The manager is an individual entrepreneur instead of a director. What will the tax authorities say?

Can an individual entrepreneur be the director of his own enterprise or is it necessary to hire someone from outside to fill this position? The question is relevant and requires detail.

Today, individual entrepreneur is one of the most acceptable forms of organizing activities, which is popular among representatives of small and medium-sized businesses. An individual entrepreneur is not a legal entity, so the registration procedure is much simpler and faster than that of an LLC. Moreover, to conduct business, an individual entrepreneur does not need to open a current account and receive a stamp. The acquisition of these details occurs on the personal initiative of the businessman, and not as required by law.

The article provides detailed information about whether an individual entrepreneur can have a director, who can be appointed to this position and what is the procedure for implementing the procedure. In addition, you will be able to find out what the differences are between the position of manager in an LLC and an individual entrepreneur, as well as what document the head of the enterprise will need to represent the individual entrepreneur to other persons.

The general director of a company that has the status of a legal entity can be either one of its founders or an outsider hired from outside to perform management functions, and this can even be an individual entrepreneur. The director represents the executive body of the enterprise, the rights and obligations of which are specified in its charter. With regard to individual entrepreneurs, the situation is such that the latter cannot appoint himself to the position of director of his own enterprise. This limitation is justified by the fact that, according to the current legislation of the Russian Federation, a person who has registered himself as an individual entrepreneur is not engaged in labor activity as such.

What an individual entrepreneur has the right to and what not:

An individual entrepreneur has the right to hire other persons, but not himself;
An individual entrepreneur does not have the right to enter information about his appointment as the head of the enterprise into his work book;
An individual entrepreneur does not have the right to assign and pay wages to himself.

Why a manager - individual entrepreneur can be better than a director

An organization can get some savings when paying mandatory payments to the budget from such a formalization of management relations.
First of all, when paying personal income tax. After all, the contract for the management of organizations is civil law. It is concluded with an individual entrepreneur. Therefore, the individual entrepreneur must withhold and pay personal income tax on his remuneration independently. And the organization no longer acts as a tax agent in relation to him.

In addition, the individual entrepreneur also pays insurance premiums “for himself” in this case independently.

Some nuances of the director position in an individual entrepreneur

If, as a rule, no additional questions arise regarding the position of director of an organization that has the status of a legal entity, the procedure for appointing a manager in an individual enterprise is not entirely clear. For example, in an LLC the director can be either one of the company’s participants or an outsider. He is endowed with certain rights and responsibilities, a full list of which is specified in the statutory documents. The director of the LLC, like other employees, receives a salary, the amount and payment procedure of which is provided for by the same charter. What is the situation with the IP director?

Since an individual entrepreneur is an individual, he has the sole right to appoint a director . According to the law, an individual entrepreneur has the right to hire employees to perform work that does not contradict the type of activity that was specified during the registration of the business. This right is guaranteed by civil legislation, in particular the Labor Code of the Russian Federation. Moreover, an individual entrepreneur can choose the most responsible and competent employee from among the employees and appoint him as the head of the enterprise, but do not confuse the director of an individual entrepreneur with a representative of the same position in an LLC. In the first case, this is not even a director, but a manager or head of a direction/department.

Tax officers see “schemes”

In their opinion, in this case, the employment relationship still remains between the organization and the manager, and the purpose of concluding an agreement on the transfer of powers of the head of the organization to the manager - individual entrepreneur is to evade personal income tax. As a result, they charge the organization additional taxes and hold them accountable.

Let us note that in some cases tax authorities insist not only on the additional payment of personal income tax, but also on the exclusion from income tax expenses of the cost of the services of a manager, which can be taken into account on the basis of subparagraph 18 of paragraph 1 of Article 264 of the Tax Code (resolution of the Seventeenth AAS dated 03/05/2012 No. 17AP-1015/2012-AK).

Can an individual entrepreneur have a director?

Of course, a businessman, having registered as an individual entrepreneur, represents his business independently. But if necessary, another person can conduct business. For example, it happens that for personal reasons: illness, difficult family situation, running another business in parallel, an entrepreneur is forced to leave his business under the supervision of an employee.

An individual entrepreneur may have a director. In this case, the employee signs an order of his appointment, reads the job descriptions, performs specific duties and receives a salary as agreed. As a rule, the director of an individual entrepreneur is simply a manager of a certain area of activity (for example, the director of a store).

General Director is a position that cannot be offered to an employee. The main decisions remain with the person on whom the business is registered, that is, with the individual entrepreneur. But some options for leadership positions for hired personnel are possible: commercial director, executive director, manager, personnel director, director of a certain direction, etc. You can find a suitable position in the Unified Qualification Directory.

