Setting up an EIRL: advantages and disadvantages

The EIRL, or Entreprise Individuelle à Responsabilité Limitée, is a legal form in the Sole Proprietorship family.

Unlike the EURL, with which it is sometimes confused, the EURL is not a company.

The EIRL therefore has no legal personality of its own.

Let's discuss the advantages and disadvantages of an EIRL!

The advantages of an EIRL 

First, we need to look at the advantages of an EIRL.

This status offers a number of advantages over other legal forms.

The following advantages are worth noting:

• The EIRL, a solitary adventure: if your plan is to run your business as you see fit, without compromise or negotiation, the EIRL is a real advantage for you! Like all sole proprietors, this status allows you to be the sole master of your business, so you can take all decisions relating to your business unilaterally. What's more, this status means you don't have to record all your decisions or appoint an auditor.
• Protection of all personal assets: a major advantage of the EIRL, this provision enables the structure's manager to clearly distinguish his or her personal assets and those of his or her spouse from any risks associated with the business.
• Combining an EIRL with auto-entrepreneur status : you can retain auto-entrepreneur status even when developing an EIRL. The advantages of either status are not affected.
• The option of being taxed underthe corporate income tax (Impôt sur les Sociétés or IS) regime : The EIRL also offers tax advantages. You can choose to be taxed under the Impôt sur les Sociétés (IS) or Impôts sur le Revenu (IR) tax systems.

 EIRL: disadvantages 

Secondly, it is necessary to highlight the disadvantages of the EIRL.

Despite its many advantages, the EIRL also has a number of more negative aspects, largely linked to the omnipresent formalism of this status.

• Strict formalities: the formalities involved in setting up an EIRL, and in declaring the company's assets and liabilities as such, are costly and time-consuming. Indeed, such an action requires the intervention of a professional whose role will be to evaluate the assets, the intervention of a notary if the assets evaluated correspond to real estate, and finally the fees due to the Registrar of the Commercial Court. This formalism is then expressed in the EIRL's accounting. Indeed, in order to carry out the accounting for its structure, it will be necessary not only to draw up annual corporate accounts, but also to register the declaration of assignment of the latter within a maximum period of six months following the close of its accounting period. Failure to comply with these strict formalities can also result in severe penalties, as it tends to re-establish the manager's liability beyond the assigned assets.

• Limited growth: what made the EIRL so attractive can also become a drawback. The legal form of the EIRL is a solitary one. It is not possible to involve another partner, even a financial one, in the running of the business. This is very different from the EURL and SASU, which can easily be transformed into SARL and SAS respectively.

In conclusion, it seems clear that the EIRL is interesting for a certain type of project

That's why it's vital to know your project inside out before opting for the EIRL legal form.