Self-employed entrepreneurs: what should you do if you exceed the sales thresholds?

Auto-entrepreneurs benefit from simplified tax and social security regimes. In return, they must not exceed certain sales thresholds.

So it's important to understand the rules governing these thresholds before setting up your own business!

What are the different sales thresholds?

The sales ceiling varies according to the activity carried out by the auto-entrepreneur.

• 82,800 for commercial activities and the provision of accommodation (hotels, bed and breakfasts, gîtes, etc.), including a tolerance threshold of €90,900;
• 33,200 € for services and self-employed professionals (BNC or BIC), with a tolerance threshold of 35,100 euros.

Please note

Sales are defined as the amounts actually received by the auto-entrepreneur during a given period.

To be continued: on August 25, 2017, Bruno Le Maire announced the doubling of these thresholds from 2018. They should be included in the 2018 Finance Bill.

What to do if the sales ceiling is exceeded?

There are three different situations in which the sales threshold is crossed:

Exceeding the basic threshold for the year of creation

The auto-entrepreneur automatically switches to the common law system for sole proprietorships.

Please note

In the first year, sales are calculated on a pro rata temporis basis. In other words, an auto-entrepreneur who sets up a business selling goods on September 1, 2017 must comply with a sales ceiling for 2017 of €27,600 (i.e. 4/12 of €82,800).

Crossing the tolerance threshold over one year

As in the previous case, the auto-entrepreneur automatically switches to the common law system for sole proprietorships.

Exceeding the basic threshold for two consecutive years without exceeding the tolerance threshold

In this case, the auto-entrepreneur benefits from a period of tolerance, during which he or she can analyze the reasons for this increase in activity, while retaining the benefit of the scheme. This tolerance period begins on the day the ceiling is exceeded, and ends on December 31 of the following year.

The question to ask is whether this overrun is linked to the company's development, or is the result of an exceptional event.

In the first case, the auto-entrepreneur will have to prepare to move over to the common law system as of January 1 of the following year; in the second case, he or she will fall back below the thresholds the following year, and will be able to continue his or her activity under this system.

What impact will the loss of auto-entrepreneur status have?

If the threshold is exceeded, the auto-entrepreneur switches to the common law system for sole proprietorships, i.e. the actual system (simplified or normal). The entrepreneur is then subject to new tax, social security and accounting obligations:

• The entrepreneur becomes liable for VAT on the first day of the month in which the threshold is crossed;
• He loses the benefit of the micro-tax system and the option for withholding tax, and switches to a real income tax system, either BIC or BNC, depending on the activity;
• As of January 1 of the following year, he loses the simplified microsocial scheme. He then switches to the RSI scheme for self-employed workers;
• The contractor will be required to keep more comprehensive accounts (journal, general ledger and inventory book);

In addition, the entrepreneur will have to register with a Centre de Gestion Agrée, in which case the company's taxable profit will be increased by 25% and he will lose the benefit of the ACRE.

A sole proprietorship is also a form of unlimited liability: the entrepreneur is indefinitely liable for any debts potentially generated by the business, should the company be unable to pay them. It therefore seems appropriate and prudent to opt for the EIRL regime (Entreprise Individuelle à Responsabilité Limitée), which secures assets not assigned to the business.

Finally, if you're running a commercial or craft business, you'll need to register with the Registre du Commerce et des Sociétés or the Répertoire des Métiers before the end of February of the year following the overrun.

It is not advisable to opt for auto-entrepreneur status if your business is set to expand rapidly. In this case, we recommend setting up an EIRL or a company (SASU, SARL...) to avoid the complications that a change of status would entail.