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Choosing your company status based on costs

If you've decided to set up your own business, but you're still not sure which status to adopt, this guide will give you a complete overview of all the charges inherent in sole proprietorships (micro-entreprise and real-estate sole proprietorships) and companies (EURL, SARL, SASU, SAS). It's an excellent way to make the right choice for your project.

Micro-business expenses

This is the simplest legal status if you're just starting out, as the formalities involved in setting up a business are very straightforward, as is the payment of social security contributions. Under certain conditions, you can also opt to pay income tax on your professional activity.

As micro-entrepreneur bookkeeping is limited to a chronological record of receipts and purchases that cannot be modified, you won't need to call on the services of an accountant, which will reduce your costs.

Social security charges

These include contributions to health and maternity insurance, family allowances, disability and death insurance, basic and supplementary pensions, as well as CSG and CRDS.

Since 2018, micro-entrepreneurs who are shopkeepers, craftsmen or practicing a non-regulated liberal profession (PLNR) have been affiliated to the general scheme for social protection. Regulated liberal professions are attached to the CIPAV.

The rate of social security contributions depends on your activity:

  • 12.8% for commercial activities (sale of goods, sale of food to be taken away or consumed on site, sale of accommodation services), plus 0.1% for the Contribution à la formation professionnelle (CFP) and 0.015% for the Taxe pour frais de chambre (TFC).
  • 12.8% for the purchase and resale activities of craftsmen, plus 0.1% for the Contribution à la formation professionnelle (CFP) and 0.220% for the Taxe pour frais de chambre (TFC).
  • 22% for craft services, plus 0.3% for the Contribution à la formation professionnelle (CFP) and 0.480% for the Taxe pour frais de chambre (TFC).
  • 22% for commercial services, plus 0.1% for the Contribution à la formation professionnelle (CFP) and 0.440% for the Taxe pour frais de chambre (TFC).
  • 22% for self-employed professionals covered by the Sécurité sociale des indépendants old-age insurance scheme, plus 0.1% for the Contribution à la formation professionnelle (CFP).
  • 22.2% for liberal professions covered by CIPAV for old-age insurance, plus 0.2% for the Contribution à la Formation Professionnelle (CFP).
  • For artisans with dual registration (Chambre de commerce et d'industrie and Chambre de métiers et de l'artisanat), the 12.8% and 22% rates apply pro rata to sales in each category; the rate for the Contribution à la formation professionnelle (CFP) is 0.1% and 0.007% for the Taxe pour frais de chambre (TFC).
  • 6% for the rental of classified furnished tourist accommodation, plus 0.1% for the Contribution à la formation professionnelle (CFP) and 0.440% for the Taxe pour frais de chambre (TFC).

Contribution rates for the Taxe pour frais de chambre (TFC) are different for certain activities carried out in Alsace and Moselle:

  • Craftsmen's purchasing and resale activities are subject to a TFC rate of 0.290% in Alsace and 0.370% in Moselle.
  • The TFC rate for craft services is 0.650% in Alsace and 0.830% in Moselle.

Good to know: if your sales are zero, no social security contributions are due, but you are still required to make your declaration on the Urssaf website. A penalty of €52 will be applied for each missing declaration.

If you benefit from the ACRE scheme (Aide à la création ou à la reprise d'une entreprise), there is a possible exemption for the first 12 months of your activity (the starting date being the day of your affiliation):

  • Total exemption if your business income does not exceed €30,852.
  • If your income is between €30,852 and €41,136, the exemption is partial. Your contributions are 50% exempt for the first year of your business.
  • No exemption if your income exceeds €41,146.

Good to know: the exemption from contributions does not apply to CSG, CRDS, workers' compensation, supplementary pension and CFP.

