In recent years, mass entrepreneurship and innovation, what form should a natural person choose if he wants to start a business alone? Is it an individual business owner, a sole proprietorship, or one-person limited liability company ? Let’s learn about the differences between these three.
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Related definitions
1. Individual business
1. According to the provisions of the "Civil Code of the People's Republic of China ", citizens who are approved and registered in accordance with the law and engaged in industrial and commercial operations within the scope permitted by law shall be individual business commerce. If the debts of individual industrial and commercial households are carried out by individual business, they shall be borne by personal property; if the debts of individual business are carried out by family business, they shall be borne by family property. Individual industrial and commercial households bear unlimited liability for debts and do not have legal person qualifications.
2. Sole proprietorship
According to Article 2 of the " Sole proprietorship Law ", a sole proprietorship refers to an operating entity invested by a natural person, the assets are owned by the investor, and the investor bears unlimited liability for the company's debts with his personal property. A sole proprietorship does not have legal person qualifications.
3. One-person limited liability company
According to the relevant provisions of the " Company Law ", a one-person limited liability company refers to a limited liability company with only one natural person shareholder or one legal person shareholder. One Person Co., Ltd. shall bear limited liability for company debts to the limit of its capital contribution. Have legal person qualifications.
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Income tax payment
1. Individual business owner
(1) Individual business owner personal income tax taxpayer. According to the relevant provisions of the " Individual Industrial and Commercial Household Personal Income Tax Tax Calculation Measures ", individual industrial and commercial houses should pay personal income tax on their business income. Therefore, individual business owners do not pay corporate income tax, they only need to pay personal income tax.
(2) The balance after operating income is reduced from the total income of each tax year, and the balance after losses is reduced to the taxable income of . The excess progressive tax rate of 5% to 35% is subject to personal income tax.
(3) According to whether the account book setting standards stipulated in the "Interim Measures for the Management of Account Building in ", the tax collection methods of individual industrial and commercial households are divided into account verification and verification collection.
(4) preferential policies :
—From January 1, 2021 to December 31, 2022, for the part of the annual taxable income of individual industrial and commercial households that does not exceed 1 million yuan, personal income tax will be levied at half the amount on the basis of the current preferential policies.
—From January 1, 2022 to December 31, 2024, the people's governments of provinces, autonomous regions and municipalities directly under the central government will determine based on the actual situation of the region and the needs of macro-control . Individual industrial and commercial households can reduce resource tax, urban maintenance and construction tax, urban maintenance and construction tax, real estate tax, , urban land use tax, , stamp duty (excluding securities transaction stamp duty), cultivated land occupation tax and education surcharge , local education surcharge. If individual industrial and commercial households have enjoyed resource tax, urban maintenance and construction tax, real estate tax, urban land use tax, stamp tax (excluding securities transaction stamp tax), cultivated land occupation tax and education surcharge, and other preferential policies for local education in accordance with the law, they can enjoy this preferential policy in addition.
—From January 1, 2004, after the rural tax reform, agricultural specialty tax will be abolished, reduced or exempted from agricultural tax, and individuals or self-employed people are engaged in planting, breeding, feeding and fishing, and business projects fall within the scope of agricultural tax (including agricultural specialty tax) and animal husbandry tax , the income obtained by them will not be subject to personal income tax for the time being.
[Policy basis]
——"Announcement of the Ministry of Finance and the State Administration of Taxation on Implementing the preferential policies for income tax for small and micro enterprises and individual industrial and commercial households" (Announcement of the Ministry of Finance and the State Administration of Taxation 2021 No. 12)
——Announcement of the State Administration of Taxation on Implementing the preferential policies for income tax for small and micro enterprises and individual industrial and commercial households" (Announcement of the State Administration of Taxation 2021 No. 8)
——Announcement of the Ministry of Finance and the State Administration of Taxation on Further Implementing the "Six Taxes and Two Fees" Reduction and Exemption Policy for Small and Micro Enterprises" (Ministry of Finance and the State Administration of Taxation on Further Implementing the "Six Taxes and Two Fees" Reduction and Exemption Policy for Small and Micro Enterprises" (Ministry of Finance) Announcement No. 10 of 2022)
——"Notice of the Ministry of Finance and the State Administration of Taxation on Personal Income Tax Issues in Rural Tax Reform Pilot Areas" (Finance and Taxation [2004] No. 30)
2. Sole proprietorship
(1) According to the "Notice of the State Council on the Issues of Income Tax Collection of Sole proprietorships and Partnerships", the production and operation income of investors of sole proprietorships shall be subject to personal income tax based on the production and operation income of individual industrial and commercial households. Therefore, sole proprietorships also do not pay corporate income tax, but only need to pay personal income tax.
(2) The "Social Proprietorship Law" clearly stipulates that "social proprietorships shall set up accounting books and conduct accounting."
(3) preferential policies :
—For sole proprietorships and partnerships engaged in planting, breeding, feeding and fishing industries (hereinafter referred to as the "Four Industries"), the income obtained by its investors will not be subject to personal income tax.
[Policy basis]
——"Ministry of Finance and the State Administration of Taxation on the issue of personal income tax issues related to the acquisition of sole proprietorships and partnership investors in the planting industry, breeding industry, feeding industry, fishing industry" (Finance and Taxation [2010] No. 96)
3. One-person limited liability company
(1) Different from individual industrial and commercial households and sole proprietorships, according to the provisions of the " Enterprise Income Tax Law of the People's Republic of China ", one-person limited liability company should pay corporate income tax, and corporate income tax is calculated based on the tax year, and the tax year will be from January 1 to December 31 in the Gregorian calendar.
(2) The corporate income tax rate is 25%.
(3) When the company makes dividend , if the investor is a natural person and the shareholder obtains dividends, he or she must pay personal income tax, and the tax rate is 20%. If the investor is a legal person and the dividends obtained belong to the equity investment income such as dividends, dividends, , etc. between qualified resident enterprises, it can be treated as tax-free income.
(4) preferential policies :
—One person limited liability company can enjoy preferential policies for corporate income tax according to regulations, such as R&D expenses additional deductions for , small and micro enterprises tax incentives, etc.
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