What are the disadvantages of being an individual entrepreneur compared to being a legal entity?
Liability for obligations
One of such "disadvantages" is the fact that for obligations related to entrepreneurial activity, an individual entrepreneur is liable on a general basis, i.e. with all of his property (Article 20 of the Civil Code of the Republic of Kazakhstan). In other words, if there are debts to the budget, suppliers, contractors and other creditors, then, on the basis of a court decision, the entrepreneur's personal property can be described and sold in order to pay off these debts. Such liability of an individual entrepreneur is unlimited. On the contrary, a participant in an LLP is not liable for his debts. Within the value of the contribution made, a participant in a business partnership bears only the risk of losses. A shareholder in a JSC is also not liable for its debts and bears the risk of losses within the value of the shares owned by him.
"Unprestigious" status
Sometimes legal entities (especially foreign ones) are reluctant to cooperate with individual entrepreneurs. The reasons may be the entrepreneur's failure to pay VAT, or the implementation of activities based on a patent.
Impossibility of reorganization
A sole proprietor cannot be “reorganized” into a legal entity, such as a limited liability partnership.
Restrictions on hiring workers
An individual entrepreneur working under a patent does not have the right to hire employees.
Difficulties in settling relations with partners
It is difficult to combine the capital of several persons within the framework of one entrepreneurial business. Although there is such a form of joint entrepreneurship as a simple partnership, in which several individual entrepreneurs can unite, such an association is not considered a legal entity.