How does a one-man limited liability company work? Here's how!

Why is the SARL unipersonnelle (EURL) such a popular legal status for French entrepreneurs? Because it combines the advantages of setting up a business on your own, while retaining the advantages of the SARL.

Its operation is very similar to that of a SARL, with one exception: you are the sole master on board. With a single shareholder, the EURL is a particularly flexible and attractivelegal status for starting up a new business.

Let's find out everything you need to know about how a one-man limited liability company works!

What is a SARL unipersonnelle (EURL)?

A SARL unipersonnelle, also known as an EURL (Entreprise Unipersonnelle à Responsabilité Limitée), is a limited liability company with a single shareholder.

Its fundamental feature is that the liability of the sole shareholder is limited to the amount of the contributions made to the company.

The sole shareholder's personal assets are protected, and cannot be seized to recover any debts relating to the company (except in the event of management error or a court-approved offence).

Having only one partner does not prevent the company fromemploying staff.

How does a one-man limited liability company work?

As a sole proprietorship, the SARL unipersonnelle (EURL) has its own legal personality. Although the law sets out a number of operating rules, the sole shareholder is free to define the company's internal rules. And with good reason: he or she is the sole drafter of the company's articles of association!

For example, it is free to set the amount of share capital (there is no minimum amount required by law). It can also commit the company to third parties. The sole shareholder is empowered to make major decisions, and reports on them in minutes known as DAU (Décisions de l'Associé Unique).

The day-to-day running of the company is entrusted to the EURL manager.

As a general rule, the sole shareholder and the managing partner are the same person. If the sole shareholder does not wish to take care of day-to-day business, he or she may appoint a managing partner.

The sole shareholder can also bind the company in dealings with third parties, and can take any management action in the company's interests. The scope of these prerogatives is defined in the Articles of Association, drawn up by the sole shareholder.

What are the tax rules for a one-person limited liability company?

If the sole shareholder is a natural person, the single-member SARL is taxed by default under the French income tax system (Impôt sur le Revenu).

This means that the sole shareholder is taxed on the income he or she receives at the level of his or her marginal income tax bracket. The advantage of this method of taxation is that any losses incurred by the EURL can be deducted from your overall income, up to a limit of 6 consecutive financial years.

However, it is possible to opt to be taxed under the corporate income tax regime. In this case, there is no turning back during the life of the company.

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

In 2021, the profits of an EURL subject to corporation tax will be taxed at the reduced rate of 15%, on the portion of profit limited to €38,120, provided sales do not exceed €10 million; and at the standard rate of 26.5% above this figure. In 2022, the standard corporate income tax rate should be reduced to 25% for all companies and for all their profits.

As a reminder, it is possible to benefit from the tax conditions of the simplified microsocial regime (applicable to micro-entrepreneurs), subject to compliance with annual sales ceilings.

What are the advantages and disadvantages of a one-man limited liability company?

One of the advantages of the EURL is that the sole shareholder's liability is limited to the amount of his or her contributions to the company. As mentioned above, this protects the entrepreneur's personal assets.

An EURL also conveys a more serious and credible image in the eyes of your partners, compared with a micro-business for example.

The EURL can easily evolve into a SARL if you finally decide to join forces.

Among the disadvantages of the EURL, the accounting, legal and tax obligations to which the company is subject are greater than for a microenterprise. In addition, the sole shareholder is liable for minimum social security contributions, even if he or she does not receive any income.

Also, the tax and social security regime for an EURL is less advantageous than that applicable to a microenterprise. Lastly, the administrative procedures involved in setting up an EURL are more extensive than those for a microenterprise.

What are the steps involved in setting up a one-man limited liability company?

Setting up an EURL involves several key administrative steps:

• The first step is to draw up the company's articles of association. We recommend that you call on the services of a professional to ensure that you leave no stone unturned.
• Next, you need to deposit your share capital with a bank. It will be placed in an escrow account, and a certificate of deposit will be issued to you.
• The next step is to publish an advert in an approved legal gazette in your area.
• Finally,an official EURL creation file must be filed with the commercial court clerk's office, comprising the official M0 creation form and the various supporting documents mentioned above.

Setting up a one-man limited liability company is no mean feat. It's advisable to call on the expertise of a professional to save time and avoid making any potentially damaging mistakes.

Domiciliary companies offer administrative and legal assistance to help entrepreneurs with all their procedures!