Tax charges

As a micro-entrepreneur, you can opt for the flat-rate withholding tax if your income for the year N-1 does not exceed the second bracket of the tax scale, i.e. the 11% bracket. The rate of deduction depends on your activity:

  • 1% for commercial activities (sale of goods, sale of food to be taken away or consumed on site, sale of accommodation services).
  • 1% for the purchase and resale activities of craftsmen.
  • 1.7% for craft services.
  • 1.7% for commercial services.
  • 2.2% for self-employed professionals covered by the Sécurité sociale des indépendants old-age insurance scheme.
  • 2.2% for self-employed professionals covered by the CIPAV pension scheme.
  • For artisans with dual registration (Chamber of Commerce and Industry and Chamber of Trades and Crafts), the rates are 1% and 1.7%, applied pro rata to sales in each activity.
  • 1.7% for rental of classified furnished tourist accommodation.

Good to know: this contribution is deducted at the same time as social security contributions.

If you do not qualify for the lump-sum payment, you will have to pay the tax corresponding to your micro-entrepreneur activity at the same time as your income tax. In this case, you will benefit from a deduction based on your activity:

  • 71% for commercial and accommodation activities.
  • 50% for crafts and commercial services.
  • 34% for the self-employed.

Finally, like all micro-entrepreneurs, except those with sales or revenue of €5,000 or less, you will be liable for the Cotisation foncière des entreprises (CFE). However, you will be exempt for the first year of your business.

The amount of this levy is set by the municipality or public inter-municipal cooperation body (EPCI) in the region where you do business. It is calculated on the basis of the rental value of the property used for your business (office, warehouse, shop, etc.) in year N-2.

Where the rental value is very low, a minimum flat-rate assessment is established on the basis of a base fixed by deliberation of the municipality or EPCI. The scale of this flat-rate contribution is revalued each year. If the rental value is very low, you will pay a minimum flat-rate contribution calculated on the basis of your sales for the year N-2. For example, for 2020, the CFE range applicable in France was between €224 and €1,067 for sales or revenue between €10,001 and €32,600.

Actual expenses for sole proprietorships

This is a highly simplified form of business, but does not allow you to have a partner. In accordance with law no. 2022-172 of February 14, 2022 in favor of independent professional activity, it is no longer possible to set up a sole proprietorship with limited liability. However, as from May 14, 2022, the sole trader will still be protected, since he will benefit from the separation of his personal and professional assets.

Unlike micro-enterprises, sole proprietorships are not limited in terms of sales. As long as you are eligible for the simplified tax system (réel simplifié), your accounting is simplified. On the other hand, if your purchase/sale or accommodation activity exceeds €818,000, or €247,000 if you're in the service-provision business, you'll be subject to the "régime réel normal", and will be required to present a balance sheet, income statement and notes. In this case, you'll need to budget for higher accounting costs.

Social security charges

As the manager of a sole proprietorship, you are considered a non-salaried worker (travailleur non salarié - TNS) and affiliated to the Social Security system for the self-employed (Sécurité sociale pour les indépendants - SSI). Your social security contributions are calculated on the basis of your actual income, at a rate of around 45% of taxable income.

If you benefit from the ACRE scheme (Aide à la création ou à la reprise d'une entreprise), there is a possible exemption for the first 12 months of your business.

Good to know: If you have no income, you are still subject to minimum social security contributions. In 2020, these amounted to €1,042 for shopkeepers, craftsmen and unregulated self-employed professionals.

Tax charges

By default, sole proprietorships are subject to income tax. You can therefore deduct your operating expenses from your sales. Your net profit will be added to your other household income and taxed on a progressive scale.

From May 14, 2022, sole traders will be able to opt for corporation tax (IS), as was the case for EIRLs. This means that up to a net profit of €38,120, their tax rate will be 15%, and 25% above €38,120.

Expenses for a one-man limited liability company (EURL) and a limited liability partnership (SARL)

These two companies have the same legal form, the EURL being a SARL with a single shareholder. The EURL is subject to direct income taxation, with a possible option for corporate income tax, while the SARL is automatically subject to corporate income tax, but may opt for the partnership regime for a maximum period of 5 years.

