If you are a self-employed professional, you have a choice of different legal forms for your business. Whether you’re a sole trader, setting up a company or have a special status, there are many options available, each with its own advantages and disadvantages, which you need to be aware of in order to choose the status best suited to your situation.
Reminder: According to the CNPL (Chambre nationale des professions libérales), a liberal profession is any profession practiced on the basis of appropriate qualifications, in a personal capacity, under one’s own responsibility and in a professionally independent manner, offering intellectual and conceptual services in the interest of the customer and the public.
Sole proprietorship (EI)
Sole proprietorships are the most common form of self-employment, mainly because of the simplicity of the administrative procedures involved.
The professional is subject to income tax. Sales from your self-employed activity are classified as non-commercial profits (BNC).
If annual revenues are below €70,000, you can opt for the micro-business system, which offers a flat-rate deduction of 34%. Above this sales threshold, you are subject to the controlled declaration system: you deduct actual expenses, supported by invoices.
The sole trader is considered a TNS, or Travailleur Non Salarié:
- Declarations are made to Urssaf
- Health cover is provided by the Société Sociale des Indépendants (SSI, formerly RSI).
- Membership of the pension fund depends on the trade concerned
In the case of an EI, there is no separation between private and professional assets. Liability is therefore unlimited in the event of company debts.
Limited Liability Sole Proprietorship (EIRL)
This operates in the same way as the EI, but enables the separation of personal assets from those allocated to the running of the business.
It is similar to that of the EI, with the possibility of opting for the Impôt sur les Sociétés (IS).
The social security system is similar to that of an EI.
The main advantage of the EIRL is that it protects personal assets against any debts acquired during the course of the business activity.
Professional partnership (SCP)
This specific legal status is available to regulated liberal professions. The SCP enables several members of the same profession to work together: lawyers, notaries, nurses, etc.
Each partner is subject to income tax on the share of profits received. An SCP may also opt for corporate income tax, but this choice is final.
Partners are self-employed, and contributions are calculated on their share of profits.
The partners of an SCP are unlimitedly liable for any debts arising from their professional activity, and commit all their assets to the professional acts performed.
In addition, an SCP requires the appointment of a manager.
The Société d’Exercice Libérale (SEL)
The SEL is a specific legal status that enables liberal professions to form partnerships in a joint stock company. It has the distinctive feature of being adaptable to the chosen corporate form:
- SELARL: Société d’Exercice Libérale à Responsabilité Limitée (limited liability company for liberal practice)
- SELAFA: Société d’Exercice Libérale à Forme Anonyme (Limited Liability Company)
- SELAS: Société d’Exercice Libérale par Actions Simplifiée (simplified joint-stock company for liberal practice)
- SELCA: Société d’Exercice Libérale en Commandite par Action (limited partnership for liberal practice)
The SEL allows the company’s capital to be opened up to outside investors, provided that the company is controlled by liberal professions and that the latter are directors of the SEL.
It depends on the SEL’s articles of association and legal form: SARL, SA, SAS.
Opting for the corporation tax (IS) thus makes it possible to optimize taxation (notably through the allocation of dividends, which are currently taxed at a lower rate than earned income).
The social regime depends on the legal form on which it depends: SARL, SA, SAS
- Directors of SELAS and SELAFA and minority managers of SELARL are assimilated employees and contribute to the general scheme,
- SELARL and SELCA managers are self-employed and pay contributions to URSSAF + specific pension funds.
Other advantages and disadvantages:
Compared with the SCP, the SEL has the advantage of limiting partners’ financial liability to their capital contribution. However, each partner remains personally liable for his or her professional actions.
In addition, transfers of shares (depending on the legal form) are regulated.
The trading company
With the exception of a few regulated sectors, self-employed professionals can choose to run their business through a trading company. This makes it possible to separate the company’s assets from those of the director.
Single-member company: EURL or SASU
These two legal forms are ideal for self-employed professionals.
- EURLs are generally subject to corporate income tax. Under the threshold of 70,000 euros in annual sales, the company system applies, while above this threshold, the controlled declaration system applies. It is possible to opt for the corporate income tax regime.
- The SASU is subject to corporate income tax, while the executive pays income tax on the remuneration received for his or her mandate. Any dividends are recorded as income from marketable securities.
The multi-person company: SARL or SAS
If several people decide to form a partnership to practice a liberal profession, a multi-person company legal status is required.
Here too, the partners’ personal assets are protected, their liability being limited to their capital contribution.
Multi-person companies are subject to corporate income tax, and the director pays income tax on his or her remuneration, as well as on any dividends.
Depending on the legal status chosen, and the number of partners and managers, the calculation of social security contributions may vary. In general, these are based on the remuneration received by the executive.
In a multi-person partnership, the different partners do not have to work in the same regulated liberal profession, as is the case for an SCP.
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