Taxation of EURL profits

Do you want to set up your own business? As a sole partner?

Like the SASU (Société par Actions Simplifiée Unipersonnelle), theEURL (Entreprise Unipersonnelle à Responsabilité Limitée ) is a viable option!

But what is an EURL?

This type of company is a SARL (Société A Responsabilité Limitée) with a single shareholder. This type of company is therefore subject to rules similar to those of a conventional SARL, apart from certain modifications linked to thesingle-partner status.

What are the main features?

First and foremost, the share capital of an EURL is freely determined by the sole shareholder, according to the company's size, activity and needs. This legal form also limits the legal liability of the sole shareholder to his or her contributions alone (except in exceptional cases, which may extend to his or her personal assets).

With regard to the operation of the latter, the drafting of articles of association is also mandatory, and the sole shareholder appears as the "manager" of the structure (he/she is affiliated to the self-employed regime), even if the manager can also be a third party (he/she is then "assimilated employee"). In SARLs, the manager's decisions concerning the competence of the partners take the form of "unilateral decisions".

What is the tax status of such a structure? A few details are in order!

Taxation of EURL profits

It's important to consider the tax status of a legal form before adopting it for your business. The EURL is taxed on profits.

As the name suggests, this is calculated on the basis of the company's profits for a given financial year. Corporate income tax is the corporate equivalent of personal income tax.

This is equivalent to around 33% of the company' s profits. If the company qualifies for the reduced rate, the tax on profits will correspond to 18% of the first 38120 euros earned, and will then be taxed at the standard rate of 33% for profits in excess of 38120.

There are two options for taxing profits: they can be taxed directly at the level of the sole shareholder via income tax (IR), or directly at the level of the company via corporation tax (IS).

How do you choose between the two?

Choosing between corporate income tax and personal income tax for an EURL

In general, EURL profits are taxed on the basis of IR rather than IS.

However, this only applies if the company's sole shareholder is a natural person. If the sole shareholder is a legal entity, profits will be subject to corporation tax.

However, if the partner is an individual, it is still possible toopt for taxation under the corporate income tax system. If this option is chosen, the decision is irrevocable.

In this context, and so that the sole shareholder/individual opts for the best tax regime, the ideal solution is to carry out a comparative study based on three points.

These three points are the impact of tax, social security contributions and actual income. The ideal solution is to develop forecasting scenarios that compare the two.

To do this, you must first list all taxable household items (excluding income from the EURL).

Next, we need to calculate the projected income tax for the tax household, based on two assumptions: taking into account the profits of an EURL taxed on income tax, and taking into account the remuneration and dividends (or distributed profits) of an EURL taxed on corporation tax.

Fortunately, a simulator available on the impots.gouv.fr website simplifies the task. Finally, we need to compare the impact of tax, social security charges and net income.

It is nevertheless advisable to carry out these operations with a professional.

A comparison of these three steps will determine which of these two taxes is best suited to YOUR project.

In conclusion, it is absolutely essential to understand your project before deciding on the most advantageous tax regime. It may also be worth considering a SASU legal form.