Simple and easy to access, the status of the sole proprietorship is well suited to small projects. But it also has disadvantages.
the status of The company individual enables you to start smoothly. But be careful, it also presents risks.
1. The individual enterprise : what is it?
The sole proprietorship is the legal structure of the most simple and easiest to manage for a creator. The formalities are reduced to a minimum and the rules of operation are extremely simplified. The leader and the business are one and the same person, and the profits from the activity are subject to tax on the income.
This status is in force : by 2018, on the 691 000 companies created in France, the 30-300 were launched in individual business, is 20% more compared to 2017. Characteristics : this status is used by young people under 30 years old (38 %) and women (39 %).
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2. Has reserved the status of a sole proprietorship ?
It is particularly suitable for project leaders who want to create their own (they can still hire) and who wish to keep control of their business. It is suitable for activities in low-investment, and whose development prospects are modest. It is a status chosen by many artisans, entrepreneurs, solo and liberal professions non-regulated such as consultants, it professionals, graphic designers…
In choosing the sole proprietorship classic, without opting for the tax regime the micro-entrepreneur (ex-auto-business), the creator is not subject to the threshold limits of turnover, which enables us to consider a long-term development.
3. What is the difference between the individual enterprise and self-entrepreneurship?
The sole proprietorship is a status while the micro-entrepreneur is a tax system.
A micro-entrepreneur is thus an individual entrepreneur who opted for a tax regime and a social system simplified so that it can exercise easily a “small” independent professional activity, regularly or from time to time, and especially in all knowledge, since the taxation and social charges are paid on the basis of the turnover achieved.
READ ALSO >> COMPARISON. ARS, micro business, self-entrepreneurship: what status to choose?
4. The advantages of the sole proprietorship
The steps are reduced to a minimum and allow you to get started quickly at a lower cost . No paperwork (no need to draft articles of association), or social capital to gather. The entrepreneur registers his company with the chamber of commerce or industry or the chamber of trades and crafts, depending on whether its activity is commercial or craft, or make a declaration to the Urssaf when the activity is liberal.
registration costs range from 27 euros for individual companies (AR) whose activity is commercial, with about 190 euros for the EI craft. (This amount may vary according to departments.) They are free for the liberal professionals are registering to the Urssaf.
accounting obligations are also reduced. It is sufficient to maintain three registers : the journal, the ledger and the inventory book.
tax , the company individual is subject to tax on the income. The contractor reports on its annual income tax return the amount of its revenues : in the category of industrial and commercial profits (BIC) for the merchants/craftsmen, and in the category of non-commercial profits (BNC) for the liberal professions. The ARS also allows the creator to opt for the regime micro-entrepreneur. He then pays his tax on a lump sum basis, and not to the real, which avoids the need to pay more than he should in the first year.
5. The disadvantages of the sole proprietorship
In a sole proprietorship, the creator is subject to unlimited financial liability. As it shall form one and the same person with the company, there is no distinction between his personal assets and his business assets. Result, in case of difficulties or failures, the creditors can be paid off on its personal property, with the exception of their primary residence is a protected right.
there are Two options however to mitigate this risk. You can:
– or make a “statement of exemption” to a notary,
– is opt for the system of the contractor individual limited liability (EIRL).
In the first case, you put away your property whether constructed or not, while in the second, you assign a heritage to the business which serves as a pledge to creditors.
The individual enterprise also necessary to organize and to anticipate the future. The heritage private and professional being confused, it is important to protect his loved ones . If you are married under the regime of community of property, your difficulties can affect your spouse. It is then recommended to pass in the notarea for choose the regime of separation of property. be Careful : this change is only possible after two years of marriage.
the Other disadvantage of the sole proprietorship : the mode of transmission. It is impossible to move the hand gradually to his children, and thus take advantage of the reliefs on the rights of donation. Finally, in the case of death, the heirs receive the business in joint ownership, with the obligation to take every decision by unanimous vote. A serious handicap to term.
READ ALSO >> COMPARISON CHART. The five legal forms of business-to-magnifier
6. Individual enterprise: what to remember
the constitution of The company
1. Number of associates. No entrepreneur is alone but he could hire
2. Amount of minimum registered capital. No object (no notion of capital)
rules of operation
3. Direction. The contractor. It is the only master on board
4. Decision-making. The contractor. It is the only master on board
5. Responsibility of the leader. It is indefinitely liable for the debts on his personal property, except : – If he has made a declaration of exemption before a notary public, to protect its built-up land – If he has opted for the regime of the EIRL, and set up a heritage trust, which allows him to isolate his personal assets from lawsuits, creditors.
The tax and social
6. Tax regime of corporate taxation of profits. the head of The company is taxed directly under the personal income tax. The individual entrepreneur who has chosen the plan of the EIRL may, under certain conditions, to opt for corporate tax.
7. Compensation of the chief executive. It is not deductible against the profits unless option for the IS for a EIRL
Read our complete file
sole proprietorship: three tax regimes for a same state
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8. Social regime of the leader. It is subject to the regime of non-employees
This article has been updated to the 29/04/2019. VF