What legal status should you choose for your business?

  • The nature of the activity

Certain activities – they are rare – impose the choice of the legal structure. This is the case, for example, for tobacco shops that are to be run as a sole proprietorship or as a general partner. It is therefore wise to inquire in advance with the relevant professional organizations, the consular chambers or by obtaining sheets or books on the chosen activity.
You can also :
– see the article in the encyclopedia: “Check the nature of its activity”,

– get the projector file corresponding to your activity.

  • The desire to be with

One may be tempted to create a business with two or more for different reasons: inheritance, economic, tax or social.
But if in the beginning you do not have the real desire to unite, to gather your skills, knowledge, address book, etc. “for better or worse”, as for a marriage, the chances of success will be significantly reduced.
If you want to be “sole master on board”, and if you can not stand to account … then it is better to remain independent, in a sole proprietorship, in EURL or even in a sole proprietorship (Sasu), even if it means that you connect yourself with others to share only certain costs and thus achieve savings: this is e.g. the case of Civil Society of Funds (SCM) or the Economic Interest Group (GIE), where each partner remains independent in the exercise of its professional activity.

  • The Heritage Organization

If you have personal assets to protect and / or pass on by donation, the choice of legal structure takes on all its significance.

– Since 15 May 2022, the individual entrepreneur has benefited from an automatic separation of his personal and professional assets. Professional creditors will therefore only be able to seize business assets that consist of assets “useful to the company”. The law in favor of self-employment promotes the transition from a sole proprietorship to a business by allowing a universal transfer of business assets without proceeding to the liquidation of those assets.

In terms of transmission, the one-man business can be donated but only in its entirety.

The legal violence that constitutes a company will differ from structure to structure. In fact, in a general partnership (SNC), for example, each partner is jointly and severally liable with the company. In the event of financial difficulties, the latter may, if the assets of the company are not sufficient to satisfy the creditors, seize the assets of one or more partners directly on condition that the latter is partially reimbursed by their co-partners.

– Regardless of the type of company chosen, the manager (s) (legal or de facto) are responsible for the proper management of the company with respect to their partners and third parties. If the latter are able to prove that they have committed management errors that prove to be the cause of the company’s financial difficulties, they will be able to seek their liability and sue them for the purpose of fulfilling obligations.

Finally, as soon as the company requests banking assistance, it will be likely that bail from certain managers or partners will be required.

– The social rights of a company have the advantage that they can be transferred gradually.

You have usually determined the financial needs of your business when creating the preliminary accounts.
When they are significant, it may be necessary to set up a company to accommodate investors in the capital.
However, be careful not to confuse “minimum capital” with “corporate financial needs”. Some companies actually impose a minimum capital, which of course has no relation to the company’s real financial needs.

Here you will find direct access to create your account to use our free business plan tool.

  • The operation of the company

Depending on the structure you choose, the operating rules will be more or less restrictive.
In the one-man business, the leader is alone. As a result, the operating rules are reduced to a minimum. He makes all the decisions and assumes his responsibilities in return.
In companies, the manager does not act at his own expense, but “in the company’s name and on behalf”. He must therefore observe a certain formalism and in particular the participation of the participants in general meetings in order to obtain their authorization for all the important actions which affect the life of the company.

  • The entrepreneur’s social system

This criterion has long been decisive in the choice of legal structure. In fact, some creators did not hesitate to set up fictitious companies that, as managers, had to be linked to the general system of employees.
The legislation has now largely evolved towards a harmonization of the articles of association. Learn more about the leader’s social status

  • The tax scheme for the entrepreneur and the company

Depending on the structure and choice of tax regime, the company’s profits will be subject to income tax or corporation tax. Again, this criterion will rarely be decisive in the creation phase. It is difficult to accurately calculate the expected turnover of the future company and thus to implement a realistic tax optimization.
However, if you can benefit from a tax-exempt measure on profits, it may be beneficial to choose a structure that allows you to place yourself under the income tax system. The exemption will then cover the entire profit, including the part corresponding to your remuneration, etc.
Be careful though, micro-entrepreneurs (formerly auto-entrepreneurs) are excluded from certain schemes.

  • Credibility with partners (bankers, customers, suppliers, etc.)

It is undeniable that in order to approach certain markets, the creation of the company in the form of a company with significant capital would be recommended.

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