What form should a donation to a sole proprietorship take?

Financing an initial project or raising the capital to launch new products is not always easy. Art, innovation, the environment... when the activity is recent, or the sector does not seem sufficiently promising for traditional institutions, it is necessary to overcome the financial obstacles by other means. Donating to an individual company is an increasingly common practice. From friends and family to complete strangers, participatory financing is a real tool for businesses. But what form does it take? Here are some answers.

The professional assets of the sole trader

It's a concept that goes hand in hand with the new single status of sole trader, resulting from the 2022 reform. The separation of business and personal assets is automatic. There are no longer any formalities to be completed, as was previously the case with the declaration of unseizability or the declaration of assignment of assets.

A sole trader's business assets consist of the items needed to run his business. In other words, the goodwill, movable and immovable property, intangible assets and cash on hand and in bank accounts . Donations to a sole proprietorship therefore belong to its business assets.

Why donate to a sole proprietorship?

There are a number of reasons for using donations to finance projects within a sole proprietorship.

Make a down payment or do without a bank

Banking institutions may be reluctant to lend to certain projects or business sectors. In such cases, donations to an individual company, participative financing or money lending between private individuals can represent alternatives to overcome these obstacles.

Get financing fast

Setting up a fund-raising campaign means you can raise the money you need to set up a business or bring a development project to fruition in a matter of weeks or months.

Increase your visibility

A crowdfunding campaign can also be part of a visibility strategy. In this case, the project owner and his or her company are promoted to a first circle of friends and family. Then, by sharing the information with friends and family, particularly on social networks, a community can be built around the values conveyed by the project, and visibility can be increased.

Measuring project viability

When a company wants to bring a solution to market, it's a good idea to test the appeal of the proposed product or service and gather feedback. Donations received as part of a crowdfunding campaign are good indicators of a project's future profitability .

What are the different types of donation?

Family donations

While donations to non-profit associations are well known as part of a tax optimization strategy, certain tax advantages are also available when donating to a company.

Under certain conditions, sums of money paid to a beneficiary (child, grandchild, great-grandchild) or a more distant relative (nephew, niece, etc.) are exempt from transfer duties.

In the case of a gift, a tax scale is applied by the tax authorities to the sums paid, after deduction of an allowance. The amount of this allowance varies according to the relationship to the donor.

Participatory financing or donation crowdfunding

This option enables individuals to provide financial support to the extent of their means for projects they consider promising. Different terms and conditions apply.

  • Unrequited donations: individuals or companies finance a project without expecting anything in return.
  • Matching funding: this involves opting for a symbolic reward, such as goodies, or promoting a pre-order system. The latter option represents a form of pre-marketing purchase. Financing to raise the funds needed to launch production.

Lending between individuals

In the case of a sole proprietorship, a loan between individuals does not constitute a capital subscription. For that, you need to be a company: SARL, SAS, etc.

It is also possible for a private individual to make a loan to a sole proprietorship, with or without interest. This practice is regulated and must follow certain formalities:

  • The lender and borrower must file a tax return above a certain threshold.
  • If no notarial deed is envisaged, we strongly advise you to draw up a loan agreement or an IOU.
  • The ceilings are limited to €2,000 for an interest-bearing loan and €5,000 for an interest-free loan.

Please note: if interest is charged, it must not exceed the usury rate. The additional sums received by the lender must be declared to the tax authorities as income from movable capital (RCM).