EIRL or EURL: this is often a tricky decision for a future entrepreneur in the midst of setting up a business. Indeed, the choice of legal status is particularly important, and is one of the first elements to be filled in when submitting a business start-up application.
EIRL stands for Entreprise Individuelle à Responsabilité Limitée, and is a system for individual entrepreneurs wishing to limit their liability to the assets assigned to the business, without setting up a company.
TheEURL is a single-member limited liability company. In practical terms, it is a SARL witha single shareholder, and is subject to a number of common obligations. Each type of company has different obligations, although they are largely similar in form.
That's why this is a delicate issue that needs to be clearly resolved.
Overview of common and specific features of each legal status
The EURL and the EIRL have a number of points in common, some of which are essential to consider.
Several tax rules apply to these two types of company. Firstly, profits are taxed according to the same rules and directly in the name of the partners.
By default, they are therefore subject to income tax.
As with many other legal forms, associates are free to choose whether or not to be taxed under the corporate income tax regime. In this sense, both statutes are equally flexible.
For the past 2 years, the sole shareholder of an EURL has been eligible for simplified micro social status, also known as "micro entrepreneur" or "auto entrepreneur".
In the past, this was already available to the manager of an EIRL. The EIRL is a special regime, not a legal status, offering simplified tax and administrative formalities.
Above all, one of the common advantages of these two forms is their ability to protect the assets of company directors. "Limited liability" means that the manager of each structure does not commit himself or herself beyond his or her contribution to the company.
His or her personal assets are therefore protected in the event of default and insolvency in the face of any debts that cannot be honored. This is done by means of a declaration of assignment within the framework of an EIRL.
In both cases, the financial management of the business requires the opening of a business bank account, separate from the one used by the manager for personal expenses.
The company's accounts must be kept up to date, including the annual financial statements, which must be sent to the Greffe du Tribunal de Commerce every year.
Companies subject to the simplified microsocial scheme are not required to meet such accounting obligations; a book of receipts and expenses is sufficient.
Finally, in the case of a real estate contribution, a notarized deed will be required for both EIRL and EURL.
The main advantage of theEIRL is undoubtedly its creation. The formalities to be completed are much lighter for the entrepreneur.
A number of supporting documents are required to establish the identity of the company's director, as well as a declaration of assignment, in order to determine the company's assets and establish the liability of its future director. To formalize the process, nothing could be simpler: simply go to the Centre de Formalités des Entreprises (CFE ) responsible for your place of residence.
This legal status does not require the drafting of articles of association, which is a specific feature of the EIRL.
Setting up an EIRL is entirely free of charge, with no minimum start-up capital required, and no need to publish an announcement of creation in a legal gazette.
Lastly, the valuation of the company's assets does not require the appointment of a contribution auditor.
In the case of an EURL, this is necessary if the total value of the contributions exceeds the amount of the share capital.
One of the advantages ofEURL is that it allows you to open up more horizons for your company's growth.
This status makes it easy to bring new partners into the company's capital.
If this is the case, the EURL is transformed into a SARL, which will also entail new procedures and formalities.
Therefore, a EURL does not have to be owned by an individual. natural personbut also by a legal entity. This is not the case with an EIRL.
This presentation of the specific features and advantages of each of the two types of status enables each entrepreneur to make an informed choice.
Deciding whether to set up an EIRL or an EIRL depends not only on the business model you wish to apply, but also on your short- and medium-term growth prospects.
It's a key issue that deserves careful consideration before any final decision is taken.
Written by our expert Paul LASBARRERES-CANDAU
May 28, 2018
