French business : life after the Microentreprise

French business : Sole tradership or Limited Company?

You first need to decide if you want a sole tradership or a Limited Company.  A company will be more expensive to set up and its accounting obligations are more rigorous but do not panic – you don’t have to be Elon Musk to open one.  A Limited Company allows you to have business partners and provides a clear separation between personal property and company property; it’s like the company is a whole other person in every sense (except you can’t go for drinks with them after work!).

With a sole tradership, you are your business and your business is you.  The law has recently improved protection for sole traders’ personal property although a true separation between personal and professional remains somewhat incomplete.

Here’s what they all have in common – unlike the micro, all these options allow you to deduct professional expenses and employ other people.  Also, they impose no turnover ceiling.  Let’s look at the main ones.

French business : Sole Tradership

Entreprise Individuelle

A sole tradership is often seen as the easiest step up from the micro which is a smaller simplified version of this regime.  It’s quick and cheap to set up and your accounting obligations are relatively light.  Since by default, this French business status makes no clear separation between you and your business, whatever your business shows as a profit is the amount considered as your personal revenue. This whole sum is therefore subject to income tax and social charges (cotisations).  It may work for you if your profit is relatively small and you have a low income tax liability.  However, if you show high profits and particularly if you are a single person with no dependents, then prepare for some huge bills from URSSAF and the tax office!

French business : Limited Company

EURL / SARL

This is a form of Ltd Co French business structure. You have the choice of declaring all your profit as your personal revenue (which puts you in a financially similar position to the Entreprise Individuelle above), or drawing a fixed remuneration and leaving the rest of the profit in your company.  In this situation, your social charges and income tax are charged only on the remuneration that you draw while your company will be liable for its own tax on profit.  This structure works well when your profits are higher than the amount you need for your own living expenses.  EURL and SARL are legally identical except the EURL is for only one person while the SARL is a minimum of 2 associates.