Individual enterprises

The individual enterprise (Sole proprietorship) is that one which belongs to the citizen under his
rights of ownership or belongs to the members of his family on the basis of collective property.
The patrimony of an enterprise is formed on the basis of citizen’s (family’s) property or from
other resources which are not prohibited by Law.
An individual enterprise does not represent a juridical entity (person) and is performing legal
activities as a physical person. The property of the individual enterprise is not separated from the
property of the individual.

Advantages/Disadvantages
The popularity of this legal form is explained by the fact that the Individual Enterprise (IE) as an
organizational-legal form presents the following advantages:

1. it may be founded by one person or the members of one family;

2. the registration procedure is simple and the costs incurred by the individual to prepare the
documents for business registration are reduced;

3. IE organizes and keeps accounting using the single entry accounting system that provides
unilateral ecording of the economic facts, using the “input-output” method), without presenting
the financial statements until their registration as VAT payers. For entities applying single entry
accounting system, accounting may be held directly by the head of the entity. This does not
absolve the Individual Enterprise (IE) from submission of tax reports.

The entrepreneurs who are willing to choose this legal form should take into consideration its
limits and the following disadvantages:

1. the Individual Enterprise`s (IE) assets are formed by citizen`s (family`s) assests and from
other sources not prohibited by law;

2. the Individual Enterprise (IE) is not a legal entity and shall be presented in law relationships as
an individual (founder). Therefore, the Individual Enterprise (IE) may be considered an
individual with the status of legal entity, and the Individual Enterprise (IE) has a separate fiscal
code different from the fiscal code of the founder. Simply said, the Individual Entreprise (IE) and
its founder are one and the same person;

3. because the assets of the Individual Enterprise (IE) are not separated from the personal
property of the founder (individual), the founder shall bear unlimited liability for the IE`s
obligations and debts with his entire fortune, except those goods which, according to the
legislation, shall not be subject to prosecution;

4. the members of the family-founders of an Individual Enterprise (IE) shall bear unlimited
liability jointly for the IE`s obligations with all their assets, except those goods which, in
accordance with the legislation, shall not be subject to prosecution;
5. the Individual Enterprise has limited opportunities for development and for the receiving bank
credits;

6.the Individual Enterprise (IE) may have staff problems. An IE`s employee can not become a
partner/an associate of the Individual Enterprise (IE), by owning a part of the share capital
(Individual Enterprise does not have share capital), as IE is identified with its founder and with
his entire fortune (houses, automobiles, etc.);

7.the Individual Enterprise (IE) has fewer opportunities to attract foreign capital and loans;

8.any citizen can be founder of only one Individual Enterprises (IE);

9.The individual (founder) bears personal responsibility for the keeping of accounting and
financial reporting.

Taxation
In terms of taxation the Individual Enterprise (IE) is not the most convenient legal form for
practicing entrepreneurship because the income tax rates are:

7% from annual taxable income that does not exceed 31140 lei;

18% from annual taxable income that exceeds the amount of 31140 lei.

An individual enterprise does not represent a juridical entity (person) and is performing legal
activities as a physical person. The property of the individual enterprise is not separated from the
property of the individual. The entrepreneur, owning an individual enterprise, bears unlimited
responsibility on his liabilities with all his property, except the property that cannot be
reprimanded under the actual legislation. The numbers of the family-owners of the enterprise
bears unlimited solidary responsibility on its liabilities with all their property, except the
property, which cannot be reprimanded, under the actual legislation.

The foundation document of the individual enterprise is represented by the resolution signed by
the founder (founders), which include: a) name, last name, date of birth, citizenship, living
address (or all this for each founder) ; b) name, last name, date of birth, living address of the
leader (director) of the enterprise - in the case when he is not a founder ;
c) the firm of enterprise including the short name; d) the location of enterprise; e) the foundation
date; f) kinds of activity; g) the conditions of reorganization and dissolution of the enterprise.
The resolution on the foundation of an enterprise may include as well other documents which do
not contradict the actual legislation. 5. The firm of individual enterprise, as well as the shortest
one, should contain the words ”individual enterprise” or “I.E.” and at least one name of the
founders.