December 24, 2013 at 04:03When to register a startup?
Greetings to the venerable Hawkers! The first problem that a novice entrepreneur in Russia faces is total bureaucracy and the confusion of relations between the state and business. As a result, a paradoxical situation arises when the issue of the period of state registration of an enterprise is no less important than the technical details of the project. Under the cut, I will talk about the stages of startup development in terms of the feasibility of registering a business.
We began to solve the issue of registration as a legal entity one of the first, since the logical desire was to work officially from the very first days, carrying out the movement of funds through accounting. Creating a legal entity is not a problem at the moment and we were already halfway to the goal when, literally a few days before paying the state fee, we again asked ourselves the main question of the entrepreneur: “Why?”. Asked not by chance. At the last moment, it turned out that we would not be able to receive financing in full, and therefore we had to urgently delete all minor expenses. This was a good lesson for us. If our former logic was based on the concepts of “right-wrong” and “good-bad”, then after a financial failure we began to be guided by the principles of profitability of any investment. As it turned out,
Any commercial activity involves expenses not only on the production and sale of products, but also on providing the necessary conditions for this. Startups at the beginning of their journey have a long time to work on their own project in the most severe financial constraints, when every penny is invested exclusively in the project itself. Is it profitable to register your business at this time? Let’s throw away emotions and consider the costs of working as a legal entity (here you can, with reservations, add IP) and an illegal entrepreneur.
Activities as a legal entity, involves costs that can be divided into three categories:
1. One-time costs when creating a legal entity. They usually make up 10-15 thousand rubles. This is the smallest cost category.
2. Periodic expenses for the maintenance of the account, accountant, lease of legal address, cash register equipment, etc. Tax payments may also be included here. The minimum monthly amount fluctuates around several thousand.
3. The cost of paying fines and penalties. The same category includes bribes and kickbacks. This expense item is often forgotten, many believe that they will be able to conduct business without violations and the corresponding consequences. In reality, this rarely succeeds even with initially honest intentions.
But what about individuals? In illegal business activities, the first two points are completely absent, but as a counterbalance, the prospect of administrative and criminal liability is added.
Thus, the best time to register your own business comes at a time when the amount of potential costs of fines and bribes, multiplied by the probability of being caught exceeds the amount of one-time, regular and penal (multiplied by the probability of occurrence) contributions to the state.
The history of any startup from the point of view of the feasibility of registering a business can be divided into three stages: from the idea to the return of invested funds, from the return of invested funds to an income of 1.5 million rubles, and from 1.5 million rubles to happy infinity. Consider each of the steps.
Indeed, what is "entrepreneurship"? The Civil Code of the Russian Federation gives a completely monosyllabic answer to this. “Entrepreneurship is an independent activity carried out at your own risk, aimed at the systematic receipt of profits from the use of property, the sale of goods, and the performance of services.” Pay attention to the words "systematic" and "profit." The fact that you were able to sell your development once does not make you an entrepreneur. Monthly sales of a million rubles also do not make you an entrepreneur, if the cost of production is one million rubles and one penny.
This, by the way, is a good reason to keep strict bookkeeping always, regardless of your state registration. In the event that you are accused of illegal business activities, the saved documentary evidence of expenses will play you a good service.
Therefore, any activity, at the stage “from an idea to receiving the first money” is not entrepreneurial and it is not necessary to register it. The meaning of registration appears only after the project begins to generate regular income, and even then, such registration is needed only to increase customer confidence and the absence of reasons to initiate an article on an administrative offense.
If you register the company at the idea stage, then spend extra money, which will then fall into the price of your product. And if you yourself lower the competitiveness of your products, then I'm sorry, you are not an entrepreneur.
So, here your project has already come back, returned the funds you invested. You are pleased to note that every month you already have money left, but your income does not exceed 1.5 million rubles. Should I register my business now?
In the absence of registration, according to Part 1 of Art. 14.1 of the Code of Administrative Offenses of the Russian Federation, you will be required to pay from 500 to 2000 rubles after each inspection of the police, tax, FAS, Rospotrebnadzor and prosecutor’s inspection. If the justice of the peace does not have time to consider your case within three months, you are completely relieved of liability (the judge will make a decision to terminate the proceedings on the case of an administrative offense).
Tax sanctions are significantly higher (Articles 116.117 of the Tax Code of the Russian Federation): a fine of 20 percent of the income received, but not less than 40 thousand rubles, or a fine of 10 000 rubles for violation of the registration deadline for inspection (if the activity was conducted less than three months, the fine is halved). In addition to the fine, inspectors have the right to re-assess unpaid taxes, as well as to oblige to pay a fine for their late payment.
As you can see, registering your own company is most beneficial at the beginning of this stage or shortly before it. The funds that you spend on registration are substantially less than the amount that you may be charged in the form of a fine.
If your income is between 1.5 million rubles. up to 6 million rubles. and you still have not registered your company, then, according to Art. 171 of the Criminal Code of the Russian Federation, you run the risk of “a fine of up to 300 thousand rubles. or in the amount of the convict’s salary (other income) for a period of up to two years, or compulsory work for a period of 180 to 240 hours, or arrest for a period of four to six months. ”
For incomes exceeding a million, a “fine of 100 to 500 thousand rubles. or in the amount of the convicted person’s salary (other income) for a period of one to three years, or imprisonment for up to five years with a fine of up to 80 thousand rubles. or in the amount of the convict’s salary (other income) for a period of up to six months. ”
In other words, if your project allowed you to earn more than a quarter of a million and you still have not bothered to register your own business, then you are a very risky person. However, in practice it is quite difficult to prove your guilt, most often such cases are discovered during the investigation of cases of money laundering. Moreover, if you are being brought to criminal liability for the first time, your neighbors and work colleagues respond positively to you, then, most likely, you will be awarded only a fine.
