You've started your business as a sole proprietorship (micro-enterprise or EI) and are now thinking of changing status. To help you make the right entrepreneurial decision, we've detailed seven points in this guide that will be advantageous if you decide to change to a sole proprietorship (EURL or SASU).
A broader field of activity as you evolve
Certain activities cannot be carried out as a micro-entrepreneur, as they are not compatible with the micro-tax or micro-social regime. This is the case for all regulated activities (legal and judicial professions, healthcare professions, chartered accountancy, general insurance agents). Agricultural, real estate and artistic professions are also prohibited.
All legal activities can be carried out within the framework of a SASU (with the exception of a tobacconist's or entertainment agency) or an EURL (with the exception of a capitalization and savings business or a tobacconist's).
Better protection for your assets
Both EURL and SASU are independent structures with their own legal personality. They are free to set their own capital. They have specific assets, offering real protection for personal assets.
However, this advantage should now be discounted, as the new unique status of sole proprietor, due to come into force in May 2022, will also enable you to preserve your personal assets without having to opt for a corporate structure.
Finally, you should be aware that if you apply for a loan from a financial institution, it is highly likely that the latter will require you to act as personal guarantor, despite the fact that you operate within the framework of a company.
Don't forget: while the personal assets of the manager of a EURL or the director of a SASU are protected, both remain liable under civil and criminal law.
The right to join forces to develop your business
Unlike a sole proprietorship, which does not allow partnerships, you can bring in third parties to your EURL to transform it into a SARL, without having to create a new structure.
The same applies to a SASU, which can be converted into an SAS without any special formalities.
Unlimited sales potential
As a micro-entrepreneur, you are required to respect certain thresholds (€176,200 for sales and accommodation activities, and €72,600 for services and liberal professions). If you exceed these thresholds for two consecutive years, you will be excluded from this scheme, and will switch to the sole proprietorship system.
With an EURL or SASU, your sales are not confined within certain limits, so you can develop your business more freely and don' t hesitate to invest.
The option of choosing between income tax and corporation tax
As a micro-entrepreneur, you only have the choice between the micro-tax system and the optional payment in full discharge system.
In an EURL, profits are automatically subject to personal income tax, but the manager can opt to be subject to corporate income tax.
With a SASU, the opposite is true. Profits are automatically subject to corporation tax, with the option of opting for income tax for up to 5 years.
There are a number of advantages to being able to opt for corporate income tax:
- You keep your personal and business taxes completely separate.
- You have greater control over your tax rate.
- Your remuneration as an executive is fully tax-deductible.
- You benefit from the loss carry-forward mechanism.
Deducting your actual expenses
The micro-tax system does not allow you to deduct your actual expenses or social security contributions, but only to benefit from a deduction from your sales (71% for sales and the provision of accommodation, 50% for services and 34% for the liberal professions).
This flat-rate deduction is deemed to cover all the expenses required for your business, but this is not always the case. With a EURL or SASU, you can deduct all expenses incurred in the interest of your company, which reduces your taxable income. What's more, you are entitled to reclaim VAT on these expenses.
Better monitoring of your business
As a micro-entrepreneur, you benefit from a very streamlined accounting system, since it is limited to the chronological, unmodifiable recording of receipts (and purchases for sales and accommodation supply activities). This type of accounting does not allow you to study the real profitability of your business. On the other hand, the accounting obligations of an EURL or SASU provide you with an accounting summary enabling you to quickly analyze your company's performance.