Taxation of EURL profits: what are the rules?

The EURL is a popular status for entrepreneurs wishing to run a business through a one-person company.

This legal status offers a number of advantages, not least that the sole shareholder's liability is limited to the amount of contributions made to the company.

Created in 1985, EURLs have their own legal entity and assets. There is no minimum capital required to create the company.

If the business grows, it is possible to transform the company into a SARL (limited liability company) to allow the arrival of new partners.

One of the reasons for the success of EURLs over the last few years has been the flexibility of the tax system : taxing profits and opting for the corporate tax system offer entrepreneurs a wide range of possibilities, depending on their preferences and objectives.

Let's take a look at each of these advantages

By default, taxable income

In this situation, the sole shareholder is taxed in his or her own name on the company's profits. This option is only available if the sole shareholder is an an individual.

If the latter carries out a professional activity in the EURL, he is then taxed on the progressive income tax scale.

If this is not the case, management of the business is entrusted to a person outside the partner's tax household, by means of an employment contract or specific agreement.

The sole shareholder is then taxed only on the amount of profits received.

EURLs whose sole shareholder is a natural person can opt for the simplified micro-social regime, i.e. micro-entrepreneur.

Free choice of income tax or corporation tax on profits

When they are set up, EURLs opt by default for income tax (IR). However, it is possible to opt for corporate income tax (IS).

Profits are then taxed in the company's name at the standard corporate income tax rate, i.e. 33.33%.

Beware, for this choice is irrevocable.

Certain EURLs can benefit from the reduced 15% corporate income tax rate if :

• annual sales not exceeding €7,630,000 excluding VAT
• Its capital was fully paid up at year-end.
• It is at least 75% owned by individuals.

The reduced rate applies to the first 38,120 euros of sales each year. Beyond that, the standard rate applies.

Note that this does not exempt the employee from paying personal income tax on the salaries and dividends he or she receives.

If the sole shareholder is a legal entity, the company is automatically subject to corporate income tax.

Choosing between the normal or simplified real estate regime

Whether you are taxed on income tax or corporation tax, you can then opt for the "normal real" or "simplified real" regime.

The latter confers several additional advantages, such as the possibility of opting for cash accounting, the presentation of a simplified balance sheet and income statement, and the filing of a simplified tax return.

Whether you choose to pay income tax or corporation tax depends on your individual situation, your earnings forecasts and your previous tax situation.

It's best to compare each situation with a professional in order to make the best choice.

Creating an EURL therefore offers many advantages, over and above the flexibility of taxation on profits.

Firstly, the liability of the sole shareholder is limited to the amount of his or her contributions.

In addition, he can optimize his social security contributions, since they will be calculated on the remuneration he has actually paid himself, and not on the company's profits.

Last but not least, EURL's management rules are simpler than those of a traditional company, and the option of micro-entrepreneur status is attracting more and more entrepreneurs.