EURL or SARL: Which business structure should you choose for your company?

What is a EURL?

An EURL is a single-member limited liability company. This legal form consists of a single member, who may be a natural person or a legal entity.

The tax regime for the EURL

For asingle-member limited liability company (EURL), the tax treatment depends on the status ofthe sole member: whether they are an individual or a corporation:

There are different categories of profits for EURLs:

• Industrial and commercial profits (BIC): activities related to commerce and crafts.
• Non-business income (BNC): income derived from self-employment.
• Agricultural income (AI): income derived from rural activities.

The Social Security System for EURLs

A sole proprietor who acts as a manager is subject to social security system for the self-employed, administered by the Social Security for the Self-Employed. Conversely, if the manager is someone other than the sole partner, they are covered by the scheme for persons treated as employees. They receive the same social security coverage as an employee.

The Pros and Cons of an EURL

Here is a summary table of the advantages and disadvantages of the EURL:

What is a SARL?

SARL stands for Société à responsabilité limitée(limited liability company). It has at least two partners or shareholders. The maximum number of partners is 100.

The tax and social security regimes for a limited liability company (SARL)

Like in the case of an EURL, the owners of an SARL benefit from a separation between their personal assets and business assets. The liability of the owners is limited to the amount of their capital contributions.

A general meeting must be held each year to set the strategic direction of the limited liability company. It is responsible for approving the annual financial statements, distributing profits, and so on.

An unpaid manager of an LLC is not enrolled in any social security program. If the manager receives compensation for their role as a corporate officer, they are considered an “employee-equivalent.” SeDomicilier provides a summary table of the social security programs applicable to LLC managers:

The Legal Differences Between an SARL and an EURL

An LLC may have multiple managers. In such cases, they are referred to as co-managers. The status of the manager varies depending on the type of LLC: minority or equal. They are responsible for ensuring the smooth operation of the limited liability company. Under the law, they are considered the legal representatives of the company.

In the event of a transfer of shares, the shareholders of the SARL must follow an approval procedure. In a single-member limited liability company (EURL), there are no shares. The general meeting of the SARL formalizes all of the company’s decisions. In contrast, the EURL has no decision-making body. The sole member records the major policies they adopt in a dedicated register.

Accounting Differences Between SARLs and EURLs

One of the key accounting milestones for an LLC is the publication of its annual financial statements. A single-member limited liability company is not required to prepare this management report if it does not exceed certain thresholds at the close of its fiscal year: total assets under one million euros, revenue (excluding VAT) under two million euros, a workforce of fewer than 20 employees, etc.

Within six months of the fiscal year-end, the manager of a limited liability company must convene a general meeting to approve the financial statements. This step is essential for making strategic decisions.

Taxation of Profits in a Limited Liability Company

Taxation differs between an EURL and an SARL. It is important to note that in the case of a single-member limited liability company (EURL), if the owner is an individual, the corporate income tax (IS) applies by default. It is still possible to opt for the income tax (IR) regime.

By default,profits in an LLC aresubject to corporate incometax. This option allows partners to benefit from the same social security coverage as their employees. They are subject to income tax only when they receive compensation and/or dividends.

The compensation paid to managers of limited liability companies (SARLs) is deductible from social security contributions paid during the year. The Madelin Act provides for the same deduction for bonuses when they are reported on the tax return.

The Pros and Cons of an LLC

Let’s summarize the pros and cons of an LLC in a table:

What are the steps involved in forming an EURL or an SARL?

The steps for forming an EURL or an SARL are similar, although there are some differences.

Drafting by-laws

The articles of incorporation set forth the operating rules for the SARL or EURL. The articles of incorporation must include:

• social form;
• lifespan;
• company name;
• corporate purpose;
• address of the social century;
• amount of share capital.

The articles of incorporation of the limited liability company (SARL) also include other provisions: the names and titles of the partners, the rules for convening the general meeting, the distribution of voting rights among the shareholders, etc.

Choosing a corporate headquarters

Choosing a company's registered office is a critical decision when establishing a business. There are many options available, depending on your business plan and the nature of your operations:

• commercial premises ;
• the manager's personal residence;
• a registered office service provider;
• a coworking space;
• a business incubator.

The formation of the capital stock

Share capital is an essential component of an EURL and an SARL. It consists of contributions made by the partners or shareholders. Depending on the amount of their contribution, a shareholder or partner has certain rights and powers within the company.

Share capital may consist of cash contributions or contributions in kind. In the latter case, these include:

• tangible assets: vehicles, computer equipment, machinery, inventory, etc.;
• intangible assets: trademarks, goodwill, software, etc.

Finally, contributions to the business refer to the skills or expertise provided by partners or shareholders. These may include patents.

The cash capital is deposited in a dedicated bank account at a bank or with a notary. After the company is incorporated, it is paid in.

Registration at the Business Registration Office

Since 2023 , the website of the INPI (National Institute of Industrial Property) has hosted the Business Formalities Portal, known as the One-Stop Shop. Whether you are a partner in an EURL or an SARL, you must visit this website to begin the process of registering your company.

Drafting and publishing a notice in a Legal Gazette (JAL)

A legal notice must be filed for every key milestone in the life of an EURL or SARL: formation, amendment of the articles of incorporation, change of registered office address, dissolution, etc. The notice must include the following information:

• date and nature of the act;
• the company's trade name;
• the duration of the SARL or EURL;
• address of the principal office and amount of the authorized capital;
• Identification of the competent court.

There are several legal notice newspapers (JAL) where you can publish your notices. You must select a JAL located in your department.

Why choose a registered office service provider for your EURL or SARL?

A registered office service provider offers numerous benefits to managers of single-member limited liability companies (EURLs) and limited liability companies (SARLs):

A prestigious location for your business

Your customers, prospects, and partners pay close attention to your company’s headquarters address. It’s a key part of your brand image. Google Business Profile listings give the public a visual overview of your location. Visitors can rate your headquarters and post photos. SeDomicilier offersaddresses in Paris and throughout France: Lille, Strasbourg, Nantes, Bordeaux, Biarritz, Toulouse, Montpellier, Lyon, Marseille, etc.

Tailored benefits for your daily life as an entrepreneur

With SeDomicilier, entrepreneurs have access to à la carte services designed to support them in their day-to-day operations:

• rent a fully furnished meeting room;
• share computer equipment (printers, scanners, Wi-Fi connection);
• rent a meeting room by the hour for remote or in-person conferences;
• streamline mail handling and the handling of incoming phone calls;
• receive legal advice, etc.

A business address service can help you save money. If you don’t need commercial space for your business, a business center is an excellent solution. Registered businesses share operating costs: water, electricity, internet, cleaning, etc. Registering your business with SeDomicilier reduces your CFE(business property tax), which is payable by EURLs and SARLs.

If you’re starting a business on your own, the EURL is the most suitable business structure. Under certain conditions, you may be eligible for the micro-enterprise tax regime. If you’re launching a business with other partners, the SARL is an attractive option that allows you to keep your personal assets separate from your business assets.