Joint activity of FOPs in one room

When starting a joint business, such as a store or coffee shop, there are usually many questions: can one seller work with one ECR for two Sole Proprietorships (SPs), how to rent a space, how to draft a partnership agreement, etc.

Let’s review how to correctly arrange cooperation between two SPs selling goods in one location from a legal standpoint.

Partnership Agreement

According to Article 176 of the Civil Code and Article 1130 of the Civil Code, several SPs can run a joint business, and it’s not mandatory for them to register a legal entity.

Moreover, for SPs on a single tax regime, the Tax Code significantly simplifies such cooperation:

• Entrepreneurs do not need to additionally register the partnership agreement with the tax authorities;

• Partners can transfer goods for sale to each other;

• SPs can lease property or equipment for joint use;

• They have the right to conclude rental agreements and supply contracts, as well as make purchases from suppliers, etc.

All these details should be specified in the partnership agreement between the entrepreneurs. To draft the document correctly and taking into account the peculiarities of the type of business activity, it’s better to involve a lawyer.

Under the partnership agreement, one SP can transfer its property or equipment to its partner for free use. For this, a separate loan agreement should be concluded, specifying the terms and additional conditions (Article 827 of the Civil Code).

As for the inventory management, each SP separately registers all sales transactions for its sold goods.

How to Arrange a Premises for Joint Business Activities of SPs?

When renting or purchasing a premises, it must be arranged for each entrepreneur individually. The following options exist:

• Joint ownership: two SPs purchase the premises and become its co-owners. Each has their share. The most common option is a 50/50 split. Additionally, a premises used for selling alcoholic beverages must be no smaller than 20 sq. meters. This is one of the requirements for obtaining a license for selling alcohol;

• The premises belong to one of the SPs: this can be confirmed with a purchase agreement, proof of ownership, donation, etc. In this case, the partner rents a part of the premises. The first SP will operate as the owner, and the second as a tenant. A full rental of the premises is not allowed, as the law states that only one tenant may operate in a premises. If an SP rents out their own property, they must register Code 68.20;

• Rental from a third party: each SP must sign a separate rental agreement for their part of the premises. In this case, each entrepreneur will have their own rental agreement. The monthly rent will also be paid by each SP separately.

A lease agreement longer than 3 years must be notarized.

For single tax payers, there is a limit on the rental of premises: no more than 900 sq. meters for non-residential property.

Which SPs Can Cooperate in the Same Premises?

Several SPs can cooperate in the following cases:

• If both entrepreneurs are single tax payers and do not wish to exceed the annual revenue cap, so they decide to divide this income between two simplified tax payers;

• A single tax payer combines their business with an SP on the general taxation system to expand the range of products sold, for example, tobacco or alcohol.

However, this rule applies only to general taxation system SPs and SPs from groups 2 and 3 under the single tax system. SPs of group 1 sell products at markets, not in stores. Otherwise, if trade rules are violated, the individual will be transferred to another group.

Joint Purchase and Storage of Goods

For product delivery, partners can work with one carrier, such as a courier service or post office. However, it is important: all transport and goods invoices, as well as other primary documents, must be issued separately for each SP.

Goods can also be stored together, for example, in one shared warehouse at the store.

How to Arrange Employment Relationships with Staff?

Each SP hires its own sellers, pays their salaries, withholds taxes from their pay, and submits reports. If one person is required to work for both entrepreneurs, they can be employed as a part-timer. In this case, the person will work for one SP as their main job and for the other as a part-timer.

However, according to labor law, it is prohibited for a person to simultaneously work as a part-timer and in their main job. Therefore, it is important to ensure that work hours do not overlap.

Staff are conditionally divided into two groups:

• General workers such as warehouse workers, drivers, loaders, storekeepers, etc.;

• Sellers, cashiers, and other employees who serve customers.

How to Arrange Employment Relations with Non-Customer Service Staff?

If one SP hires a worker who will receive goods for storage, for example, in a shared warehouse, then partners must sign a service agreement for such services. The document should justify why one employee is allowed to handle the reception, placement, and storage of another's goods.

A similar approach may apply for joint use of services such as loaders and drivers. In this case, SPs sign an agreement for moving, unloading, loading, and transporting goods. For this, the activity code 52.10 from the KVED-2010 list "Warehousing" should be added.

SPs submit data to the State Fiscal Service about the employees they directly sign employment contracts with.

How to Arrange Employment Relations with Service Staff?

To ensure order at the workplace and in the documentation, it is better to employ cashiers, waiters, or sellers under the relevant employers. That is, each SP must have their own department and their own hired employees.

Single tax payers from group 2 can have a limited number of employees — up to 10 people. If the tax authorities find

that the set limit is exceeded, it will be considered a violation of the terms of operation within the group.

Features of Using ECRs in Joint Business Operations

Each SP separately keeps income records for their sold goods. When selling products, entrepreneurs use ECRs or their software equivalents — pECRs, regardless of whether the transaction was made in cash or by bank card.

Even if a store or any other place of business has several departments, it is possible to organize either a single shared cash register for payment acceptance or separate payment points.

If it’s a single cash register, the seller is obligated to separately account for the funds of each SP. All entrepreneurs — both general taxation system and single tax group 2 and 3 (since January 1, 2022, according to Law № 1914) — carry out trading operations via ECRs or pECRs and provide the customer with a transaction document.

Using Payment Terminals in Joint Business Operations

If an SP uses an ECR or pECR, they must also install a payment terminal for accepting bank card payments. Point 1 of Resolution No. 878 emphasizes that the number of payment terminals must be at least 50% of the number of registered cash registers.

The legislation does not directly mandate entrepreneurs to connect a POS-terminal to the ECR/pECR. However, its connection can be useful: when choosing cashless payments, all the necessary transaction data will automatically be transferred to the terminal. After a successful payment, the terminal will send the data to the pECR application.

Business partners may use one ECR/pECR device for customer payments, but the program must be configured so that funds are credited to the separate accounts of each SP.

To summarize: several SPs can operate in the same premises. The premises can either belong to one of the entrepreneurs or be rented from a third party. Each SP must organize employment relations with staff who will serve customers. Business owners keep separate records of revenue from product sales. Payment for goods must be processed through ECR or pECR.