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Individual Business VS Company September 9,2018.

As the country keep encouraging people to start-up business, many people are considering Registering A Company or setting up a business as a boss. But everyone will face such a question: Register A Company or Individual Business, which one is better?


What’s the difference?



Individual Business

Company

Legal status

No

Yes

Joint Liability

Unlimited joint and several liability

Limited joint and several liability (Limited liability company)

Tax preference

The tax authority will set a tax on the estimated sales based on its location, scale, number of employees, and sales of goods.

Companies are required to pay taxes according to their declared income, and small-scale taxpayers can enjoy tax-free preferential policies with a quarterly income of no more than 90,000 yuan.

Taxes

VAT, individual income tax, etc.

VAT, corporate income tax, etc.


Do you really understand Individual Business?


Some people heard that Individual Business no need bookkeeping? Enjoy duty free? And avoid inspections by the local industrial and commercial department and taxation department? The answer is No!



1.Individual Business need bookkeeping

The second provision of the“Provisional Measures for the Management of Individual Industrial and Commercial Households' Accounts” stipulates: “All Individual Business engaged in production and business operations with fixed places, shall establish, use, and keep account books and vouchers, and account based on legal and valid vouchers, in accordance with laws, administrative regulations, and these Measures.


For the Self-employed with a registered capital over 200,000 yuan, double-entry bookkeeping shall be set up;The registered capital between 100,000 yuan and 200,000 yuan, shall set up simple accounts.


The Self-employed may employ professional organizations or qualified accounting personnel who have been approved to engage in account bookkeeping business to create accounts and handle transactions on their behalf.



2.Individual Business need to pay taxes

According to the “State Administration of Taxation Announcement on Relevant Issues Concerning Exemption of Value-added Tax for Small and Micro Enterprises”,small-scale taxpayers, both the self-employed and the company, can enjoy VAT exemption with monthly income under 30,000 yuan, and quarterly income under 90,000 yuan.


Note that this preferential policy is only for small-scale taxpayers who meet the requirements, whether you are a self-employed person or a company. If you are a self-employed person but have applied to become a general taxpayer, this policy does not apply to you.



3.Individual Business need annual inspection

According to Article 14 of the “Individual Industrial and Commercial Ordinance”, the self-employed should apply for annual inspections to the registration authority within the prescribed time of each year”. Article 23, the self-employed who have not applied for annual inspection within the prescribed time limit shall be ordered by the registration authority to make correction within a time limit; if the individual has not corrected within the prescribed time limit, the business license shall be revoked.


According to Article 3 of the Interim Measures for Annual Reports of Individual Industrial and Commercial Households, “the self-employed shall submit their annual report of the previous year from January 1 to June 30 each year through Enterprise Credit Information Publicity System or the administrative department of industry and commerce responsible for their registration. "


Therefore, the Self-employed must report annually in June and be responsible for the authenticity and legitimacy.



4.Individual Business need to apply for approval


All the business scopes involve pre-approval or post-approval, the self-employed and the company must apply for approval.



In accordance with Article 22 of the “Individual Industry and Commerce Ordinance”, when the registration of a self-employed is changed and no change is registered, the registration authority shall order it to make corrections and impose a fine of less than 1,500 yuan; if the circumstances are serious, the business license shall be revoked.


The Self-employed also need to register for changes if they have changes.



5.Individual Business will be checked.

Many Self-employed had their business licenses, and they did not apply for tax registration certificates and relevant business licenses in time; Or after the change, they did not go to the industrial and commercial department to apply for a change of filing; Or because the health, environment, fire and other issues during the operation did not do a good job of maintenance, there are risks or reported by neighboring households.



What is the advantage of Registering A Company?


1.Individual Business cannot transfer but companies can.

According to Article 10 of the“Individual Industry and Commerce Ordinance”, Self-employed who change their business operators shall be re-applied for registration by the new business operator after the cancellation of registration.”



2.Individual Business do not have investors and partners but companies have.

Individual Business operate as individuals and assume unlimited legal liability. Moreover, Individual Business do not have a share, and no one is willing to partner and invest in an self-employed.



3.Corporate is more popular in business trading.

Nowadays, doing business, discussing cooperation, signing contracts, etc. are all carried out between the company and the company. Some internet platforms support company-based merchants.



Individuals and companies have their own advantages, and they have different roles for entrepreneurs in different periods. You can combine your own situation, small-scale is generally suitable for self-employed, such as opening a small restaurant or a small supermarket; large-scale , in view of long-term development, are more suitable for companies.


Related reading:China WFOE Formation,Guangzhou, Shanghai, Shenzhen Company Registration

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