To open a company, you need to choose a legal status, which is nothing other than a certain type of legal personality. There are many different types, corresponding to :
- The nature of the activity you will be carrying out,
- Number of associates,
- The legal status of associates (individuals and/or legal entities),
- The tax system you want.
To help you make the right choice for your future company, we'll take a look at the criteria to be taken into account and the main features of each type of status.
Six criteria should be taken into account when choosing the best status for your company:
- Number of associates,
- The amount of your contributions,
- The amount of your assets and those of your associates,
- The project you want to set up,
- The social security system you prefer,
- The tax system you're aiming for,
- Your business.
Let's take a look at each of these criteria to give you a clearer idea of the type of status that may be of interest to you.
1. Number of partners
Although you can set up a business on your own, you can also plan to create a company with several partners.
The wealthier your partners, the greater your investment capacity.
If you know that associates will be joining you in the future, don't worry: you can always develop your company by changing its articles of association, even once it has been created.
Besides, what does legal status have to do with the amount of capital contributions?
2. Some bylaws require a minimum amount of contributions
SARL (société à responsabilité limitée), SASU (société par actions simplifiées unipersonnelles), SAS (société par actions simplifiées), EURL (entreprise unipersonnelle à responsabilité limitée), and SNC (société en nom collectif), are companies that can be created with a single euro contribution.
Conversely, companies such as SA (sociétés anonymes) can only be formed with capital of 37,000 euros. In the same vein, cooperatives taking the form of a public limited company, such as SCOP (société coopérative et participative), require a minimum capital of 18,500 euros.
However, if you'd like to set up a public limited company (SA), you should know that SAS, SASU and SA can have 50% of their capital paid in, with the remainder spread over a maximum period of 5 years.
For SARLs, a 20% payment is possible, also spread over five years.
This formula can be very interesting if you want to give more credit to your company. Why? Because when your suppliers or customers see that your share capital is 50,000 euros, or 100,000 euros, rather than 1,000 euros, your credibility will be enhanced.
3. The importance of your assets and those of your partners
Setting up a business means taking risks. But to prevent these risks becoming reckless ones, you need to protect your personal assets.
That's why some types of status can be more attractive than others, because they offer greater protection.
When you or your associates have a large number of personal assets, the first thing to think about is protecting them from creditors who could ask for them to be sold to pay off your business debts.
This is where you need to pay close attention to the documents you sign with credit institutions.
Lenders are often tempted to use your personal assets as collateral for business loans. In this way, they remove the legal protection that your company's status can offer you.
4. Project size
Depending on whether your goals are very lofty, and you're hoping one day to go public, or whether they're more geared towards freelance activity, your legal status will be completely different.
Freelancers, who are in fact auto-entrepreneurs, may prefer single-member companies, or even micro-enterprises, while partners expecting capital inflows on the stock markets will want to start immediately with a public limited company.
5. Legal status according to social security system
The social security system is defined not only by the payment of social security contributions and various levies, but also by the social security system to which you will be assimilated.
So, to remain in the general scheme, you'll generally have to pay yourself.
Otherwise, you will be obliged to switch to the social security system reserved for the self-employed. This means you will have to pay contributions calculated on the basis of the company's profits, or your remuneration if you are not eligible for the general scheme.
6. Legal status according to tax system
Each major type of status leads to a different tax regime. Sole proprietorships are subject to income tax, as are EURLs. Conversely, other corporations are subject to corporate income tax.
This is where the importance of your project also plays a major role.
In some cases, and depending on the tax bracket, either corporate income tax or corporation tax is more attractive.
7. The exception of micro-entrepreneurs
Micro-entrepreneurs benefit from a system known as "micro-fiscal" and "micro-social". The micro-tax system is designed to simplify accounting and tax declarations for micro-entrepreneurs.
To qualify, the company's sales (excluding VAT) must not exceed 176,200 euros for commercial and accommodation activities (hotels, gîtes, etc.), and 72,600 euros for services.
This allows you to opt for a "versement libératoire", i.e. a single payment that enables you to settle all your taxes and social security contributions in a single instalment.
Above all, your social charges are assessed on the basis of your sales. The conditions of the micro-social scheme are the same as those of the micro-tax scheme.
8. Nature of business
There is a very important distinction between commercial and liberal professions. The former allow you to create commercial companies (SARL, EURL, SASU, SAS, SA), while the latter direct you towards SELs, or liberal practice companies :
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SELARL: limited liability partnership,
- SELAFA: SEL in anonymous form,
- SELAS: SEL par actions simplifiées,
- SELCA: SEL limited by shares.
