It's important not to confuse three very different notions: the status of a worker (self-employed or salaried), the legal status of the self-employed worker and, finally, his or her social and tax regime. Our aim is to help you make sense of them, which is essential if you're planning to start a self-employed activity. Discover the differences between freelancers, independent workers, auto-entrepreneurs and VSEs.
Who are the self-employed?
The legal status of a self-employed worker is different from that of an employee. The difference lies in the presence or absence of a subordinate relationship. This is the case for salaried workers, who are subordinate to a hierarchical superior, whereas self-employed workers are free to manage their organization as they see fit, and have no subordinate relationship with their customers.
Self-employed workers may be craftsmen, shopkeepers or self-employed professionals. They are affiliated to the schemes for self-employed workers, while salaried employees are covered by the general social security scheme, the MSA (for agricultural professions) or special schemes.
In short, self-employed workers are natural persons who carry out an economic activity on their own account.
You will be considered self-employed if you meet one of the following conditions:
- You are registered with an affiliation body (Trade and Companies Register, Trade Register, Commercial Agents Register, Urssaf).
- You are a company director
- You run a business under the micro-social scheme
- You set your own working conditions, unless they are specified in a contract between you and your principal.
What does freelance mean?
Freelance does not represent a specific legal status; it simply refers to a worker who carries out a professional activity independently. Generally speaking, freelancers provide services (graphic designer, webmaster, IT developer, coach, etc.).
A freelancer must therefore choose a status to exercise his or her profession, in the same way as all self-employed workers.
What individual structures are possible for self-employed workers?
The self-employed can choose between two types of individual structure: the micro-enterprise and the sole proprietorship. They choose the one best suited to their activity, sales and future development plans, etc. What these two structures have in common is that they are set up by a single self-employed person. They are not legal entities, and have no legal existence separate from that of the entrepreneur.
Micro-business (formerly auto-entreprise)
The two names micro-entreprise and auto-entreprise merged in 2016. While it's more common to hear auto-entreprise referred to, it's the term micro-entreprise that is legally recognized.
The important thing to remember is that the micro-enterprise is actually a simplified form of sole proprietorship. In fact, the real difference between a micro-enterprise and a sole proprietorship lies in the social and tax regime. The auto-entrepreneur automatically benefits from the micro-enterprise or micro-social regime, with very streamlined accounting and reporting obligations, and no social security contributions to pay if sales are zero. Sole traders are automatically subject to a real tax regime (simplified or normal, depending on their sales), and therefore to minimum social security contributions, even in the event of a deficit.
That's why micro-entrepreneur status is so attractive for freelancers who are just starting out, and who have no certainty about the contracts they'll land. This is often the case for freelancers, who are highly dependent on the needs of companies that outsource some of their services.
Good to know: if the micro-entrepreneur's annual sales exceed the authorized ceilings (€188,700 excl. tax for commerce and the supply of accommodation, and €77,700 excl. tax for services and the liberal professions) for two consecutive years, the auto-entrepreneur automatically switches to sole proprietorship status.
Sole proprietorship
While micro-enterprises require only the chronological, unalterable recording of receipts and purchases, this is not the case for sole proprietorships. The entrepreneur must keep a ledger, a journal, draw up an inventory and declare his annual accounts to the tax authorities. This is why they often need the help of an accountant.
Although they are automatically subject to the real tax system, sole traders can opt for the micro-enterprise system, depending on the amount of their sales, which eases their accounting obligations. However, the day their sales exceed the ceilings authorized to benefit from the micro-business regime, they become subject to tax:
- on a simplified taxable income basis if annual sales are between €188,700 and €840,000 (for commerce and the supply of housing) and between €77,700 and €254,000 (for services and the liberal professions);
- under normal income tax rules if annual sales exceed €840,000 and €254,000 respectively.
Very small businesses (VSEs)
Article 51 of the French Economic Modernization Act (LME) no . 2008-776 of August 4, 2008 abolished the term "TPE" and replaced it with "micro-entreprise".
To qualify as a micro-business, a company must employ fewer than 10 people, and have annual sales or a balance sheet total not exceeding 2 million euros.
Good to know: it's important not to confuse the term micro-entreprise, used as a business category, with the micro-enterprise tax and social security regime.