Creating an EURL: advantages and disadvantages

Would you like to set up your own business? There are a number of legal forms you can choose from, but it's not always easy to find your way around. SAS, SASU, auto-entrepreneur or EURL, the choice of structure can quickly become complex.

In this article, we look at the EURL : L'Entreprise Unipersonnelle à Responsabilité Limitée. It's a variation on the SARL, but intended for a single shareholder, and very easy to access.

We explain in detail everything you need to know about EURL to help you make the right decision!

Definition of EURL : Sole Proprietorship with Limited Liability

Definition: The EURL is a legal form of company formed by a single shareholder. In simple terms, it is a derivative of the SARL (limited liability company), which does not allow the creation of a sole proprietorship. The EURL is also known as a SARL unipersonnelle.

This gives the entrepreneur the opportunity to set up his business as a legal or physical entity in his own right, thereby protecting his assets and limiting his liability.

What exactly is an EURL?

EURL is a simple, flexible form of enterprise

Designed for all types of projects, this legal form can be used for craft, commercial, service or agricultural activities.

Like the majority shareholder of a SARL, the founder-manager of a EURL is subject to the RSI regime. As far as thelegal organization of the company is concerned, the EURL gives the manager control over the company's affairs, making him or her responsible for all decisions taken. However, it is possible to dispense with this role by delegating the day-to-day management of the company to a third party. It is also possible to define the role and powers of the managing director in the company's articles of association or in a separate deed.

With regard to share capital, EURLs must stipulate an amount in the articles of association, determined by the partner according to the development of the business. Contributions may be made in cash, in kind or in industry. If the contribution is made in cash, it's important to note that you can only contribute one-fifth of the capital at start-up. The remainder will be paid in within five years of your company's registration.

The advantages of EURL

EURL offers a number of significant advantages for entrepreneurs wishing to set up their own business

• The major advantage of the EURL is undoubtedly that you can set up your company on your own, without having to form a partnership.
   
• If the question of financing is a concern for many entrepreneurs when they set up their business, the EURL minimizes the financial risks. In fact, if the manager declares himself as an individual, he will be subject to the advantageousincome tax system (IR) rather thancorporation tax (IS). It is also possible to opt for corporation tax (IS), which is ideal for higher tax brackets.
   
• Managing an EURL will be easier than for a SARL: no management report or meeting minutes will be required. All important decisions will depend solely on the choice of the sole shareholder.
   
• If the managing partner wishes to sell his shares after 5 years, he will benefit from an exemption on excess sales of shares when he retires.
   
• If the managing partner wishes to delegate management of the business to another person, there's no need to set up a management lease! The formalities will be much simpler, thanks to a rapid change in the appointment of the manager.

The disadvantages of EURL

After its strengths, let's move on to some of the disadvantages of the EURL status.

• From a legal point of view, the EURL is quite strict in terms of administration. The secretariat must be precise, and will impose a number of obligations, such as thestrict drafting of bylaws, the creation of a governance scheme, the convening and management of General Meetings, and so on.
   
• If the manager wishes to welcome a new partner into the company, and thus switch to the SARL form, the transformation will take place through a transfer of shares in the EURL, and thus by increasing the capital. With the EURL, this transfer of shares is more costly than a transfer of SAS shares.
   
• Unlike other forms of company, the managing partner of an EURL is not subject to the salaried employee scheme, but to the RSI. Although it has its advantages, this affiliation system, often a source of dysfunction, has a bad reputation in the self-employed world.

Conclusion

The EURL is one of the attractive legal forms that any entrepreneur can choose to set up a business. Similar in many respects to the SARL (limited liability company), the EURL differs from the SARL in that it is managed by a single shareholder. Nevertheless, it's a good idea to take into account the few disadvantages specific to this type of structure. These include the fixed legal framework, the lack of flexibility to switch to a SARL and the default affiliation to the RSI. Before opting for the EURL, be sure to assess the adaptability of your business to this type of structure.

All in all, the EURL is a good choice for any entrepreneur seeking professional success!