SELARL: advantages and disadvantages

Looking to launch a business project related to a regulated profession?
It's possible if you opt for the SELARL legal structure for your future company.

But what is a SELARL?

A SELARL, or Société d’Exercice Libéral à Responsabilité Limitée (Liberal Professional Limited Liability Company), is a legal structure derived from the SARL model.

This type of company is for people who want to develop a company to practice a regulated freelance profession, like lawyers, architects, or doctors.

To shed light on this little-known legal structure, today we're focusing on the specificities, advantages, and disadvantages of a SELARL.

Specifics of a SELARL 

First, it's important to start by describing the specific characteristics of a SELARL, whether legal or tax-related.

The most notable characteristics we can mention are:

• A SELARL is a civil company. However, unlike Professional Civil Companies or other SCPs, the former have the advantage of operating on the model of capital companies.
• It's important to mention that the content of the articles of association of a SELARL is extremely regulated by law.
• Like an SARL, the minimum share capital to be raised is €1.
• The partners in a SELARL can be professionals working in the company, other individuals, or minority corporate entities.
• This type of company can have between 2 and 100 partners. If it goes beyond that, the SELARL becomes a SELAFA, which is a public limited company for liberal professions.
• A SELARL can be a single-person company, which is then known as a SELURL or Société d’Exercice Libéral Unipersonnelle.
• In a structure like the SELARL, the liability of all the partners is limited to the contributions made by them. Nevertheless, it is worth specifying that the professional liability of a partner, relating to professional acts, is personal and covers all of the individual's assets, as well as those of the company.
• This type of structure is generally subject to Corporate Income Tax (IS). However, you can opt for Personal Income Tax (IR).
• SELARL managers are called 'gérants' (managers). They absolutely must be practicing liberal professionals. They can receive a fixed remuneration related to their status as a manager. This remuneration is then taxed according to income tax rules. They can instead receive dividends. They cannot contribute to unemployment insurance under any circumstances.
• It's possible to transfer shares. However, this decision needs to be approved by a ¾ majority of the SELARL's partners. This is the case for most important company decisions.

The advantages of the SELARL

Secondly, we need to consider the various advantages of a SELARL (French professional limited liability company).

With that said, here are a few examples:

• First off, this kind of structure lets you bring in outside capital without putting the professional's independence at risk.
• As specified above, the liability of the partners is limited to their capital contribution.
• Next, it should be mentioned that any remuneration paid to a manager is deductible from the taxable profit. This remuneration is set directly by the managers themselves, who at the same time determine the amount of social security contributions they will then have to pay, as the latter are linked.
• Finally, the partners can choose not to pay themselves dividends at the end of the year. This decision can help avoid taxes on those dividends. It's a real advantage compared to SCPs, where profits are always taxed whether they are distributed or not.

The downsides of a SELARL company

It's important to list the downsides of this legal structure.

The SELARL actually has disadvantages compared to a classic SCP, but also compared to a SELAS or Sociétũ d’Exercice Libéral par Action Simplifiée.

Compared to a SCP (French civil professional partnership)

There are several disadvantages compared to a SCP:

• From an accounting point of view, SELARLs are required to maintain accrual accounting, where invoices are used as evidence. This type of accounting is slightly more complex than cash accounting which is typical for SCPs. This often leads to a higher bill from accountants.
• There's quite a bit of red tape involved with SELARLs (private limited company for liberal professions). Way more than with a SCP (professional civil society). That's why it's super important for SELARLs to approve their annual accounts every year, which need to be filed with the Commercial Court Registry, and also to decide how to allocate the profits.

Compared to a SELAS (Simplified joint stock company)

Finally, a SELARL also has a number of notable disadvantages when compared to a SELAS (Société d’Exercice Libéral par Actions Simplifiée - Simplified Joint Stock Company for Liberal Professions):

• Thus, the managers of a SELARL are imperatively self-employed, non-salaried workers, while those of a SELAS have the more protective status of assimilated employee.
• Next, when transferring shares, the costs that the buyer has to pay are lower in a SELAS than in a SELARL.
• Finally, the dividends of a SELARL are subject to social security contributions, whereas this isn't the case for a SELAS.

Professions and sectors that favor the SELARL.

The SELARL is super popular with many regulated professions, thanks to its specific perks like limited liability and tax flexibility. Here's a list of the main professions and sectors where the SELARL is often the go-to choice:

Legal sector
Lawyers, notaries, bailiffs and other legal professionals find the SELARL a suitable structure for practicing their profession while benefiting from a corporate organization. This form makes it possible to limit their financial liability while facilitating the integration of new partners and the transfer of shares.

Medical and paramedical sector
Doctors, dentists, veterinarians, pharmacists, physiotherapists and self-employed nurses frequently adopt the SELARL. This structure makes it possible to pool resources, share the costs of expensive equipment and offer a more complete and coordinated range of care within the same entity.

Architecture and engineering sector
Architects, engineers, surveyors and other building and construction professionals often opt for the SELARL. This choice allows them to combine their skills within the same company while limiting the financial risks associated with their activity.

Accounting and finance sector
Accountants, auditors, wealth management advisors and other finance professionals find the SELARL an advantageous structure for carrying out their activities. The SELARL allows them to structure their firms effectively and optimize their taxation.

Arts and culture sector
Liberal professions in the cultural sector, such as conservationists-restorers, art critics and certain artists, can also form SELARLs to organize their activities. This legal form offers them increased flexibility while protecting their personal assets.

So, the SELARL is a legal structure that's really popular in lots of regulated professional sectors. It's a great mix of legal protection, tax flexibility, and growth potential, making it a smart choice for many professionals.

In conclusion, the SELARL is a legal structure that may be of interest depending on the entrepreneur's project and needs. However, it remains a little-known structure despite its many characteristics. If you want to create or register your SELARL, you can do so easily with sedomicilier.fr.