Here we present the advantages and disadvantages of theEURL, which, as its name suggests, limits the liability of the manager.
The EURL is a status that applies to anyone wishing to set up a business alone. He or she becomes what the law calls the " sole shareholder ", with all the powers of a shareholders' meeting.
Although there is a standard set of articles of association, the law leaves it up to the sole proprietor to draw up articles of association tailored to his or her own situation, when applying for registration with the RCS or CM.
EURL means single shareholder. And a single shareholder means low capital investment. Yet a company's share capital, coupled with its partners' investment capacity, is often what enables it to gain market share.
There is no example of a successful business that has not gone through the fund-raising stage to achieve success. The EURL is no exception. Fortunately, this type of status remains open to change.
In this way, the manager of an EURL can open up its share capital to others at any time, and bring in other partners or potential investors. In this way, the EURL is transformed into a SARL, which is exactly the same legal form, except that the manager loses his status as sole partner.
The great flexibility of the EURL makes it a particularly attractive legal status. Its advantages include
Simplified advertising formalities
As soon as the company is created, the law makes it subject to simplified publicity formalities. While the obligation to register with the RCS or the CM is maintained, the sole shareholder is exempted from having to publish the company's creation in the Bulletin officiel des annonces civiles et commerciales (BODACC).
More precisely, it is the clerk of the commercial court with which the company is registered who transmits the company's creation announcement directly to the BODACC. Although this transmission and registration are free of charge, amendments to the articles of association are subject to a fee.
Thus, the sole shareholder of an EURL saves 143 euros for the transfer of the company's registered office, and 116 euros for any amending registration. The EURL manager also saves 25 euros on the cost of the notice required to file the company's annual financial statements.
Liability limited to the amount of contributions
This is probably the most important advantage of the EURL: the entrepreneur's liability is limited to the amount of his contributions. What does this mean in concrete terms? It means that your creditors won't be able to seize your personal assets to cover your debts.
In other words, a creditor can never ask for your house to be seized to pay off the company's debts. However, it is not uncommon for lenders to allow you to take out a loan only with the guarantee that part of your assets can be seized.
Consequently, it is up to the manager to weigh up the pros and cons when signing a loan agreement with a bank. Once the principal residence has been mortgaged, the notion of liability limited to the amount of contributions tends to disappear.
Choosing the amount of share capital
The law of August1, 2003 on economic initiative simplified business start-ups. For the EURL, it lowered the minimum share capital requirement from 7,500 euros to just 1 euro.
The possibility of opening a one-euro share capital makes it easier to set up a one-man limited liability company, which prior to the 2003 law meant that many people had to take out a loan or abandon this legal form altogether.
However, there are two limits to low share capital. The first is bank loans. Bank loans are only granted on the basis of the amount of capital contributed. The loan granted is generally three times the amount of the share capital.
The second limitation relates to the entry of outside investors into the company's share capital. To retain a majority shareholding in the company, the sole manager will be obliged to contribute a larger sum of money to his company, in order to maintain his majority shareholding and thus decision-making power.
Possible changeover to SARL status
Bringing one or more investors into the company's capital is made easier by the fact that the EURL can very easily be converted into a SARL (limited liability company). The legal form is in fact strictly identical, the only difference being in the number of partners and certain publicity formalities.
It is the deed of transfer of shares that will switch the EURL to SARL status. However, this change will have a number of consequences:
- Decisions will be taken at the meeting,
- The manager is no longer self-employed (dependent on social security),
- Social security contributions are rising,
- Obligation to draw up pay slips,
- Changeover to capital company tax regime.
The choice of taxation
The sole manager of an EURL is free to choose between corporate or income taxation. Choosing income taxation guarantees simplicity of operation, since no payslip needs to be issued by the manager.
However, the choice of income tax can be more onerous when the marginal tax rate exceeds the 30% mark, which corresponds to the corporate tax rate. With a maximum tax rate of 41%, it is not uncommon for income taxation to be less advantageous than corporate taxation.
Like all legal forms, the EURL has its drawbacks:
Social security for the self-employed
EURL managers are not covered by the general social security scheme, but by the Sécurité Sociale des Indépendants (SSI), which has replaced the Régime Social des Indépendants (RSI).
Although the SSI is now managed by the general social security scheme, the EURL manager is still subject to the same social security contribution rates, i.e. from 0% (income under 45,250 euros) to 3.10% (income over 57,590 euros).
However, social security cover for the SASU manager remains with the CPAM, which pays benefits in the event of illness or maternity.
Strong legal obligations
The EURL is a one-person company. In this sense, it is reminiscent of a sole proprietorship. However, it's a long way from it. The EURL has strict accounting obligations.
By law, the company is required to keep "regular and accurate" accounts, including the chronological recording of all financial transactions, the preparation of invoices, and the retention of all accounting documents and supporting evidence for a period of ten years.
Impossibility of using the micro-business tax system
Although the EURL is, by definition, a small company, it does not qualify for the advantages of the micro-business tax regime. As a result, the sole shareholder of the EURL will not benefit from any flat-rate deduction on the company's sales, which nevertheless range from 50% to 71% depending on the type of activity (self-employed, commercial or purchase-resale).
So, before opting for the EURL, you need to weigh up the pros and cons between opting for a status that can lead to the development of your business, or a more tax-efficient status such as that of a micro-enterprise, which blocks any possibility of expansion.