General Director is a position that cannot be offered to an employee.

According to Article 413 of the Civil Code of the Russian Federation, the law cannot consider any obligations if the creditor and the debtor are the same person. Therefore, an individual entrepreneur cannot appoint himself as a director, since civil obligations in this case do not make sense. Also, an entrepreneur cannot pay his own salary or enter into an employment contract with himself. The status of an individual implies that the individual entrepreneur performs his social functions directly, unlike a legal entity, where personification is simply necessary, that is, in order to express its will, the company needs a manager appointed for this.

The order for appointment as a director is signed by both parties, and if the employee requests, he is given a copy. The date in the order is considered the day of taking office.

To avoid further disagreements, accompany this appointment with two more documents:

Job description.
A standard employment contract, which specifies all the duties of the appointee, his areas of responsibility, work schedule and functions.

Don't forget to provide your employee with a power of attorney to perform certain functions, this will make things easier for both of you. And so that there are no problems with payment at the bank (so that your director’s signature on payment documents does not cause disputes), you together draw up a card with sample signatures at the bank.

Don't forget to provide your employee with a power of attorney to perform certain functions, this will make things easier for both of you.

Here is a sample of each of the necessary documents: an order for hiring, an order for taking on the position of director, a job description for a commercial director.

So, you can perform the duties of a director yourself, but you do not have the right to appoint yourself as one. Or you can hire a director for an individual entrepreneur as a manager or executive director. Think for yourself whether you need a person who will share with you all the power.

Reason for unjustified tax benefit

The courts have dealt with similar disputes more than once.

There are examples of court decisions where they did not see in the actions of an organization a scheme aimed at obtaining an unjustified tax benefit.

Since the transfer of functions for managing the company is transferred on completely legal grounds. This opportunity is provided by Article 42 of the Federal Law of 02/08/1998 No. 14-FZ “On Limited Liability Companies”.

And the registration of the former general director as an individual entrepreneur before concluding an agreement on the transfer of powers of the sole executive body does not indicate either the illegality of registration or the invalidity of the transaction (Resolution of the Arbitration Court of the Volga District dated January 22, 2015 No. F06-18785/2013).

But there were also opposite conclusions. For example, the Federal Antimonopoly Service of the Ural District, in resolution No. F09-4929/12 dated June 11, 2012, agreed with the tax authorities that as a result of the transfer of powers to the individual entrepreneur, the organization received an unjustified tax benefit.

The court's conclusions were influenced by the following circumstances:

before the conclusion of the agreement on the transfer of powers of the sole executive body to the manager, he was a manager in the organization and worked under an employment contract;
registration as an individual entrepreneur occurred several days before receiving authority to manage organizations;
the manager ceased his activities as an individual entrepreneur immediately after termination of the management contract;
monthly remuneration was paid to the manager regardless of the quality of his work and labor productivity. At the same time, the amount of remuneration was not related to payment for a specific volume of services provided. Payments were fixed and periodic, which is typical for labor relations.

Previously on the topic:

Individual entrepreneur as manager

Director of an individual entrepreneur and director of an LLC: main differences

If in an LLC the powers of the manager are specified in the charter, then in the case of an individual entrepreneur, the document regulating the activities of the manager is an employment contract. The option of hiring a manager is suitable for those entrepreneurs who have not one outlet, but several, which requires a full-time employee at each of them. Some individual entrepreneurs are limited to one director who controls the activities of the entire enterprise.

The main difference between the head of an individual entrepreneur and the director of an LLC is the following. The manager of an LLC is its executive body and is vested with the necessary powers, that is, he can represent the legal entity of which he is a director in other bodies and structures. No additional documents giving him such powers are required. In the case of individual entrepreneurs, the situation is different. The manager of an enterprise has the right to represent the individual entrepreneur who hired him only if he has a power of attorney issued by the latter. As a rule, powers of attorney of this kind contain a list of powers that the individual entrepreneur gives to the head of the department to perform the assigned task, that is, the actions of the manager are somewhat limited, which cannot be said about the powers of the director of the LLC.

What are the functions of this position for an individual entrepreneur?

Waybill for a truck of an individual entrepreneur - what is it?

Occupying this role, the manager is the head of the company's production and economic activities. He bears full responsibility for the storage and lawful use of the enterprise's property. Also, he is responsible for the decisions made, the financial results of the LLC, and makes the maximum contribution to the development of the company.

Important! Thus, the functions of such a position for an individual entrepreneur are the general management of the production work of the organization and the entire team.

