While the SARL is the legal form most frequently used by entrepreneurs, with 56% of start-ups, the EURL is not to be outdone, with 40% of company founders opting for this type of structure.
While the EURL and SARL are relatively similar in terms of administration, organization and taxation, there are a number of differences.
Let's take a look at the situation so that you can choose the right status for your business.
An EURL is a single-member limited liability company. This legal form is made up of a single partner , either an individual or a legal entity, thus limiting his or her liability and protecting the company's assets.
All types of activity, whether craft, commercial or liberal, can adopt this status.
Due to its single-person aspect, the EURL is subject to the self-employed scheme, the RSI now called Sécurité Sociale des Indépendants since January 2018 .
The EURL is a good alternative for entrepreneurs wishing to set up their own business with a solid legal structure.
The SARL is a limited liability company requiring at least two managers. Like the EURL, these managers can benefit from professional assets that are distinct from their personal assets.
Liability is reduced to the amount of their contributions, thus avoiding risks in the event of financial problems.
The managing partners do not run the company alone, and a general meeting must be held every year to contribute to decision-making. This annual meeting validates the SARL's accounts and distributes its profits.
From a legal point of view, the SARL and the EURL have several distinctions. As mentioned above, the EURL has a single shareholder , while the SARL is obliged to have at least two and a maximum of one hundred.
Unlike the EURL, the SARL can also have several managers. Also, the SARL will need to carry out an approval procedure in the event of a share transfer, whereas the EURL will not.
In terms of corporate decision-making, it's the general meeting organized by the SARL's associates that will make all the important choices.
In the case of EURLs, the sole shareholder has carte blanche for all decisions, provided they are recorded in a specific register.
As far as the company's annual financial statements are concerned, the sole managing partner of an EURL is spared the need to produce a management report if at least two thresholds are not exceeded at the time of closing the company's financial year.
These ceilings include a balance sheet total of one million euros, estimated sales (excluding VAT) of two million euros, and a maximum payroll of 20 people. The EURL and SARL are similar in terms ofapproval of accounts.
Within six months of closing, the manager must call a general meeting to approve the accounts. This will enable both structures to formalize a decision taken by the partners and make it definitive.
Once the accounts have been approved, this decision cannot be modified.
Taxation also differs between an EURL and a SARL. In the case of an EURL, if the partner is a natural person, the company tax regime (IS) applies by default. However, it is possible to claim income tax (IR).
It is also possible to opt for the micro-enterprise regime since the Sapin 2 law introduced in 2016. This type of taxation varies according to whether or not the manager also fulfills the role of partner.
If he is a partner, hisremuneration will be taxable, but will not be deducted from the EURL's corporate profits.
If the manager is not a partner, his or her remuneration will be deductible from the company's profits, provided it is not excessive and represents actual work.
If the partner is a legal entity, the SI will be compulsory and cannot be modified.
By default, SARLs are taxed on a corporation tax (IS) basis, so that associates can benefit from the same tax regime as their employees. These partners will be subject to personal taxation only if they receive remuneration and/or dividends.
This remuneration will be deductible from social security contributions paid during the year, as well as from premiums under the Madelin law, and will be entered on tax returns.
In certain specific cases, however, family-owned SARLs can benefit from the partnership regime, with no time limit.
Written by our expert Maeva Girardot
March 13, 2018
