Entrepreneurship development
The private business sector plays an important role in the smooth development of the country's economy. Regulatory legal acts, such as the laws of the Republic of Tajikistan “On state protection and support of entrepreneurship”, “On inspection of the activities of business entities”, “On investments”, “On state registration of legal entities and individual entrepreneurs”, “On the licensing system for certain types of business activities”, “On partnership between the state and the private sector” gave a serious impetus to the development of entrepreneurial activity and attracting more capital.
At the same time, since 2007, the Advisory Council under the President of the Republic of Tajikistan on improving the investment environment was created, which created a favorable basis for strengthening the process of improving the investment environment and business development.
It was the introduction of specific measures, such as the adoption of regulations, the creation of a favorable framework to support entrepreneurship and the investment climate, that steadily increased the share of this important sector of the economy in the formation of gross domestic product, which in 2023 amounted to 61.7 percent. If in 2013 the income of the private business sector from the sale of products amounted to 22 billion 023.9 million somoni or 54.3 percent, then in 2023 this figure will be 80 billion 674.9 million somoni.
Today, in order to develop entrepreneurship and investment, regularly review industry issues, advisory councils have been created in many cities and regions of the republic to improve the investment and business environment. The private sector's share of the country's gross domestic product is more than 61.7 percent.
The change in economic relations, primarily in the relations that took place in the field of entrepreneurial activity, played a very important role for the economic development of the country. Now we can say with confidence that entrepreneurship in the republic is developing step by step.
In this regard, according to statistical data through the “Single Window”, until April 1, 2024, 352 thousand 400 operating business entities were registered throughout the republic, which is 2.8% more than the same period last year.
Of this number, 318 thousand 502 units are active individual entrepreneurs, which increased by 2.9 percent compared to the same period last year.
Of these, 47 thousand 39 people have a patent, 57 thousand 989 people have a certificate with special conditions, 35 thousand 780 people have a certificate and 177 thousand 694 are dekhkan farms.
Also, as of April 1, 2024, the total number of legal entities operating in the republic is 33 thousand 489, which is 2.0% more than in the same period last year.
During this period, 409 branches of representative offices of foreign legal entities were registered in the country, which is 1.7% more than for the same period in 2023.
Why register a business?
When carrying out business activities without state registration, the income of such a person for the period of unofficial activity is taxed twice.
When choosing a registration form, you need to take into account the specifics of your activity and your future plans. In general, each form of business has its pros and cons.
In addition, registering a business opens up new opportunities for an entrepreneur: to attract more buyers, take out loans for business development and enter into official agreements with clients and partners, who, if anything, will defend him in court. Therefore, conducting illegal activities is risky from all sides.
However, what is the registration process like and what type of registration should you choose?
The business registration process is regulated by the Law of the Republic of Tajikistan “On State Registration of Legal Entities and Individual Entrepreneurs”.
Despite the large number of types of legal entities, the simplest and most suitable for small and medium-sized businesses is LLC - a limited liability company.
It is LLC and individual entrepreneur that we will consider as the most popular forms of business registration.
What is the difference between an LLC and an individual entrepreneur?
LLC and individual entrepreneur are two fundamentally different forms of business registration. They differ in status, the number of people who start a business, responsibility for debts, access to business money, reporting and areas in which they can work.
In general, if you have a small business that you manage yourself without a large number of employees, and your annual income does not exceed a certain amount, it is more profitable to open an individual entrepreneur.
Individual entrepreneurs have their advantages: it is easier and faster for them to register, they do not need to maintain accounting records, and, in addition, they have a lower tax burden. However, everything is not so rosy - individual entrepreneurs do not have separate property, so in the event of bankruptcy, they will have to sacrifice personal belongings.
With potentially large annual income or the need to hire many employees, you will have to open an LLC. This will require more complex tax reporting, but in the event of a financial collapse, you will not have to answer for debts with personal property - only with the authorized capital of the company.
So who is an individual entrepreneur?
This is an individual who is engaged in entrepreneurial activities without forming a legal entity. You can work as an individual entrepreneur on the basis of a patent or certificate.
Who can work as an individual entrepreneur?
You can only open an IP on your own; two or three people cannot open an IP. However, a certain type of individual entrepreneur allows you to hire a small number of employees.
You can combine your status as an individual entrepreneur at the same time as working for some other company, doing business in your free time.
Individual entrepreneurial activity registered in the prescribed manner is included in the length of service.
What types of IP are there?
Until March 31 of this year, there were only two types of individual entrepreneurial activity - on the basis of a patent and on the basis of a certificate.
According to the new Tax Rules for the activities of individual entrepreneurs, approved by the Government of Tajikistan, a third type has also been introduced, which is something between the previous two. The new type of individual entrepreneurial activity is called “Entrepreneurial activity on the basis of a Certificate with special conditions.”
It should be remembered that the rules established by the government contain a clear list of what type of activity belongs to a specific type of individual entrepreneur. For example, photographers, dancers and tutors are on the list of activities that require a certificate with special conditions - even if their annual income would theoretically qualify for a patent.
Where should I register and what documents should I bring?
Registration is carried out in the state registration sector at the district tax authority at the place of activity.
To do this, an individual must fill out and sign an application. The application form can be obtained from the district (city) sector of state registration. Along with the application, you must submit other documents: a copy of your passport, photographs, and so on.
The full list of documents is specified in Art. 22 of the Law of the Republic of Tajikistan “On State Registration of Legal Entities and Individual Entrepreneurs”.
What is an LLC?
In Tajikistan, LLC is the most widely used organizational and legal form.
This type of legal entity is regulated by the Law of the Republic of Tajikistan “On Limited Liability Companies”, according to which the concept of LLC is a business company established by one or several persons, the authorized capital of which is divided into shares in the amounts determined by the constituent documents.
Simply put, LLC partners combine their efforts, work together and divide among themselves the income that remains after paying all costs and taxes.
Who can operate as an LLC?
Unlike an individual entrepreneur, an LLC allows you to open your own business with friends. Participants have the right to manage the affairs of the company and receive a portion of the profits earned. They also acquire certain responsibilities, for example, making their contribution to the authorized capital on time and maintaining commercial secrets.
However, an LLC can be established by one person.
What other features does an LLC have?
If individual entrepreneurs do not keep accounting records, then this is mandatory for an LLC. When opening a legal entity, you will have to maintain careful documentation to reflect each transaction on the accounting accounts, and submit financial statements at the end of the year.
Large firms hire an accountant to do this, but small LLCs can try to handle it on their own - if they have at least basic accounting skills.
Where do I need to register and what documents do I need to bring?
To register an LLC you will need a much more impressive package of documents than for an individual entrepreneur. The founders of the company enter into a constituent agreement and approve the charter of the company.
A more detailed list of documents is specified in the Law of the Republic of Tajikistan “On State Registration of Legal Entities and Individual Entrepreneurs”.
Opening your own small business is the dream of many. Some people start small, making homemade decorations or baking cakes, while others aim higher, outlining the potential income and expenses of opening a laundry.
However, no matter what activity you plan to engage in, you will have to register it.
If you want to develop a large company, work with prestigious counterparties and attract investors, then it is better to immediately register an LLC. But for a small business and a budding startup, an individual entrepreneur is perfect.