SELs are reserved for self-employed professionals, but there's nothing to prevent them from opening a conventional limited liability company, such as a SARL.
Now that we've seen the criteria that can lead us to choose one type of legal status over another, let's take a closer look at the following legal statuses:
- Micro enterprise,
- Sole proprietorship
- Sole proprietorship with limited liability
- One-man business with limited liability (EURL)
- Single-member simplified joint stock company (SASU)
- Limited liability company (SARL)
- Simplified joint-stock company (SAS)
- Public limited company (SA)
1. Why opt for micro-business status?
The micro-business is the self-entrepreneur scheme. It makes running your business a lot easier, and goes very well with the fact that you are the only member of the company.
Given that you have to manage everything on your own to run your business, it's always a good idea to make your life easier with greatly simplified tax and accounting procedures.
What's more, this status can enable you to earn money by not having to charge VAT to the customer, as long as your sales do not exceed certain thresholds.
2. Sole proprietorship
This is another type of simplified company. As the name suggests, you cannot opt for this status if you have partners.
The advantage is that you make all your decisions on your own, and you don't have to make a minimum contribution to form capital, since there is none.
The advantage is that certain protections for your personal assets guarantee that your creditors will only be able to seize your assets related to your professional activity, for all claims arising from May 15, 2022 onwards.
It's quick and easy to set up, and allows you to opt for the micro-enterprise tax and social security system, but you can also opt to be taxed under the corporate income tax system.
3. Sole proprietorship with limited liability (EIRL)
Another form of business dedicated to entrepreneurs acting without any partners, the EIRL is a status that offers greater asset protection. The EIRL manager's personal assets can never be involved in legal proceedings initiated by creditors.
With the exception of the credit institutions mentioned above. However, the EIRL status was definitively abolished by the law of February 14, 2022, which overhauled the status of individual entrepreneur.
4. One-man limited liability company (EURL)
The EURL is the corollary of the SARL. This status enables you to set up a limited liability company on your own, while leaving the door open to a move towards SARL status, should other people wish to join you.
Your liability to creditors is limited to the amount of your contributions. What's more, you are free to set the amount of share capital you wish to allocate to your company when it is created.
Finally, the tax authorities give you the choice of opting for either anincome tax or acorporation tax regime.
5. The SASU (société par actions simplifiées unipersonnelle) and the SAS (société par actions simplifiées)
A SASU is a single-member version of the SAS. While the sole shareholder of a SASU benefits from less restrictive operating rules than for the SAS :
- no management report required below certain thresholds,
- no need to file the report with the clerk's office if it has to be drafted,
- no approval of the parent company financial statements,
- no mention in the company register of the clerk's receipt for the annual filing of accounts.
For the rest, the operating conditions are similar. The share capital, and all the rules governing the company's operation, are freely determined in the articles of incorporation.
The law also gives associates complete freedom to make contributions, which may be in cash or in kind. However, certain decisions must be put to the vote of the associates, in accordance with the conditions laid down in the bylaws.
The quality of the drafting of the company's articles of association is therefore the Achilles' heel of this legal form. If the articles of association are poorly drafted, or if there is disagreement between the partners, management of the company can quickly become complex.
6. Limited liability company (SARL)
The SARL is the most common legal form. It must have at least two partners, but no more than one hundred, which is usually more than enough. Share capital is freely determined, provided it exceeds 1 euro. In other words, it is compulsory.
Although contributions in cash (money) and in kind (tangible and intangible assets) can constitute the SARL's share capital, contributions in kind (know-how) are not accepted. However, they do entitle the partner entering the company with an industrial contribution to voting rights at the Annual General Meeting.
Partners' liability is limited to their contributions, and their personal assets are protected from the company's creditors.
From a tax point of view, the SARL is subject to corporate income tax, but it is possible to opt for income tax, if it is a family SARL, to the exclusion of SELARLs.
7. Public limited company (SA)
The most complex form of company, the SA allows investment by individuals and/or legal entities who have absolutely no connection with each other, to the point of not even knowing each other. The SA is therefore dedicated to projects requiring particularly substantial investment.
A public limited company is a cumbersome structure, with a Board of Directors comprising between 3 and 18 members. A blocking minority exists above 50% of the capital, and the quorum for taking part in decisions is 20% of the shares.
These companies are subject to corporate income tax, with the exception of income tax for the first five years of the company's existence, provided certain thresholds are met, notably in terms of sales and number of employees.
Would you like support in choosing the legal status best suited to your project? SeDomicilier offers you a team of expert advisors for a tailor-made solution.
With so many different legal statuses to choose from, it's a real plus to have the support of qualified legal experts who can advise you.
