Small businesses: lighter accounting requirements

Bookkeeping is a legal requirement under the French Commercial Code. They must be regular, sincere and faithful to the company's reality. It is essential to anticipate any financial difficulties that may arise. Regardless of their legal form and the lighter accounting requirements they may benefit from, small businesses must comply with certain rules at the close of the financial year.

Mandatory bookkeeping for very small businesses

VSEs are required to keep accounts, i.e. :

  • Record all accounting documents and movements affecting their assets;
  • issue invoices;
  • Check the existence and value of assets and liabilities by inventory;
  • Draw up annual accounts at the close of each financial year (balance sheet, income statement, notes).

These companies can keep their own accounts, or have them doneby a chartered accountant. Only a member of the Ordre des Experts-Comptables can carry out such bookkeeping or auditing. Managers who take the risk of keeping fictitious accounts are liable to a fine of 500,000 euros and 5 years' imprisonment.

Professionals registered with the Registre du Commerce et des Sociétés (RCS) are subject to another obligation: that of keeping, in electronic or paper format, a journal book chronologically retracing all operations, and a general ledger. The inventory book is no longer mandatory for fiscal years opened on or after January 1, 2016, but must be kept for 10 years.

Accounting requirements vary according to tax system

The scope of a company's accounting obligations varies according to its tax regime.

Companies subject to the micro-business tax regime and taxed as industrial and commercial profits (BIC) or non-commercial profits (BNC) benefit from simplified accounting. They are not required to prepare a management report, and can present their accounts in a simplified format provided that, at the close of the last financial year, they do not exceed two of the following three thresholds:

  • 6 million euros in total assets,
  • 12 million euros in net sales,
  • 50 employees.

If a company exceeds two of these three thresholds for two consecutive accounting years, it will be required to produce a management report. In a communication from its legal committee (no. 23-009 of 1-2-2023), ANSA (Association nationale des sociétés par actions) recently answered a question concerning the application of this two-year reference period condition to a company that has just been incorporated. ANSA points out that the two-year reference period applies only to the assessment of the change of category, and cannot be interpreted as applying to the creation of the company at the end of its first year of operation. Consequently, when preparing the accounts for the first financial year, the company can determine whether or not it exceeds the thresholds set out in Articles L123-16 and L123-16-1 of the French Commercial Code, and thus position itself in one or other of the categories. If a company falls below these thresholds at the end of its first year, but exceeds them at the end of its second year, it will change category only if it still exceeds them at the end of its third year.

Companies subject to the real simplified tax regime (RSI) under the BIC or corporate income tax (IS) schemes must record revenues when they are earned and expenses when they are incurred(accrual accounting). They retain the option of opting for cash accounting during the year (recording invoices when received and expenses when paid). These companies are also required to keep a journal and a general ledger.

Companies subject to the standard real income tax regime (RN) under the BIC or IS schemes are required to keep accrual accounts for their fiscal year. They are obliged to keep full accounts, a journal and a general ledger.

Last but not least, companies subject to the controlled declaration regime (BNC) are required to keep cash accounts throughout the financial year, although they may opt for accrual accounting. The resulting accounting obligations include keeping a tax profit and loss account and an income and expenditure journal.