Can I Close My Sole Proprietorship (SP) and Continue Selling on Marketplaces?

Contents:

• Is It Possible to Continue Working?
• How to Close a Sole Proprietorship (SP) When Working on Marketplaces?
• What recommendations can be offered?
• Conclusion
• Question and Answer

Many entrepreneurs, when starting their business journey, opt for registering as a sole proprietor (SP) as the easiest and most accessible way to legalize their activities. However, for various reasons, there may come a time when one needs to close their SP while still wishing to sell goods or services on marketplaces. In this article, we will explore whether this is possible and how to go about it.

Is It Possible to Continue Working?

Yes, it is possible to continue working on a marketplace. However, this requires choosing a different business structure—either a limited liability company (LLC) or self-employment. While an LLC may not be suitable for everyone due to its higher tax burden or the necessity to maintain full accounting records, self-employment remains an alternative. This regime involves paying tax on professional income when selling self-produced goods or providing handmade services.

This brings us to the main complication: under the tax regime for professional income (TPI), reselling products purchased from suppliers in Russia or China is not permitted. It is essential that the products are deemed to be self-produced. This could be indicated by branded packaging or another distinguishing mark. Additionally, trading in licensed goods is not allowed under this regime. Therefore, it is possible to close an SP and continue selling on marketplaces, provided these conditions are met.

How to Close a Sole Proprietorship (SP) When Working on Marketplaces?

Step 1. Preparation for Closing the Sole Proprietorship (SP)

Before making the final decision to close your SP, it’s important to consider several key factors:

• Financial Obligations: Ensure that you have no outstanding debts to counterparties, banks, or tax authorities.
• Settling with Employees: If you have employees, ensure all calculations are made, including payment of wages, compensations, and benefits.
• Closing Bank Accounts: Close all bank accounts associated with your SP business.
• Submitting Reports: Before closing your SP, submit all required tax declarations and reports.

Step 2. Choosing a New Business Structure

After closing your SP, you need to choose a new form of business organization that will allow you to continue selling on marketplaces. Here are some possible options:

• Self-Employment: If your turnover permits, you can register as a self-employed individual and continue selling goods or services on marketplaces.
• LLC or Joint Stock Company (JSC): If you plan to expand your business and attract investments, consider registering a limited liability company (LLC) or joint stock company (JSC).
• Working under Contract with Another Legal Entity: You can sign an agreement with another company that will act as an intermediary between you and the marketplace.

Step 3. Updating Your Information on Marketplaces

Once you’ve chosen your new form of business organization, you will need to update your details on the marketplace. This will require providing new documents that confirm your new business status.

Step 4. Adapting Business Processes

After closing your SP, you may need to adjust your business processes to suit your new business structure. For example, if you choose self-employment, you’ll need to account for the specific tax and reporting rules for self-employed individuals.

What recommendations can be offered?

Before dissolving your individual entrepreneurship, it is advisable to settle all financial and legal obligations related to operations on the platforms. This includes liquidating or returning unsold inventory, obtaining comprehensive reports, and resolving any outstanding debts.
It is crucial to terminate agreements with platforms such as Wildberries or Ozon prior to closing the business. Failing to do so may lead to legal and financial complications, as the entrepreneur will no longer hold the legal status required to conduct business on these platforms.

Conclusion

While it is possible to close an individual entrepreneurship and continue operations on a marketplace, it necessitates meticulous preparation and consideration of all relevant details. The choice of a new business structure depends on one’s objectives and long-term plans. It is essential to remember that each form of business ownership carries its own set of requirements and stipulations, which must be taken into account when engaging with online platforms. Prior to making a decision about dissolving the individual entrepreneurship, it is highly recommended to seek advice from a legal or financial expert in order to evaluate potential risks and consequences.

Question and Answer