The law provides for a wide range of legal forms enabling you to set up your own business.
That's why it's essential to understand the different legal forms that exist and to find the one best suited to your situation before making your choice.
Let's start with the Sole Proprietorship (EI). This is a company represented by one person: its manager. This means that they are one and the same person.
The French government treats the entrepreneur's personal assets and the company's assets in the same way.
In other words, the latter's liability becomes unlimited, except in the case of theEntreprise Individuelle à Responsabilité Limitée (EIRL).
The EIRL makes it possible to separate the manager's assets from those of the business. If you opt for this type of business, you will be subject to the Régime des Travailleurs non Salariés (TNS) and to income tax.
The advantages of sole proprietorship are many. First of all, you don't need to raise any capital to set up your business, and with its easy and inexpensive set-up formalities, this makes it one of the simplest systems to create.
What's more, this plan allows you to benefit from simplified accounting procedures
On the other hand, sole proprietorship is a risky business.
To put it plainly: all responsibility falls to you in the event of difficulties, and you won't be able to join forces afterwards either. As for dividends, they are largely discouraged.
In other words, any dividend payment will be overtaxed, making this type of payment unattractive in this case. What's more, depending on your family situation, income tax can be very expensive.
Micro-entreprise status allows you to benefit from very simple set-up formalities, thanks to a simplified tax system.
For example, you won't have to prepare a traditional tax return, but instead a monthly sales declaration.
If you opt for this type of status, your social security system will be that of a self-employed worker.
Please note, however, that your contributions and taxes will be calculated directly on the basis of your sales and the type of activity you carry out. Your expenses will not be deductible or depreciable, which makes it an unattractive status for certain activities, such as buying and selling.
Another point to bear in mind is that a micro-business does not authorize you to hire employees or to form partnerships.
Finally, you must remain below a certain sales threshold (€70,000 in 2019 for service provision) to continue to benefit from the micro-enterprise scheme.
If you exceed this threshold, you will have to switch to another plan.
Now it's the turn of the Entreprise Unipersonnelle à Responsabilité Limitée (EURL). This is an interesting type of company, with limited liability.
With this type of company, you can opt to pay corporation tax (Impôt sur les Sociétés - IS).
Unlike the micro-enterprise, the EURL is a true corporate form, giving you a number of advantages, such as depreciation of investments, deduction of expenses and VAT recovery.
With this type of status, you benefit from the TNS social security system. This system allows you to pay lower contributions, but on the other hand, it reduces your social security coverage and, above all, makes management more complex. Have you ever heard of the RSI (now Sécurité Sociale des Indépendants)? That's right!
And finally, the SASU status.
This type of system, which is quite advantageous, is similar to that of the simplified joint stock company, but with a single shareholder.
In this case, you will be subject to corporate income tax. If you opt for a SASU, you will be treated as an employee, and will be entitled to the same pension scheme as employees, as well as the same social security protection. However, you will not be eligible for unemployment insurance.
The status of assimilated employee is much easier to manage on a day-to-day basis than the TNS regime.
What's more, you'll be able to pay yourself dividends, which are now taxed at a very advantageous rate with the flat tax, which authorizes a single deduction of 30% on the amount of dividends paid.
The last model described, the SASU, is the one most often chosen by freelance entrepreneurs.
In any case, once your company is up and running, it can be very useful to call on an online chartered accountant like Dougs to draw up your balance sheet and take care of your tax affairs.
Written by our expert Editorial staff
February 26, 2019
