Comparison: freelance administration VS micro-enterprise

Micro-business (formerly auto-entreprise)

Micro-entrepreneur status is a simplified form of sole proprietorship, offering the possibility of rapidly setting up a business with streamlined formalities. Accessible to most profiles, micro-entrepreneurship can be an exclusive activity or an additional source of income. For example, a salaried employee, retiree or student can register as a micro-entrepreneur and benefit from additional income to supplement their main income.

Advantages of micro-business

The advantages of micro-entrepreneur status are undeniable, especially when starting a business:

• Fast, free start-up: online registration on the one-stop shop managed by INPI is a simple, free procedure. As of January 1, 2023, this one-stop shop will automatically register you in the National Register of Companies (RNE), replacing the former Centres de Formalités des Entreprises (CFE).
• Simplified accounting: all you need to do is keep an income/expense ledger and, in some cases, issue customer invoices. You don't need to call in a chartered accountant.
• Charges proportional to sales: social security contributions are calculated on the basis of your sales. If your sales are zero, you don't owe any contributions. On the other hand, if sales are higher, the percentage charges are applied to the total sales figure, without taking into account purchases and expenses, which can quickly become a disadvantage.

Disadvantages

The micro-entrepreneur scheme has certain limitations that must be taken into account:

• Sales ceiling: a micro-entrepreneur is subject to an annual sales ceiling, set at €188,700 for sales of goods or housing, and €77,700 for services or liberal professions. If these amounts are exceeded for two consecutive years, the micro-entrepreneur will exit the micro-enterprise scheme the following year, and automatically switch to a conventional sole proprietorship.
• Basic VAT exemption: an advantage or a disadvantage, depending on the case! Micro-entrepreneurs are taxable, but not liable for VAT. This means they don't have to charge VAT to their customers, but they can't reclaim it on their purchases either.
• Flat-rate income tax: there are two tax options: withholding tax (classic method) or payment in full discharge of tax. The tax authorities apply a flat-rate deduction to declared sales to determine taxable income: 71% for sales/purchases, 50% for services and 34% for self-employed activities. If the micro-entrepreneur opts for the "versement libératoire" option, he or she will have to pay income tax monthly or quarterly, at the same time as social security contributions, based on declared sales, which may not always be financially advantageous.

Portage salarial

A "société de portage salarial" is an independent commercial organization that offers to support your project. Unlike an intermediate situation, you can choose to remain in portage for as long as you like. However, it's important to note that the role of this company is not really to support or train you, but rather to provide you with the necessary accounting, tax and regulatory logistics.

The way a "portage salarial" company works is simple: you sign a fixed-term or open-ended contract with the "portage" company, similar to a real employment contract. You then become an employee of the company, with all the benefits of private-sector status, such as paid vacations and unemployment benefits. However, you remain totally free to manage your own time and organization. It's up to you to find customers, negotiate rates and manage your assignments. The "société de portage" is only involved in invoicing and collection. It takes care of your administration and accounting, then pays you a salary with a pay slip, based on the sales you've made, after deduction of social security contributions. The company earns a commission of between 5 and 10%.

Advantages of freelance administration

By opting for freelance administration, you can benefit from a number of advantages:

• Less red tape: you can concentrate fully on your business and your customers, without being burdened by cumbersome administrative tasks.
• No need to create a legal structure: you won't have to worry about setting up a company with all the associated formalities.
• No liability insurance: you don't need to worry about taking out liability insurance, because you'll be an employee of the "portage" company.
• No business bank account: you won't need toopen a business bank account dedicated to your activity.
• No CFE (Cotisation Foncière des Entreprises) to pay at the end of the year: you'll be exempt from this business tax.
• Social protection as an employee: you benefit from the social protection of an employee, including benefits such as paid vacations.
• Autonomy in your work despite a contract: you retain a degree of autonomy in your work while being bound by a contract with the "portage" company.
• Guarantees in the event of non-payment by a customer (depending on the company): some portage companies offer guarantees in the event of non-payment by your customers.
• Flexible salary (depending on the company): you can choose to receive the same salary each month, even if your sales fluctuate.
• Access to a community of "ported" employees: you'll have the opportunity to join a community of "ported" employees, which can break down isolation and facilitate exchanges between professionals.

Disadvantages

Freelance administration can have a number of disadvantages:

• Difficulties in maintaining working capital for future investments.
• Degressive management fees based on sales. The higher the sales figure, the lower the fees, which can put beginners at a disadvantage.
• Higher social security contributions than other types of status, representing 50% of sales excluding tax.
• Three contracts must be signed: an employment contract, a services contract and a membership agreement. Certain clauses can be very strict, and the "portage" company has the right to terminate contracts without justification.
• Minimum sales required to benefit from freelance administration.

The micro-entrepreneur status is ideal for testing your project, or for activities generating low sales. It's quick, easy and free to set up, modify and close your business. Social security charges are calculated precisely on the basis of actual revenues, so there are no unpleasant surprises.

The freelance worker benefits from the advantages of a conventional employee, while retaining the independence of an individual entrepreneur. Their working environment is clearly defined and regulated, and they are part of a network that can provide support if needed. This status can reassure an employee who is reluctant to take the plunge into entrepreneurship.

Depending on your field of activity, you can opt for the micro-enterprise or wage portage system to reduce risks and limit investments.