The law provides for multiple legal statuses allowing you to create your company alone.
So it's essential to understand the different legal structures that exist and find the one that best suits your situation before making your choice.
Let's start with the Individual Enterprise (EI). This is a company represented by one person: its manager. This means that they form one and the same person.
The government treats the personal assets of the business owner and the company's assets in the same way.
In other words, their liability becomes unlimited, except in the case of a Limited Liability Individual Enterprise (EIRL).
The EIRL allows you to separate the assets of the manager from those of the company. If you opt for this type of company, you will then be subject to the Non-Salaried Workers Scheme (TNS) as well as income tax.
There are many advantages to sole proprietorships. First of all, you don't need to raise capital to set one up, and with its simple and inexpensive set-up formalities, it's one of the easiest structures to create.
Plus, this scheme lets you take advantage of simplified accounting procedures.
However, the sole proprietorship is a system with risks.
To be clear: you are fully responsible in the event of difficulties, and you will not be able to form a partnership later on. As for dividends, they are strongly discouraged.
In other words, any dividend payments will be taxed heavily, making this type of payment unattractive in this case. Plus, depending on your family situation, income tax can be expensive.
The micro-enterprise status allows you to benefit from very simple creation formalities thanks to a simplified tax system.
For example, you won't have to file a standard tax return. Instead, you'll just make a monthly declaration of your revenue.
If you go for this status, your social security scheme will be that of the self-employed (TNS).
But be careful: Your contributions and taxes will be calculated directly from your turnover and the type of activity you carry out. Your expenses will not be deductible or depreciable, which makes it a disadvantageous status for certain activities, particularly buying and reselling.
Another point to consider is that a micro-entreprise does not allow you to hire employees or associate with others.
Finally, you must stay below a turnover threshold (€70,000 in 2019 for service provision) to continue to benefit from the micro-enterprise scheme.
Beyond this threshold, you will have to change your tax system.
Now let's talk about the Single-Member Limited Liability Company (EURL). It's an appealing company structure, especially because of its limited liability.
With this type of company, you can opt for Corporate Income Tax (IS).
Unlike the micro-enterprise, the EURL is a real form of company and allows you to benefit from certain advantages, such as amortizing your investments, deducting your expenses or recovering VAT.
With this type of status, you'll benefit from the TNS social security scheme. This scheme offers lower contributions but, in return, less social cover and, above all, more complex management. Ever heard of RSI (now Sécurité Sociale des Indépendants)? That's it!
And finally, the SASU status.
This type of scheme, which is quite advantageous, is similar to that of a simplified joint-stock company, but with a single person.
In this case, you will be subject to corporation tax. If you select the SASU, you will be considered an employee and will be entitled to the employee pension scheme and the same social protection. However, you will not be able to benefit from unemployment insurance.
This assimilated employee status is much easier to manage on a daily basis than the TNS scheme.
Plus, you can pay yourself dividends which, today, have a very advantageous tax system with the flat tax, which allows a single levy of 30% on the amount of dividends paid.
So, the last option we talked about, the SASU, is the most common structure chosen by freelance business creators.
In any case, once your company is up and running, it can be really helpful to use an online accountant like Dougs to prepare your balance sheet and handle your tax obligations.
Written by our expert Editorial staff
February 26, 2019