EURL payroll taxes

If you decide to act as manager, you will have the status of a self-employed worker (TNS); you will be affiliated to the SSI and will be subject to social security contributions of 45% of the amount of your profits if you have opted for IR, or of the amount of your remuneration if you have opted for IS.

For the first two years of your business, your contributions will be calculated on a flat-rate basis, since your sales are not yet known.

If you don't earn any income, or if you earn only a small amount, you will still have to pay a minimum annual contribution of €1,042 in 2022.

If you benefit from the ACRE scheme (Aide à la création ou à la reprise d'une entreprise), there is a possible exemption for the first 12 months of your business.

If, on the other hand, you decide to entrust the management of your business to a third party, this person will come under the "assimilated employee" scheme, and will be affiliated to the general Social Security system. In this case, you will have to pay between 75% and 80% in social security contributions, i.e. almost twice as much as if you were a self-employed worker.

EURL tax charges

The EURL is automatically subject to income tax, so your profits will be taxed in the category that corresponds to your activity (BIC or BNC) and incorporated into the other income of your tax household.

If you do not exceed certain ceilings set according to your activity, you will be eligible for the micro-enterprise tax regime.

On the other hand, if you opt for corporate income tax, your income will be independent of your profit. Under certain conditions, you can benefit from the reduced rate of 15% on your sales (after deduction of your remuneration). Your remuneration and any dividends must be added to the other income of your tax household.

Social charges for SARLs

  • If you are a majority shareholder 

You will be subject to the "travailleur non salarié" (TNS) system, with social security contributions of 45% and a compulsory minimum contribution. For the first two years of your business, your contributions will be calculated on a flat-rate basis, since your sales are not yet known.

If you benefit from the ACRE scheme (Aide à la création ou à la reprise d'une entreprise), you may be eligible for an exemption for the first 12 months of your business, under the same conditions as for an EURL.

  • If you are a minority or equal shareholder manager

You will be affiliated to the general social security scheme as an employee, and your social security contributions will be between 75% and 80% of your income.

SARL tax charges

By default, a SARL is subject to corporate income tax. The salary of the minority/equal or majority manager is subject to the same tax regime as employees.

Under certain conditions, you can also opt to pay income tax for up to 5 years. If you are a managing partner, your remuneration will be taxed as BIC or BNC, depending on your company's activity. If you are a non-partner manager, your remuneration will be taxed in the same way as a salary, with a flat-rate deduction of 10%.

Charges for a SASU (simplified single-member limited company) and a SAS (simplified joint-stock company)

SASU and SAS have the same corporate form, and the same accounting obligations (books of account, annual accounts, etc.). The main difference between these two types of company is that the SASU is a société par actions simplifiée unipersonnelle.

Social charges for SASU and SAS

The chairman of a SASU or SAS may pay himself a salary, but this is not an obligation, and in this case he is not required to pay social security contributions (which is not the case for an EURL or SARL).

If you decide to pay yourself a salary, you will be covered by the "assimilés salariés" scheme, and your social security contributions will be up to 82% of your net salary.

If you benefit from the ACRE scheme as president of a SASU or SAS, you can take advantage of a possible exemption for the first 12 months of your business.

Tax charges for SASU and SAS

Both SASU and SAS are automatically subject to corporate income tax. Dividends are taxed at the end of the financial year. The rates are 15% between 0 and €38,120 of net profit, and 25% above that.

However, it is possible to opt for income tax, under certain conditions and only for the first 5 years of the fiscal year. In this case, dividends are subject to a flat-rate withholding tax of 30% (17.2% for social security contributions and 12% for the non-liberating advance payment on income tax) before being paid to the sole shareholder (SASU) or to the various shareholders (SAS).

The shareholder(s) must then declare the dividends received on their tax return.