The number of new businesses created in France is constantly increasing. It has risen from an average of 550,000 between 2011 and 2020 to 995,000 (all legal forms combined) in 2021, an increase of over 17%.
The legal forms most chosen by business creators this year are the micro-enterprise with 17%, the SAS and SASU (which is a single-member SAS) representing 68% and limited liability companies 30%.
It should be noted that choosing a legal status for your business is a crucial step, as it determines both the tax regime to which you will belong, your share capital and liabilities. In this guide, you will find sound advice on which legal form to choose for your company.
What are the different legal forms?
The legal form you choose determines the organisation and operation of the company and the status of the manager. For this reason, you should obtain all the necessary legal information before setting up your company.
The choice of legal form must take into account the nature of the activity you wish to carry out. There are several legal forms and each one has its own specific requirements that should be studied according to your project and expectations.
- The simplified joint stock company (SAS): this is a commercial company that offers great flexibility, as the law allows the partners the freedom to define the rules of operation. What's more, the formalities for setting up the company are so simple that you can create an SAS online
- Single-member simplified joint stock company (SASU): this is an SAS owned by a single partner
- The limited liability company (SARL): this is a commercial company made up of at least two partners whose liability is limited to the amount of their contributions
- The single-member limited liability company (EURL): this is a limited liability company with a single partner
- The micro-enterprise (auto-entreprise): this is reserved for entrepreneurs wishing to operate in their own name and benefit from the micro-social and micro-tax regime because of a low turnover
- The sole proprietorship (EI) or the former individual limited liability company (EIRL): suitable for a commercial, craft, industrial or liberal activity, the sole proprietorship is a simplified form of company that anyone over 18 years of age can create and thus become an individual entrepreneur
How do you define the legal status of your business?
To determine the legal status that corresponds to your company, you must take into account several parameters such as
The number of partners
If you want to work alone, you can create a :
- EURL or a SARL with a single partner
- micro-enterprise or an EIRL
- SASU or a SAS with a single shareholder
If you plan to have partners, then you must choose between creating an SAS or a SARL.
Organisation and management of the business
All entrepreneurs want flexibility in the management of their business. When analysing and comparing the various legal forms, the one that offers the most freedom is the SAS.
The latter allows shareholders to benefit from internal organisational freedom both in terms of the allocation of power and its exercise.
Indeed, contrary to public limited companies (SA) where the law provides the provisions governing the organisation of power management, in the SAS, the right is left to the managers to define these conditions in the articles of association of their company.
The method of remuneration of the partners: dividends or salary?
Remuneration in the form of a salary is more appropriate in an EURL or SARL, as the amount of social charges is much lower than in the SAS or SASU. We are talking about 40% of the net salary in a SARL compared to 80% of the net salary for the President of an SAS.
The type of taxation of profits
You can choose between two methods of taxing profits, each depending on the legal form of your company:
- Income tax: this concerns the EURL when its partner is a natural person, the sole proprietorship, the EIRL. In this form of taxation, the partners are directly liable for tax on the company's profits.
- Corporate tax: this is suitable for the SAS, SASU, SARL, and EURL if the partner is a legal entity. In this form of taxation, the company pays the tax on the profits made. Utilizing tax accounting software can help streamline this process and ensure accuracy in your filings. The partners who wish to receive the fruits of their shareholding proceed to a dividend distribution. They are then taxed directly on their income.
However, it is important to note that companies subject to income tax may choose to pay dividends to their shareholders.
