Which legal status to choose between micro-enterprise and SASU?

Micro-entrepreneur status: the simplest option

Micro-enterprise (formerly known as auto-entreprise) is a simplified form of sole proprietorship. It enables you to set up a business quickly and easily, thanks to simple procedures. Open to most profiles, the micro-business can be an exclusive activity.

Strengths to consider

• Fast, free start-up: since January 1, 2023, the process of setting up a micro-business has been simplified thanks to the "one-stop shop" managed by INPI on its website INPI.fr Welcome to the home of innovators, whatever your chosen business sector or legal form. Once you've submitted your declaration and signed electronically, the relevant bodies will process your information, and you'll soon receive a SIREN/SIRET number authorizing you to operate your business.
• Streamlined accounting: you can keep a simple income/expense ledger, retain all receipts and issue customer invoices as required, without the need for a chartered accountant.
• Expenses based on sales: social security contributions are calculated by applying a percentage to gross sales. If gross sales are zero, no social security contributions are due. Even in the case of sales, social security contribution rates remain advantageous.
• Flat-rate allowance: you benefit from a flat-rate allowance to compensate for the impossibility of deducting your expenses, which can be advantageous if your expenses are limited.
• Withholding tax option: this is only financially advantageous if you know you'll be taxed. With this option, you pay a percentage of your sales (1%, 1.7% or 2.2%) each month or quarter, representing your income tax. Although you won't have to pay tax at the end of the year, this option is only interesting if your income is high enough to be taxed.

There are several weak points worth considering

• The sales ceiling: this ceiling can potentially hinder the growth of your business. As a micro-entrepreneur, your sales of goods or housing must not exceed €188,700 in annual turnover, while for services or liberal professions, the limit is €77,700. If you exceed these thresholds for two consecutive years, you will automatically exit the micro-entrepreneur scheme and switch to sole proprietorship status.
• Basic VAT exemption: this can be an advantage or a disadvantage, depending on your situation. As a micro-entrepreneur, you don't have to charge or declare VAT to your customers, but you can't reclaim VAT on your purchases either. It's important to note that you are still subject to VAT, and if you exceed certain sales thresholds two years in a row, you will lose the benefit of the basic VAT exemption from the 3rd year onwards.
• You can't form partnerships: as a micro-entrepreneur, you can't form partnerships with other people in your business.
• Credibility with credit institutions: the absence of a balance sheet and income statement can affect your credibility with credit institutions, making it more difficult to obtain loans, since these documents are essential for assessing a company's solvency.

The micro-entrepreneur status is ideal for experimenting with a project, or when a company is starting up with limited sales. It remains particularly attractive for many entrepreneurs, especially in the craft and services sectors.

SASU: the most serious

The SASU is a simplified joint-stock company with a single shareholder. It too has its strengths and weaknesses.

Highlights

• When you opt for a SASU, you have the option of holding the position of chairman or partner. As chairman, you are entitled to remuneration, which provides you with social security protection similar to that of an employee with an employment contract. As a partner, you receive dividends, exempt from social security contributions.
• Your liability is limited to your contributions. Your personal assets are therefore protected.
• The operation of a SASU is extremely flexible. You have a choice between income tax (for a maximum of five years) and corporation tax, although the latter is usually assigned automatically.
• There's nothing to stop you joining forces. The SASU will then simply become a multi-person entity, with no tax, accounting or legal consequences.
• You can optimize your tax situation by juggling remuneration and dividends. More remuneration increases the company's expenses and reduces its taxable income. On the other hand, you'll pay more personal income tax. More dividends, and therefore lower expenses, will reduce your personal income tax, but increase the corporation's corporate income tax. A careful analysis is therefore necessary to make the best decision for your situation.

Weak points

• The formalities are naturally more complex and costly than for a micro-business. The wording of the articles of association, which leave the manager a great deal of freedom, must be precise and envisage different scenarios. We advise you to call on a professional to help you establish the rules of operation.
• Social security contributions are higher than those applied to micro-entrepreneurs, generally amounting to twice as much.
• The absence of remuneration for the chairman of a SASU implies an absence of social security cover.
• SASU companies are subject to a number of accounting and tax obligations, including keeping a daybook and a general ledger, as well as preparing annual financial statements, including a balance sheet and income statement. It is therefore advisable to entrust these tasks to a chartered accountant.

The SASU is an appropriate choice if you plan to grow rapidly and reach the sales ceilings of the micro-enterprise. What's more, if you're considering a future partnership with other individuals, or if you're looking to convince investors or banks to support your project, the SASU may be the best option.