Sole proprietorship: changes brought about by the separation of assets and liabilities

The key element of the law of February 14, 2022 in favor of self-employed professional activity is the introduction of a professional patrimony separate from the entrepreneur's personal patrimony. This new status should limit the interest of the EIRL (limited liability sole proprietorship) regime.

Over 3 million self-employed workers affected

More than 3 million people in France work asself-employed, a legal term that encompasses craftsmen, shopkeepers, agricultural entrepreneurs, the liberal professions and micro-entrepreneurs. All these players have chosen not to organize as a company, the main aim being to avoid having to carry out certain administrative formalities. However, this status presents a major disadvantage for workers, who remain liable for debts contracted by the company out of their personal assets (except in the case of the EIRL).

The law in favor of independent professional activity introduces a more protective status for the personal assets of entrepreneurs. From May 15, 2022, their liability will in principle be limited to their professional assets.

A more complex definition of personal assets

To better understand the boundary between the two assets, it should be remembered that prior to the creation of the single status, the sole trader's main residence could be protected from seizure by creditors by means of a declaration of unseizability. Under the new law, banks will no longer be able to seize a worker's personal assets, be they real estate, movable property, securities held in a patrimonial account or money placed in a personal bank account. The only exception: the professional use of these personal assets.

The law of February 14, 2022 in favor of self-employed professional activity sets out two special cases. Firstly, it stipulates that tax and social security debts are to be covered by business assets, except in cases of tax fraud or non-payment of social security contributions. In such cases, the tax authorities may seize all the entrepreneur's assets to cover the payment of income tax, social security contributions and property tax. Secondly, the entrepreneur can waive protection of his principal residence and personal assets when taking out a bank loan, or by notarial deed. This may be the case if he wishes to provide more guarantees to the banks in order to obtain a larger sum.

Older receivables are not affected

The reform of the single status for sole proprietorships will apply to all new businesses. For existing businesses, however, the separation of personal and business assets will only be effective from May 15, 2022. In other words, nothing will change for current claims. This means that former creditors will still be able to seize the individual entrepreneur's personal assets to cover one or more debts.

The creation of this unique status and the separation of assets and liabilities provide real protection for entrepreneurs against the risks associated with their business.