Sole Proprietorship Registration: What to Know About the Form
The sole proprietor is the simplest form defined by the law on entrepreneurs, but its legal nature must be understood precisely: an individual entrepreneur is not a legal person. In business relations it exercises its rights and performs its duties as a physical person, and for obligations arising from entrepreneurial activity it answers to the creditor personally, with all its property, unless otherwise agreed.
An entrepreneur is a physical or legal person who has an enterprise — an organized system for carrying on entrepreneurial activity. Entrepreneurial activity is lawful, not one-off, independent and organized activity carried out for profit; it may be conducted in the form of an individual entrepreneur or an enterprise company; the company is a separate legal person — the very mark by which it differs from an individual entrepreneur.
When Activity Does Not Require the Entrepreneur Form
The law also bounds what is not considered entrepreneurial: the artistic, scientific, medical, architectural, advocacy, arbitral, mediation, notarial, audit or consulting activity of physical persons, activity as a patent attorney, and the use of a micro power plant connected to the electricity distribution network do not require the entrepreneur form. Such persons — representatives of liberal professions — may, unless a special law provides otherwise, use the legal forms of the entrepreneur.
A special rule exists for agricultural and forestry activity: it too is not considered entrepreneurial so long as fewer than 5 persons not belonging to the owner’s family are permanently employed for it; once that threshold is crossed, founding a legal form of entrepreneur becomes necessary.
The Registration Procedure and the Application
Registration of an entrepreneur is mandatory and covers both state and tax registration, carried out by the registering body. An entrepreneur is deemed created from the moment of registration in the register, and the decision on registration is effective as soon as it is posted on the registering body’s unified electronic portal. The rules for keeping the register are defined by the law on the public registry and by the instruction. Information on the registration, amendment and cancellation of data kept in the register is sent electronically by the registering body to the Revenue Service. Responsibility is divided as well: the authenticity and accuracy of the submitted data rest with the organ that created them, while the registering body answers only for the consistency and security of the registered data and documents.
For registration as an individual entrepreneur, the physical person submits to the registering body a written application and an identity document; for a foreign case, the document used for identification in notarial acts. The application contains the applicant’s name, legal address, personal number and signature. The right to submit it belongs also to physical persons legitimately residing in the occupied territories — in the Autonomous Republic of Abkhazia and the Tskhinvali region — who are registered as the law prescribes and have a personal number; their procedure is defined by the instruction.