The 10 steps you need to follow to start your project / STEP 7 : Legal Status

This phase entails equipping your business creation project with a legal framework that will allow it to emerge legally.

The strategy is not as complicated as we think. Whatever your activity, you will have to choose:

For the sole proprietorship (EI).

for the creation of a company.

To facilitate this, the AFE has compiled a very simple application that will guide you to the most appropriate formula for your application.

I. By choosing the sole proprietorship.

II. By choosing the company.

III. The criteria for choosing the legal structure.

I. By choosing the sole proprietorship.

Together with your company, you will be one and the same person.

As a result, you will have great freedom of action, you will be the sole master on board and not accountable to anyone. Indeed, the notion of abuse of corporate assets does not exist in the sole proprietorship.

In return, your professional and personal assets will be legally interwoven. In principle, you will be liable for your company’s debts on all your assets, including those acquired with your spouse, if you are married under the legal regime of the community of acquittals.

Fortunately, the law automatically shields your principal residence from your professional creditors and allows you to protect your other property by making a declaration of unseizability before a notary, published in the Mortgage Office and, as the case may be, in the Trade and Companies Register, the Trade Register or in a newspaper of legal notices.

Similarly, an individual entrepreneur may also opt for the EIRL (Individual Contractor with Limited Liability) scheme. This option allows him to build up assets allocated to his professional activity distinct from his personal assets. These assets are composed of the assets assigned to his professional activity and professional creditors may only seize these assets in the event of a crisis.

The company will officially bear your surname but you can of course add a trade name.

The profits of your company should be declared in your personal income tax return in the category corresponding to your activity like industrial and commercial profits (BIC) for traders and craftsmen, or non-commercial profits (BNC) for self-employed professionals. They will therefore be subject to income tax.

The option for corporate income tax is possible but is reserved for individual entrepreneurs who operate under the EIRL regime.

Your social regime for the self-employed (self-employed workers) will be managed by the RSI (Régime social des Independents). With the optional supplementary insurance, you will be entitled to the same (or even better) protection at the same cost as employees. To know more about it

If you are under the micro-enterprise tax regime, you will automatically benefit from the simplified micro-social regime. You will thus be a micro-entrepreneur.

The formalities for setting up your company will be reduced to a minimum. It will be sufficient to declare your activity, as a natural person, to the business formalities centre located:

To the Chamber of Commerce and Industry for traders.
To the Chamber of Crafts and Crafts for craftsmen.
At the clerk’s office of the commercial court for commercial agents.
And to URSSAF for the liberal professions.

If your spouse works with you, he or she will have to choose between the status of an employee spouse or a collaborating spouse. Like any entrepreneur, you will naturally be able to recruit one or more employees, either from the start of the company or at the development phase.

II. By choosing the company.

As a legal entity, you will create a new person (legal entity), legally separate from you. As a result:

Your company will have its own assets. In the event of difficulties (and if you have not committed serious mismanagement as a de jure or de facto manager), your personal assets will be protected from the action of the company’s creditors.

Be cautions, however! In some forms of company (such as the SNC for example), the partners are jointly and severally and indefinitely liable with the company. Consult the table comparing the different types of companies.

If you use the property of your company for personal purposes, you may be prosecuted for the abuse of corporate property.

As a “new person“, the company will have a name (corporate name), a domicile (registered office) and must have a minimum of contributions constituting its initial assets to cover its first investments and expenses (registered capital).

As an officer appointed to represent the company to third parties, you will not act “on your own behalf”, but “in the name and on behalf” of another person. You will have to comply with a certain formalism in order to make important decisions. Similarly, on a periodic basis, you will have to report to your co-partners on the management of your business.

At the tax level, the company may be personally taxed as a corporation tax (CIT), either automatically or by option.

The status of your company will depend on the legal structure you choose. If on the other hand you are the majority manager of a limited liability company or sole shareholder of a EURL, you are affiliated to the self-employed persons’ scheme. In other cases, you will be subject to the general social security system (assimilated-employed system).

The creation of your company will entail additional formalities such as drafting and registration of the articles of association with the tax authorities, appointment of the manager(s), publication of an announcement in a newspaper of legal notices.

III. The criteria for choosing the legal structure.

The choice of a structure is generally based on the following criteria

The nature of the activity.
The willingness to partner.
The patrimonial organization.
Financial needs.
The functioning of the company.
The social regime of the entrepreneur.
Legislation has now largely evolved towards harmonisation.