PS All the numbers indicated depend on the current version of the laws and may change when approving new versions
What is “good” and what is “profitable”
We began to solve the issue of registration as a legal entity one of the first, since the logical desire was to work officially from the very first days, carrying out the movement of funds through accounting. Creating a legal entity is not a problem at the moment and we were already halfway to the goal when, literally a few days before paying the state fee, we again asked ourselves the main question of the entrepreneur: “Why?”. Asked not by chance. At the last moment, it turned out that we would not be able to receive financing in full, and therefore we had to urgently delete all minor expenses. This was a good lesson for us. If our former logic was based on the concepts of “right-wrong” and “good-bad”, then after a financial failure we began to be guided by the principles of profitability of any investment. As it turned out,
Issue price
Any commercial activity involves expenses not only on the production and sale of products, but also on providing the necessary conditions for this. Startups at the beginning of their journey have a long time to work on their own project in the most severe financial constraints, when every penny is invested exclusively in the project itself. Is it profitable to register your business at this time? Let’s throw away emotions and consider the costs of working as a legal entity (here you can, with reservations, add IP) and an illegal entrepreneur.
Activities as a legal entity, involves costs that can be divided into three categories:
1. One-time costs when creating a legal entity. They usually make up 10-15 thousand rubles. This is the smallest cost category.
2. Periodic expenses for the maintenance of the account, accountant, lease of legal address, cash register equipment, etc. Tax payments may also be included here. The minimum monthly amount fluctuates around several thousand.
3. The cost of paying fines and penalties. The same category includes bribes and kickbacks. This expense item is often forgotten, many believe that they will be able to conduct business without violations and the corresponding consequences. In reality, this rarely succeeds even with initially honest intentions.
But what about individuals? In illegal business activities, the first two points are completely absent, but as a counterbalance, the prospect of administrative and criminal liability is added.
Thus, the best time to register your own business comes at a time when the amount of potential costs of fines and bribes, multiplied by the probability of being caught exceeds the amount of one-time, regular and penal (multiplied by the probability of occurrence) contributions to the state.
The history of any startup from the point of view of the feasibility of registering a business can be divided into three stages: from the idea to the return of invested funds, from the return of invested funds to an income of 1.5 million rubles, and from 1.5 million rubles to happy infinity. Consider each of the steps.
Stage 1. You are not an entrepreneur
Indeed, what is "entrepreneurship"? The Civil Code of the Russian Federation gives a completely monosyllabic answer to this. “Entrepreneurship is an independent activity carried out at your own risk, aimed at the systematic receipt of profits from the use of property, the sale of goods, and the performance of services.” Pay attention to the words "systematic" and "profit." The fact that you were able to sell your development once does not make you an entrepreneur. Monthly sales of a million rubles also do not make you an entrepreneur, if the cost of production is one million rubles and one penny.
This, by the way, is a good reason to keep strict bookkeeping always, regardless of your state registration. In the event that you are accused of illegal business activities, the saved documentary evidence of expenses will play you a good service.
Therefore, any activity, at the stage “from an idea to receiving the first money” is not entrepreneurial and it is not necessary to register it. The meaning of registration appears only after the project begins to generate regular income, and even then, such registration is needed only to increase customer confidence and the absence of reasons to initiate an article on an administrative offense.
If you register the company at the idea stage, then spend extra money, which will then fall into the price of your product. And if you yourself lower the competitiveness of your products, then I'm sorry, you are not an entrepreneur.
Stage 2. Counting money
So, here your project has already come back, returned the funds you invested. You are pleased to note that every month you already have money left, but your income does not exceed 1.5 million rubles. Should I register my business now?
In the absence of registration, according to Part 1 of Art. 14.1 of the Code of Administrative Offenses of the Russian Federation, you will be required to pay from 500 to 2000 rubles after each inspection of the police, tax, FAS, Rospotrebnadzor and prosecutor’s inspection. If the justice of the peace does not have time to consider your case within three months, you are completely relieved of liability (the judge will make a decision to terminate the proceedings on the case of an administrative offense).
Tax sanctions are significantly higher (Articles 116.117 of the Tax Code of the Russian Federation): a fine of 20 percent of the income received, but not less than 40 thousand rubles, or a fine of 10 000 rubles for violation of the registration deadline for inspection (if the activity was conducted less than three months, the fine is halved). In addition to the fine, inspectors have the right to re-assess unpaid taxes, as well as to oblige to pay a fine for their late payment.
As you can see, registering your own company is most beneficial at the beginning of this stage or shortly before it. The funds that you spend on registration are substantially less than the amount that you may be charged in the form of a fine.
Stage 3. I also like to take risks!
If your income is between 1.5 million rubles. up to 6 million rubles. and you still have not registered your company, then, according to Art. 171 of the Criminal Code of the Russian Federation, you run the risk of “a fine of up to 300 thousand rubles. or in the amount of the convict’s salary (other income) for a period of up to two years, or compulsory work for a period of 180 to 240 hours, or arrest for a period of four to six months. ”
For incomes exceeding a million, a “fine of 100 to 500 thousand rubles. or in the amount of the convicted person’s salary (other income) for a period of one to three years, or imprisonment for up to five years with a fine of up to 80 thousand rubles. or in the amount of the convict’s salary (other income) for a period of up to six months. ”
In other words, if your project allowed you to earn more than a quarter of a million and you still have not bothered to register your own business, then you are a very risky person. However, in practice it is quite difficult to prove your guilt, most often such cases are discovered during the investigation of cases of money laundering. Moreover, if you are being brought to criminal liability for the first time, your neighbors and work colleagues respond positively to you, then, most likely, you will be awarded only a fine.
PS All the numbers indicated depend on the current version of the laws and may change when approving new versions