Disadvantages and risks

Tax consultants do not recommend concluding a management agreement for an LLC if its sole founder is the manager of the individual entrepreneur of this organization. Judicial practice not in favor of entrepreneurs confirms these conclusions.
There are risks of reclassification of the contract concluded with the manager-individual entrepreneur by the tax inspectorate and the Pension Fund of the Russian Federation - from remuneration for work as a manager into an employment contract.
You can register a new LLC only with a director - an individual. It is impossible to immediately place a manager of an individual entrepreneur at the head of the enterprise. These actions are formalized only at an existing enterprise with amendments to the Unified State Register of Legal Entities. At the same time, the charter of the LLC must indicate the possibility of transferring the role of the single executive body to another organization or individual entrepreneur.
If an organization applies the simplified tax system “Income minus expenses,” it will not be possible to reduce the tax base by expenses for the managing individual entrepreneur.
There is a risk that the tax inspectorate will additionally charge corporate income tax, considering payments to the manager to be unjustified from an economic point of view or due to the lack of a business purpose.

Business goals for hiring an individual entrepreneur can be: increasing the level of responsibility of the manager, the need for crisis management, the ability to regulate issues of termination of the contract and remuneration with the manager.
Don't miss such little things as economically unjustified payments to the manager. For example. The manager received a monthly salary of 30,000 rubles. Further, by the decision of the founders (participants) of the company, it was decided to take him to the position of manager of the company as a manager of an individual entrepreneur. Subsequently, the manager’s functions did not change; he continued to manage the company as an individual entrepreneur, but the remuneration increased to 200,000 rubles. It is not safe. This form of tax optimization leads to additional charges.

In what cases do individual entrepreneurs approve such a position?

The legal status of an individual entrepreneur - from what moment does it begin?

Involving an outside manager is one of the most popular methods of improving the taxation system at an enterprise. In this situation, the founder formalizes an individual entrepreneurship and provides management services for his own company. Or the second option: dismissal of the general director of the company and registration of him as an individual entrepreneur, with further provision of services to him for managing this enterprise.

However, tax authorities consider such a scheme to be illegal, allegedly created for tax evasion.

An individual entrepreneur can only be the founder of his business

Managing individual entrepreneur as head of an LLC

Can an individual entrepreneur be the manager of an LLC? The law approves this possibility. But before appointing an individual entrepreneur as the head of an LLC, it is necessary to think through all the nuances of such tax optimization. It is important to take into account all the subtleties of drawing up an agreement with a managing individual entrepreneur . This agreement must have a reasonable business purpose and contain the intentions of the founders to obtain an economic effect. Otherwise, such “incorrect” tax optimization can only lead to minimizing the company’s tax obligations and corresponding additional charges.

This solution has certain advantages, risks and disadvantages.

Advantages

Increasing the level of responsibility of the manager. The fact is that the director in his position risks financial liability, and the functions of an individual entrepreneur in the same role belong to the sphere of civil law relations. Consequently, an entrepreneur risks his property for non-compliance with laws;
Optimization of salary taxes : it is important to understand what taxes an individual entrepreneur pays. The director of the LLC is forced to pay 13 percent personal income tax and contributions to insurance services on the salary of the director, which in total reaches almost a third of the salary. An individual entrepreneur managing an LLC, if he works, for example, under the simplified tax system “Income”, deducts only 6 percent of the income. In this case, the individual entrepreneur independently pays all insurance premiums for himself in a fixed amount;
There is also a difference in income qualification : the director receives a salary, and the manager of an individual entrepreneur receives remuneration for work as a manager;
Not one individual manager can be selected, but several. Such a step, when there are managers acting on the basis of a management contract, opens up opportunities for building an effective management structure.
Due to the expenses for the manager, you can reduce the tax base for income tax. According to paragraph 18 of Art. 264 of the Tax Code of the Russian Federation, other expenses associated with production and sales include the taxpayer’s expenses for managing the organization or its individual divisions, as well as expenses for purchasing services for managing the organization or its individual divisions.
Cash received by an individual entrepreneur from a bank account can be spent without restrictions on personal (consumer) needs. Thus, thanks to the individual entrepreneur, legal cash withdrawal is guaranteed. You have the opportunity to withdraw serious amounts of money to an individual entrepreneur.

Can an individual entrepreneur (IP) be a director of a legal entity (LLC)?

Our answer: Yes.

Today, an individual entrepreneur (IP) can head a legal entity (LLC) as a sole executive body as a managing individual entrepreneur .

This option for managing a legal entity (LLC) is absolutely legal. It is often used in practice to optimize taxes and increase the attractiveness of an organization as a more reliable counterparty. Often attracts the attention of tax inspectors for systematic checks for tax evasion. It has its advantages and disadvantages.

We'll talk about this in more detail in our article.