How do you choose your legal status?

A company's legal status determines all the laws, rules, legal texts and operating procedures applicable to it.

This is a major question that all business creators need to ask themselves, in order to arbitrate between the many possibilities offered by French law.

The main challenge is to find a legal status suited to the company's needs and sector of activity.

Here are the 5 questions to ask yourself to make the best choice and contribute to the success of your project.

Will I become a partner?

There are two types of business: sole proprietorships and companies. If you're the only person involved in your project, you'll need to choose one of the following types of sole proprietorship:

• Sole proprietorship (EI);
• Société par Actions Simplifiée Unipersonnelle(SASU);
• The Sole Proprietorship with Limited Liability (EIRL);
• Single-member limited liability company(EURL);
• The simplified auto-entrepreneur (AE) or micro-entrepreneur scheme.

Among this list, SASU and EIRL have the advantage of making it easier for new partners to join the project.

If several people are involved in the project, you will need to set up one of the following legal forms:

• Limited Liability Company (SARL);
• Société par Actions Simplifiée (SAS);
• Société Anonyme (SA);
• The Société d'Exercice Libéral (SEL).

Are my personal assets protected?

Protection of private assets depends on the liability of the entrepreneur. If he wishes, he can limit his liability to the amount of his contributions to the company, by choosing one of the forms of limited liability company.

SARL, EURL, EIRL, SAS and SASU are some of the most common types of company status that enable the separation of the entrepreneur's personal and professional assets.

In the event of unforeseen financial difficulties, or customer default, limiting the liability of the company director protects his personal assets and the balance of his family home.

How big is my project going to get?

Even if it's sometimes difficult to answer this question when you're setting up your business, it's important to consider the possibility of having to make major investments over the long term.

SAS and SA companies offer several classes of shares to suit all investor profiles

Bylaws can also be amended to include specific clauses, known as approval or exclusion clauses.

What is the social security system for managers?

The company director may have one of two statuses: "self-employed" or "assimilated employee". This depends on the company's legal status and its position as a shareholder.

In the case of a SAS, SASU or SA, if the manager is not one of the partners or is a minority shareholder, he or she is treated as an employee.

The person contributes to the general social security scheme

If you are the majority shareholder of a SARL or EURL, you are not considered an employee. The person contributes to the specific scheme for the self-employed (RSI, now replaced by Sécurité Sociale des Indépendants, MSA or URSSAF, depending on the type of business).

The reforms announced by the government in autumn 2017 aim to definitively abolish the RSI by 2020.

Self-employed workers will be attached to the general social security scheme, in the same way as salaried employees. There will therefore be no difference in this respect.

The reforms announced by the government aim to align the social protection system for the self-employed with that of salaried employees to encourage their growth!

What is my company's tax status?

You have two options for taxation:

• Income tax: associates pay income tax in their own name. To opt for this system, you can create an EI, EURL or SNC. Specific measures apply depending on the type of business, such as farming or the liberal professions.
• Corporateincome tax (impôt sur les sociétés- IS ): the company pays the tax itself. Dividends paid to shareholders are subject to income tax. You'll need to choose between a EURL, SARL, SAS, SASU or SA.

This choice must be made according to the preferences of the associates and their individual tax situation.

There's no such thing as an ideal legal status, just ones that are better suited to your project than others.

Building a coherent project requires careful examination of your company's plans and objectives, in order to choose the most appropriate legal status.

This will help you gain credibility with your business partners, financiers and future customers, and contribute to the success of your project!