Accounting for individual entrepreneurs

May, 10 2020

The current legislation obliges not every individual entrepreneur to maintain accounting records, nevertheless filing statements with tax authorities on a regular basis is a must for all. This is regulated by Federal Law No. 402-FZ. Non-compliance with the requirements entails fines and compulsory liquidation for the entrepreneurs.

If it is costly to have your own accountant, you can use accounting services for individual entrepreneurs from third-party companies. This solution makes it possible to save on the employee’s salary, organisation of his or her workplace, etc. There is no need to worry that hired experts can disclose the financial data to someone else. Full confidentiality is one of the main principles of the companies offering accounting services for individual entrepreneurs.

Options of accounting for individual entrepreneurs

Each enterprise can independently maintain accounting documentation or contact specialized companies providing accounting services to individual entrepreneurs. If individual entrepreneurs choose the first option, they have to ensure proper maintenance and storage of financial documents, and to hire experts if they do not have sufficient skills themselves. This can be problematic for individuals.

According to the legislation, there are several available options of accounting for individual entrepreneurs:

  • exemption from compulsory accounting for individual entrepreneurs – conditions making this possible are described in detail in Federal Law No. 402-FZ;
  • independent maintenance and filing of statements according to the standard or simplified procedure;
  • services of specialized companies that provide accounting services for individual entrepreneurs.

Individual entrepreneurs and some branches of companies may be exempted from compulsory maintenance and filing of accounting statements according to par. 2 of Federal Law No. 402-FZ. However, this should not be understood as if it could be possible not to report to the state at all. All the financial operations have to be recorded anyway – individual entrepreneurs are not exempted from taxes.

Regardless of whether accounting is performed independently or with the help of third-party experts, there are two taxation regimes applied for entrepreneurs:

  • the general taxation system, which involves payment of income tax;
  • special regimes – simplified taxation system, unified tax on imputed income, patent taxation system.

Each of these taxation regimes has its own rules of accounting for individual entrepreneurs, which are included in regulatory acts.

Accounting for individual entrepreneurs within different taxation systems

If individual entrepreneurs choose the general taxation system due to their types of activity, they are obliged to apply three tax rates altogether:

  • income tax;
  • VAT;
  • property tax.

This tax regime is established by default if entrepreneurs do not specify otherwise during their registration. It will be necessary to file tax returns annually and quarterly. However, most companies try to choose the options with a lower tax burden: simplified taxation system, patent taxation system, or the special regime in the form of unified tax on imputed income.

Entrepreneurs using the simplified taxation system file the return once a year. Each quarter it is necessary to pay an advance, which is after included in the single annual tax. In case of the simplified taxation system entrepreneurs maintain accounting records, entering all income and expenses in the ledger. This is also relevant for entrepreneurs within the patent taxation system. Nevertheless, a separate income and expense ledger is used for each obtained patent.

In case unified tax on imputed income is applied, the amount of imputed income for a certain type of activity is the basis for tax assessment. In terms of unified tax on imputed income, entrepreneurs calculate taxes from potentially possible rather than actually received income.

VALEN Company – accounting for individual entrepreneurs in Moscow

VALEN Company offers accounting services in Moscow and other regions. Our experts have many years of experience of working in outsourcing. Qualified accountants are ready to set the current documentation in order, to timely file all the required statements, as well as to provide detailed advice to eliminate mistakes in the further work of the entrepreneur. You can get advice or make a request on our website or by calling us on +7 (495) 7-888-096. We also look forward to seeing you in our Moscow office.

Entrust accounting for individual entrepreneurs to professionals.

Author of the article
Accounting for individual entrepreneurs
Valentina Khlavich
Managing Partner
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