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Publication date: 27.05.2024
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Cooperation of the Limited Liability Company and the Natural Person of the Entrepreneur of the 2nd Group in Ukraine
A limited liability company (LLC) is a form of commercial enterprise, which is characterized by the fact that the participants (founders) do not bear personal responsibility for the company's obligations, except in cases provided for by law. Ukrainian legislation provides for different types of LLCs depending on the number of participants and the size of the authorized capital. They can be registered with one or more members.
A natural person entrepreneur (NPE) is a person who independently carries out entrepreneurial activities without forming a legal entity. A sole proprietorship can be registered in accordance with the procedure established by law and receives the corresponding status of a subject of entrepreneurial activity. He bears personal responsibility for his actions and obligations arising from his business activities. A sole proprietorship has the right to conduct various types of business, from production to service provision.
Checking a counterparty before entering into any agreements or cooperation can be an important step to ensure the security and success of your business.
NPE of the 2nd group in Ukraine have special conditions and restrictions regarding the types of activities and the range of counterparties with which they can cooperate. In particular, they can work only with certain categories of counterparties. Here is a detailed overview of the possibilities of cooperation between LLCs and NPE of the 2nd group.
Conditions of activity of the NPE of the 2nd group
2nd group sole proprietorships can choose a simplified taxation system with a fixed single tax rate, which provides certain advantages, but also imposes restrictions. NPE of the 2nd group can engage in retail trade, provision of services to the population and other business entities (LLCs), production of goods, etc. They can cooperate with natural persons (citizens). They can cooperate with other sole traders and legal entities on a simplified taxation system (in particular, LLCs).
Restrictions of the NPE of the 2nd group
Prohibition on cooperation with large enterprises: NPE of the 2nd group cannot provide services to large enterprises or income tax payers (except in certain cases that have a clear legal regulation). The maximum amount of income for the NPE of the 2nd group is 7 million hryvnias per year (as of 2024).
Cooperation with LLC
Types of possible contracts. The LLC can cooperate with the NPE of the 2nd group through the following types of contracts:
1. Service provision agreement: the NPE can provide the LLC with various services (consulting, marketing, repair, etc.).
2. Subcontract: performance of works for LLC.
3. Lease agreement: lease of premises or equipment.
Advantages of cooperation for LLCs
1. Tax benefits: the costs of services or works provided to the NPE of the 2nd group are included in the gross expenses of the LLC.
2. Flexibility of terms: the ability to quickly change the terms of cooperation as agreed by the parties.
Advantages for NPE
1. Stable orders: cooperation with an LLC can provide constant income.
2. Simple accounting: a simplified taxation system allows the sole proprietorship to avoid complex reporting.
Document management
For the correct organization of cooperation, it is necessary to ensure proper document flow:
1. Enter into a contract that clearly defines the obligations and rights of the parties, the cost of services/works, terms of payment, etc.
2. Confirm the fact of providing services or performing works.
3. NPE issues invoices for LLCs.
4. Tax invoices: if the NPE is a VAT payer.
Recommendations
Legal Advice: Consult a lawyer regularly to avoid legal risks.
Tax accounting: engage professional accountants for proper accounting and reporting.
Income control: NPE of the 2nd group must monitor their income so as not to exceed the established limit.
Conclusion
Cooperation between LLC and NPE of the 2nd group in Ukraine is possible and has a number of advantages for both parties. It requires strict compliance with legal requirements and proper legal and accounting registration. Properly organized cooperation can become the basis of a successful business.
