Choosing a business legal structure in France for starting a business is no simple task. There is so much to know about the different legal business types in France that it is impossible to fit it all in this little blog post. I will expand on each business structure in the future because this is a very interesting topic for women wanting to start a business in France.
The most popular business structure for mom-trepreneurs is the Auto-Entrepreneur statute. This is the type of business I currently have, as well as my husband. To get started, here is some basic info to get your feet wet.
Legal Business Types in France
Auto-Entrepreneur
Started in 2008, this is quickly becoming the most popular business statute for entrepreneurs wanting to start a small business.
Advantages of starting this type of business is that it does not require a lot of paperwork to start, there are no upfront costs and taxes are lower. Entrepreneurs can register online through an easy application form and receive their company identification numbers in a week or two. It then takes about 2 months to be registered with the new business under social security.
Disadvantages of having an auto-entrepreneur business is that business owners cannot deduct business expenses, are capped on yearly revenue and are not allowed to hire employees.
Entreprise Individuelle (EI)
This type of business is a step up from the auto-entrepreneur in that business owners can write off expenses, hire employees and have no limits on what they can earn.
The biggest disadvantage with this business type is that entrepreneurs must prepay at least 3,000 euros for taxes after 3 months of operation and then over 4,000 euros the next year. Even if the company earns 0 euros, it will not get refunded for overpaying.
The first two years are tax estimates, and then the third year they will owe an amount based on how much was earned the previous year. If the business prepays too much the 3rd year, it can take 2 years for them to receive a full reimbursement.
This gets very confusing for new business owners and is a large reason why many entreprise individuelle companies fail.
Entreprise Individuelle à Responsabilité Limitée (EIRL)
This business structure became available in January 2011. The only difference between it an EI is that business owners are granted limited liability.
Entreprise Unipersonelle a Responsibilité Limitée (EURL)
This type of business has only one owner and is afforded limited liability from debts to the amount of the initial capital.
A EURL can choose to be taxed through the personal income tax system or to pay company tax on profits. Social security contributions will be as a self-employed person under the régime des non salaries (TNS).
The company must appoint a gérant, who can be the business owner. The gérant will be held legally responsible for running the company.
Société à Responsibilité Limitée (SARL)
If the business has more than one owner, it will fit under this business type. It is similar to the EURL but more complicated because it involves several people.
The profits will be assessed for income tax through the system of company taxation. It can be taxed under the system of personal income if the business is small to medium sized under 5 years old, and does not consist of family members.
As with the EURL, a gérant will need to be appointed.
Société à Responsibilité Limitée Famille (SARL Famille)
Similar to the SARL but the business owners are related. This type of business structure qualifies for a type of partnership taxation, called le régime des societies de personnes.
Other Legal Business Structures
The type of business structure is also dependent on the type of business the entrepreneur wants to set up. In France, there are different associations that control different professions. Some other business types include SCP, SEL, SA, SAS, SN and SCM.
Choosing a business legal structure and setting up your business in France is no simple task. There is so much to know about the different legal business types in France that it is impossible to fit it all in this little blog post – consider it just an introduction. I will expand on each business structure in the future because this is a very interesting topic for women wanting to start a business in France.
Legal Business Types in France
Auto-Entrepreneur
Started in 2008, this is quickly becoming the most popular business statute for entrepreneurs wanting to start a small business. Even though there are over 1,000 different professions that may register under this business type, verify that your business is listed. For instance, a copywriter can be an auto-entrepreneur but an author cannot.
Advantages of starting this type of business is that it does not require a lot of paperwork to start, there are no upfront costs and taxes are lower. Entrepreneurs can register online through an easy application form and receive their company identification numbers in a week or two. It then takes about 2 months to be registered with the new business under social security.
Disadvantages of having an auto-entrepreneur business is that business owners cannot deduct business expenses, are capped on yearly revenue and are not allowed to hire employees.
Entreprise Individuelle (EI)
This type of business is a step up from the auto-entrepreneur in that business owners can write off expenses, hire employees and have no limits on what they can earn.
The biggest disadvantage with this business type is that entrepreneurs must prepay 3,000 euros for taxes after 3 months of operation and then over 4,000 euros the next year. Even if the company earns 0 euros, it will not get refunded for overpaying.
The first two years are tax estimates, and then the third year they will owe an amount based on how much was earned the previous year. If the business prepays too much the 3rd year, it can take 2 years for them to receive a full reimbursement.
This gets very confusing for new business owners and is a large reason why many entreprise individuelle companies fail.
Entreprise Individuelle à Responsabilité Limitée (EIRL)
This business structure became available in January 2011. The only difference between it an EI is that business owners are granted limited liability.
Entreprise Unipersonelle a Responsibilité Limitée (EURL)
This type of business has only one owner and is afforded limited liability from debts to the amount of the initial capital.
A EURL can choose to be taxed through the personal income tax system or to pay company tax on profits. Social security contributions will be as a self-employed person under the régime des non salaries (TNS).
The company must appoint a gérant, who can be the business owner. The gérant will be held legally responsible for running the company.
Société à Responsibilité Limitée (SARL)
If the business has more than one owner, it will fit under this business type. It is similar to the EURL but more complicated because it involves several people.
The profits will be assessed for income tax through the system of company taxation. It can be taxed under the system of personal income if the business is small to medium sized under 5 years old, and does not consist of family members.
As with the EURL, a gérant will need to be appointed.
Société à Responsibilité Limitée Famille (SARL Famille)
Similar to the SARL but the business owners are related. This type of business structure qualifies for a type of partnership taxation, called le régime des societies de personnes.
Other Legal Business Structures
The type of business structure is also dependent on the type of business the entrepreneur wants to set up. In France, there are different associations that control different professions. Some other business types include SCP, SEL, SA, SAS, SN and SCM.
Image Credit: JohnONolan on Flickr.com
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