation of registration within 15 days from the date of completion of the liquidation.

Wholly-owned enterprises applying for cancellation of registration shall submit the following documents to the registration authority:

(1) An application for cancellation of registration signed by the investor or liquidator;

(2) The liquidation report signed by the investor or liquidator;

(3) Other documents required by the State Administration for Industry and Commerce.

A sole proprietorship enterprise shall return the business license and official seal when completing the cancellation registration. ^[2]

Mainly check whether the name and business place used by the sole proprietorship are consistent with the approved business name and business place; whether the business is carried out in accordance with the approved business scope and method; whether the investor's name, address, investment amount, and investment method have changed; whether Increase or decrease of branches; whether the registration items have changed, whether there are leases, alterations, lending, transfer of business licenses, and other matters that should be reviewed. The annual inspection report and all relevant materials submitted are complete, authentic, legal, and valid, and comply with legal requirements.

time requirement:

Individually-owned enterprises should submit annual inspection materials to the registration authority before March 15 of each year. The annual inspection time is from January 1 to April 30 each year.

Documents to be submitted for the sole inspection of a sole proprietorship

1. Annual inspection report

2. Copy of business license

3. Other documents required by the State Administration for Industry and Commerce ^[2]

A sole proprietorship enterprise does not pay corporate income tax in accordance with the current tax law, and pays an individual income tax at an excess progressive tax rate of 5 to 35 percent (the tax rate table is attached).

Taxable income = sales income for the current month (period) * income rate = 160220.09 * 5% = 8011 yuan taxable amount = taxable income * applicable tax rate-quick calculation deductions.

The concentrated expression of the legal status of a wholly-owned enterprise is that it does not have independent legal personality and does not have legal personality, which is typical

Similarities between sole proprietorships and individual businesses

First, the investment entities of the two are basically the same. The investment subject of the two can only be a natural person (citizen), not a legal person or other organization. Second, sole proprietorship enterprises and individual industrial and commercial households implement a declaration system for the invested assets, and do not need to undergo capital verification by a statutory capital verification agency. Since both bear unlimited liability, the actual payment of the in-kind, industrial property rights, non-patented technology and land use rights as capital contributions is also not emphasized.

Third, both bear the same form of legal liability, and both must assume unlimited liability with personal or family property. If it is divided by capital contribution, individual industrial and commercial households can be divided into two forms: individual business and family business; and sole proprietorships can also be divided into individual proprietorships invested by personal property and sole proprietorships invested by family property. In terms of liability, the sole proprietorship or individual industrial and commercial households that have invested in personal property bear unlimited liability with personal property. Individually-owned enterprises or individual industrial and commercial households that invest in family property all bear unlimited liability with family property.

Fourth, as an economic organization, a sole proprietorship and an individual business must have the necessary funds, places, employees, and production and operating conditions. This is also a necessary condition for individual industrial and commercial households and sole proprietorship enterprises to enter the market as market entities.

In addition, sole proprietorship enterprises and individual industrial and commercial enterprises also have many similarities in terms of trademark use subjects and advertising strategies.

The difference between a sole proprietorship and an individual business

First, a sole proprietorship must have a fixed place of production and operation and a legal name of the enterprise. Individual industrial and commercial households can not afford a name, or they can operate without a fixed place of production and operation. In other words, a legitimate business name and a fixed place of production and operation are the requirements for the establishment of a sole proprietorship, but not the requirements for the establishment of an individual business.

Second, the investors and operators of individual industrial and commercial households are the same person, and must be natural persons who invest in the establishment of individual industrial and commercial households. The investor and operator of a sole proprietorship enterprise may be different persons, and the investor may entrust or hire others to manage the affairs of the sole proprietorship enterprise. In other words, the sole proprietorship of an individual proprietorship can be separated from the management right, which determines that the sole proprietorship is more in line with the characteristics of a modern enterprise system. However, the ownership and operation rights of individual industrial and commercial households are integrated with investors, and they can no longer meet the requirements of the development of modern enterprise systems, so it can only be applied to small-scale business entities.

Third, a sole proprietorship enterprise may set up branches or appoint others as the person in charge of the sole proprietorship branch. This stipulation shows that a sole proprietorship enterprise can not only establish a branch office within the jurisdiction of the registration management organ, but also establish a branch office in a different place, and the sole proprietorship enterprise establishing the branch office shall bear the responsibility. And individual industrial and commercial households cannot establish branches according to regulations. On the other hand, although individual industrial and commercial households can operate in different locations, as localities have simplified the registration procedures for foreign personnel in recent years, the regulation of individual industrial and commercial households' off-site operations has gradually diminished. It can be seen that the overall size of a sole proprietorship is generally larger than that of an individual business.

Fourth, the legal status of individual sole proprietorships and individual industrial and commercial households are different. In the civil, administrative, and economic legal systems, a sole proprietorship is a form of other organizations or other economic organizations that can carry out legal activities in the name of the enterprise itself. Whether individual businessmen can be used as a form of other organizations or other economic organizations has been the subject of debate among domestic civil jurists. In daily legal activities, the legal capacity of individual industrial and commercial households is often limited to a certain extent. More often, individual industrial and commercial households carry out legal activities in the name of individual citizens. In fact, many domestic legal experts have suggested that individual industrial and commercial households are not enterprises in the legal sense. In addition, sole proprietorship enterprises and individual industrial and commercial businesses have different abilities as market players to participate in other activities in the market economy. For example, sole proprietorship enterprises can become shareholders of the company, thereby enjoying the rights and obligations of the company's shareholders in the name of the enterprise. As a company shareholder in the name of an enterprise, it can only become a company shareholder as an individual investor (natural person).

Fifth, the requirements for the financial system and taxation policies of individual-owned enterprises and individual industrial and commercial households are different. In fact, this is also a concern for investors. According to the "Personal Sole Proprietorship Law", a sole proprietorship enterprise must establish a financial system for accounting purposes. It is worth mentioning that the financial system of a sole proprietorship is a necessary condition for a sole proprietorship and is not changed by the requirements of any department. However, due to the complex situation of individual industrial and commercial households, there are many disputes over whether to establish an accounting system, and only the principles are stipulated in the new Accounting Law to be implemented. According to the law enforcement situation, individual industrial and commercial households can establish account books in accordance with the requirements of the tax authorities. If the tax authorities do not require them, they may not perform accounting. In addition, in terms of tax policy, since China's tax legal system is a relatively independent system, there is no unified connection between it and the market legal system. The taxation department determines that the standard for general taxpayers and small-scale taxpayers is not divided according to the different positions of enterprises in the market. Generally speaking, it is more difficult for individual industrial and commercial households to be identified as general taxpayers, while sole proprietorships can be identified as general taxpayers if they meet the conditions. How to organically combine the legislation of the market subject and the tax legislation is an issue worth exploring in the future to improve the legal system of the socialist market economy.