The SARL (limited liability company) status is highly appreciated by entrepreneurs for its many advantages and flexibility. In fact, INSEE estimates that 40% of businesses created in 2016 were set up under this status. Here's everything you need to know before opting for a SARL when setting up your business.
SARL: the ABCs
Definition
A SARL (Société à Responsabilité Limitée) is a company with a minimum of 2 partners.
This status is open to craftsmen, shopkeepers, industrialists and self-employed professionals. However, it cannot be selected to practice a legal, judicial or healthcare profession, with the exception of pharmacists.
Note that it is possible to opt for a form identical to the SARL with a single partner: the EURL (Entreprise Unipersonnelle à Responsabilité Limitée).
Key points of the SARL
--- --- Share capital | - 1 € minimum
- possibility of paying only 20% on creation and the balance within 5 years Number of partners | - from 2 to 100 Partner liability | - limited to the amount of contributions Manager | - natural person only
- nominated by associates Taxation | - IS (corporation tax) by default
- on option and subject to conditions, possibility of opting for IR (income tax)
SARL: the main advantages
The SARL is a popular form of company for the following main reasons: + little capital is required + the liability of the partners is limited to the amount of their contribution + it is possible to create a family structure, if necessary.
How do I set up a SARL?
Drafting the articles of association
Drafting the company's articles of association is an essential part of the process. The articles of association must contain a great deal of important information: + the corporate form (SARL) + the duration of the company (maximum 99 years) + the corporate name + the registered office + the corporate purpose + the amount of share capital + details of each contribution + the number and distribution of shares among the partners + the deposit of funds corresponding to cash contributions + the financial year end date.
Register the company with the Registre du Commerce et des Sociétés
To register your company, you need to complete the M0 form and send it to your local Centre de Formalités des Entreprises.
Publish a SARL incorporation notice
A notice of incorporation of your SARL must be published in a newspaper authorized to publish legal notices.
Being a SARL partner
Who can be a SARL partner?
There are few restrictions on becoming a partner in a SARL. In fact, any individual or legal entity (company or association under the 1901 law) is eligible.
Similarly, there is no age or capacity requirement. This means that a minor, even if not emancipated, can become one. However, the administration of his or her property is entrusted to his or her legal representative.
Finally, there are no nationality restrictions. A foreigner, even without a residence permit, can therefore become a partner in a SARL.
How to become a SARL partner
As with other types of company, anyone who makes a capital contribution to an SARL becomes a partner and receives a number of shares proportional to their contribution.
The contribution can be made: + in cash (a sum of money) + in kind (equipment, premises) + in kind (technical knowledge, know-how or services).
To avoid blocking situations, it is possible to sign a SARL partners' agreement setting out certain operating rules.
What are the advantages and rights of SARL partners?
Being a partner in an SARL offers certain advantages and powers.
- Voting rights: each associate has a number of votes proportional to the number of shares they own, enabling them to participate in certain decisions. At least once a year, associates meet at a General Meeting to approve the company's accounts.
- The right to receive dividends, i.e. a share of the SARL's profits.
- The right to appoint and dismiss the SARL's manager(s).
- The right to information: each partner has the right to put questions in writing to the managing director about any fact likely to compromise the continuity of the business.
What are the disadvantages and risks for associates?
In principle, the very concept of the SARL is designed to protect the partners' personal assets. Thus, in the event of financial difficulties, the liability of associates is in principle strictly limited to the amount of their contributions.
However, it is not uncommon for banks to require a personal guarantee from the partners before granting credit to the SARL. In this case, they commit their personal assets to guarantee the company's credit.
The manager of a SARL
Who can be a SARL manager?
SARLs are unique in that they can be managed on a one-person or collective basis. Moreover, the manager (s ) need not be chosen from among the partners. On the other hand, there are more restrictions on becoming a manager than on becoming a partner. You must: + be a natural person of full legal age or an emancipated minor + be of French nationality, a citizen of the European Union, or at least hold a residence permit authorizing you to carry on a commercial activity + not be subject to any professional incompatibilities + not have been banned from managing the company.
What is the social security system for the manager of a SARL?
The social security system applicable to SARL managers depends on their status.
If you are a majority shareholder, i.e. you hold more than 50% of the company's shares alone, with your spouse or minor children, you are affiliated to the "Travailleurs Non-Salariés" scheme and pay contributions to the Sécurité Sociale des Indépendants (formerly RSI).
If he is a minority or equal manager, he is "assimilated employee". They therefore contribute to the general social security scheme.
Taxation
By default, a SARL is subject to corporate income tax. It is therefore taxed on its profits at 28%, or 15% for SMEs under certain conditions.
By 2020, the 28% rate should be reduced to 25%.
It is possible to choose to be subject to income tax if the SARL is a family business, or if the company meets certain conditions in terms of number of employees, sales, type of activity, etc. In this case, the SARL's profits are taxed on the income of the partners in proportion to their share of the business. In this case, the SARL's profits are taxed on the income of the partners in proportion to their share of the company.
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