Creating a commercial company or a sole proprietorship are two very different approaches. One involves higher formalities and costs (incorporation), while the other requires less formalities and costs (creation of an individual business). You don’t have to stop there to decide. The size of the project and the resources necessary for development are even more decisive criteria. The consequence of the choice is quickly obvious to the entrepreneur when we compare the characteristics of these two legal forms …
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Engage or limit liability
The individual entrepreneur practices in his own name. This means that there is no distinction between the activity of the entrepreneur and his physical person. The entrepreneur’s personal assets are exposed to the economic difficulties of the company. However, the 2005 Economic Modernization Law removed the primary residence from this economic responsibility.
To further protect personal wealth, it is possible to opt for the regime of sole proprietorship with limited liability (EIRL). This form of sole proprietorship requires formalities and costs which bring it closer to the type of one-person limited liability company (EURL). It remains less formal than a company.
In contrast, the incorporation of a company (EURL or SASU) with legal statutes gives the company legal personality. The company and its sole partner or its partners form separate legal entities. The partners or shareholders cannot be held liable beyond their commitment to share capital.
This question of responsibility is linked to the size of the project. For a business without large fixed assets or a small service activity, the individual business meets the needs. If you have to invest, bring in business and more capital, building a company is much more appropriate. It is always possible to transform a sole proprietorship into a company, but the procedure is a bit technical.
Choose or not your social and fiscal regime
By default, the individual entrepreneur is subject to income tax. To get out of this tax, he can choose the form of EIRL mentioned above. The corporate tax option is possible but irrevocable.
For its part, the manager of a EURL declares its profits at company level, but they are taken into account in the overall declaration of the partner’s income. SASU is subject to corporate tax by default. Young SASUs (under 5 years old) can opt for RI for up to 5 years (conditions to be checked).
For the manager’s social security scheme, the sole proprietorship is attached to the self-employed workers’ regime. In the EURL, the sole managing partner of the company depends on the same social regime as the individual entrepreneur. For a third-party manager, depending on the method of remuneration chosen, he will benefit from the “assimilated salaried” scheme, even classic salaried in certain cases.
How to set up a sole proprietorship or a company?
The registration of a sole proprietorship can even be done online via the CFE corresponding to the nature of your activity. For example it is the Chamber of Commerce and Industry for a commercial enterprise, the Chamber of Trades and Crafts for craftsmen, the Urssaf for the liberal professions … Your file must be complete to validate the registration, which the CFE takes care of.
To create and register a company, the entrepreneur must first adopt statutes. Many versions are available online. This kind of file will suffice for a EURL or an LLC. At your choice. Check the document update date and use a reliable site. If you can, ask an expert for advice.
In the case of the SASU which leaves a statutory freedom, you can define the powers and modes of decision as it suits you. Legal advice can be useful to check that your statutes are consistent.
Once the statutes of your company have been adopted, it must be registered in the Trade and Companies Register (RCS). Depending on the characteristics of your project, you will be asked for a series of documents: Cerfa form, identity of the manager, proof of address for the head office, 1 original signed bylaws, legal announcement (copy, original or certificate of publication) … It is possible to carry out this registration directly with the CFE on which you depend, online on its site, or at the registry of the commercial and companies register (RCS).
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