Company registration for the marketplace

The activity of a marketplace, like any other business, involves many legal aspects. One of them is the registration of a legal entity, which is a mandatory initial stage. In order to correctly determine all the legal parameters of the company, it is necessary to choose the future algorithms for the operation of the marketplace. Mistakes when registering a company can complicate the work of the marketplace. You can read about how to properly register a company for the marketplace in our article.

Contents: 

• Organizational and legal form for the marketplace
• Choosing a taxation system for the marketplace
• Selecting a country for registering a marketplace company

Organizational and legal form for the marketplace

The organizational and legal form predetermines the following issues:

• The responsibility of the entrepreneur;
• Distribution of profits;
• Procedure for transferring rights to the marketplace;
• Commencement and termination of activities;
• Number of business owners.

The organizational and legal form must correspond to the actual relationship of the owners of the marketplace and satisfy their request. However, their list is limited by law, so from the existing ones it is necessary to choose the most suitable one for you. The most common forms are an individual entrepreneur (IE), a limited liability company (LLC) and a joint stock company (JSC).

The first question is the number of founders. An individual entrepreneur is suitable for individual management, however, if there are one or more founders, then either LLC or JSC can be established. At the same time, the maximum number of LLC participants is 50.

The second important question is what kind of property the owner is responsible for. An individual entrepreneur does not have a division into personal property and property for entrepreneurial activity; he is responsible to creditors with all his property. As a general rule, in LLC and JSC liability is limited

• In LLC - the value of the owned share;
• In JSC - the value of the shares owned.

This division comes from an essential difference: JSC and LLC are legal entities that own their own property. 

The third question is accounting. LLC and JSC are obliged to maintain accounting records, in contrast to individual entrepreneurs.

The fourth question is the transfer of the marketplace. In order to transfer the rights to the marketplace, in the case of an LLC, you need to sell a share, and with a JSC, shares. With an individual entrepreneur, the procedure will be more complicated, since in fact you own all the property separately. You can transfer a part to LLC and JSC if you are not the only participant. But in LLC, the transfer will be complicated by the preemptive right of other participants, who have priority in the purchase of shares over third parties.

The fifth question is the distribution of profits. In the case of an individual entrepreneur, you are the sole owner and you receive all the profits, at the same time you can always take the property. In LLC and JSC, the size of the participant's profit is proportional to his share / stocks.

The sixth question is the status in the market. Individual entrepreneurs, despite their full responsibility, enjoy less trust in comparison with LLCs and JSCs, since the latter are legal entities.

Choosing a taxation system for a marketplace

The choice of taxation system depends on 

• Organizational and legal form;
• Amount of income;
• Methods of monetization;
• Algorithm of payments of the marketplace.

First, it is worth noting the general limitations of the simplified taxation system (STS). 

• Number of employees - no more than 100 people;
• Share of participation of other legal entities - no more than 25%;
• Income received for the year - no more than 150 million rubles;
• Prohibition of branches / representative offices.

From 2021, exceeding some of these limits does not automatically ban the use of the simplified tax system, but raises the rates. 

Second, it's worth deciding what will be considered profit or revenue for the marketplace. It is worth mentioning that most marketplaces operate on an agency system. You can read about what contractual structures are used by marketplaces in another article "Contractual marketplace construction". Then the agency fee will be considered as profit.

The obligation to pay VAT also depends on the taxation system. The marketplace on GTS must pay VAT from the agency fee.

Selecting a country for registering a marketplace company

On the one hand, it is easier to register a legal entity in Russia if the participants are located in Russia or are citizens of the Russian Federation. However, the specifics of Russian regulation may prevent the establishment of a company here. For example, Russian legislation prohibits payments with cryptocurrencies. Therefore, it will be necessary to choose a different jurisdiction.

Thus, registration is the legal start of the marketplace. The choice of jurisdiction, organizational and legal form and taxation system are three legal factors that affect the success of your business. To reduce these risks, it is worthwhile to take a responsible approach to the establishment of a legal entity. The most common form is LLC, and STS can be a profitable system, although there is no one-size-fits-all solution for a marketplace. Therefore, all aspects must be considered taking into account the peculiarities of the platform. If you have any questions or need help registering a company for the marketplace, please contact A4 Law Firm lawyers.