Consultancy firm: what legal status for success?

The importance of choosing the right legal status for your consulting business

Legal status gives your consulting business a legal existence. To carry out your business legally, you need to choose a legal status for your company. Choosing a legal status for your consulting business is not, however, a trivial matter. The rules governing your business depend on it. Your choice of legal status will have consequences in terms of complexity and cost for ..:

• taxation of your consulting business (income tax or corporation tax),
• the type and amount of tax levied on the executive's income,
• the possibility of reducing the tax burden on the executive's income,
• the amount of expenses relating to the creation and annual legal follow-up,
• the rate of social security contributions applicable to the executive's income (around 42% or 72%),
• the amount of unemployment compensation paid by Pôle Emploi,
• legal flexibility to integrate potential partners or investors,
• taxation applicable in the event of sale of the company.

The choice of legal status can also influence decision-making processes within your consulting business. It is not uncommon for companies to change their legal status during the course of their life, following various events such as the addition of a new partner or the development of their business. Choosing the right legal status helps to anticipate the various events that can occur during the life of a company.

What legal status should I choose for my consulting business?

To set up your own consulting business, you can choose from a number of legal forms , including EI, micro-entreprise, SARL or SAS. The société par actions simplifiée unipersonnelle (SASU) or the entreprise unipersonnelle à responsabilité limitée (EURL) can also be interesting legal forms for your consulting business. When choosing the legal status best suited to your business, you need to take into account a number of criteria specific to your project. It is also essential to take into account the project owner's family and personal situation.

Sole proprietorship

The sole proprietorship (EI) is the simplest legal form for setting up a business, and the one most often chosen by independent consultants at the outset. This legal form offers several advantages for the entrepreneur. Not only does it require no capital deposit, but it's also the least expensive of all legal forms.

Whether it's for setting up a business or for legal and administrative support, the EI is not expensive. A sole trader has the social status of a TNS (Travailleur Non Salarié). This is quite advantageous for him, as he will pay fewer social security contributions than managers who are assimilated employees (around 42% instead of 72%). Non-salaried workers are exempt from VAT, up to a maximum annual sales figure of 33,200 euros.

Micro-business

If you are an entrepreneur whose activity does not exceed certain thresholds, you can also opt for the micro-enterprise tax regime instead of the EI. This means you won't have to draw up annual accounts, or keep any bookkeeping at all. By choosing this system, you can also opt for a payment in full discharge of income tax (under certain conditions). You can also take advantage of the simplified micro-social system for social security contributions.

You can choose to set up your consulting business as anauto-entrepreneur, provided you don't exceed the sales threshold of 70,000 euros. Choosing auto-entrepreneur status is a good way to start a consulting business, especially if you're starting out on your own and want to test the market.

It's also a good choice if you plan to work as a part-time consultant. In some regions of France, the Urssaf (union de recouvrement des cotisations de sécurité sociale et d'allocations familiales) requalifies people who make more than a certain monthly turnover. This is the case even if annual sales fall below the 33,200 euro limit.

SARL, SAS, EURL

The SARL and SAS are multi-person legal forms. They are a good choice of legal status for those wishing to set up a consulting company with several people. If you decide to go it alone at first, however, you can opt for the EURL. This type of legal status will enable you to set your own remuneration. You'll also avoid the automatic ratchet effect of higher taxation when business is good at the moment, but you don't know what the future will bring.

You should also bear in mind that the legal liability of a SARL or SAS is less than that of an EI. It is often said that the consultant has an obligation of means rather than of results. However, case law and the law sometimes make little difference. So you need to limit your personal liability.