Which legal form do you choose for your company?

  • The nature of the activity

Certain activities – they are rare – impose the choice of legal structure. This is the case, for example, with tobacconists that must be operated as sole proprietorships or as general partnerships. It is therefore wise to obtain information in advance from the relevant professional bodies, the consular chambers or by obtaining information sheets or books about the chosen activity.
You can also :
– consult the article of the encyclopedia: “Check the nature of its activity”,

– get the projector file corresponding to your activity.

  • The desire to participate

One may be tempted to create a company of two or more for various reasons: patrimonial, economic, fiscal or even social.
But if in the beginning you do not have the real desire to join forces, pool your skills, knowledge, address book, etc. “for better or worse”, as in a marriage, the chances of success will be significantly reduced.
If you want to be “sole master on board” and if you can’t stand being accountable… then it’s better to remain independent, in a sole proprietorship, in EURL or even in a one-person simplified limited liability company ( Sasu ), even if it means that you have to associate with others in order to share only certain costs and thus save: this is the case, for example, with the civil society of resources (SCM) or the economic interest group (GIE) in which each partner remains independent in the exercise of his professional activity.

  • The heritage organization

If you have personal assets to protect and/or pass on by gift, the choice of legal structure is of great importance.

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

As for the transfer, the sole proprietorship can be donated, but only in its entirety.

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

– Regardless of the type of company chosen, the business manager(s) are (legally or de facto) responsible for the good governance of the company towards their partners and third parties. If the latter can prove that they have committed management errors that are the cause of the company’s financial difficulties, they will be able to take their responsibility and bring an action against them for filling liabilities.

– Finally, once the company asks for bank assistance, it is likely that the suretyship of certain managers or partners will be demanded.

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

Normally you have determined the financial needs of your company when preparing the provisional accounts.
When they are significant, the formation of a company may be necessary to accommodate investors in the capital.
However, be careful not to confuse “minimum capital” and “financial needs of the company”. Indeed, some companies impose a minimum share capital, which of course is not related to the real financial needs of the company.

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 sole proprietorship, the manager is alone. This reduces the operating rules to a minimum. He makes all decisions and takes responsibility in return.
In companies, the administrator does not act for his own account, but “in the name and on behalf of the company”. He must therefore observe a certain formalism, and in particular the participation of the partners in the general meetings in order to obtain their consent for all important actions that affect the life of the company.

  • The social system of the entrepreneur

This criterion has long been a determining factor in the choice of the legal structure. Indeed, some creators have not hesitated to create fictitious companies to join the general scheme for employees as managers.
Legislation has now largely evolved towards a harmonization of statutes. Read more about the manager’s social status

  • The tax regime of the entrepreneur and the company

Depending on the structure and choice of tax regime, the company’s profits are subject to income tax or corporate income tax. This criterion will also rarely be decisive in the creative phase. After all, it is difficult to precisely calculate the expected turnover of the future company and thus to implement a realistic tax optimization.
Still, it can be beneficial to choose a structure that allows you to place yourself under the income tax regime if you can enjoy a measure of exemption from income tax. The exemption will then cover all winnings, including the part corresponding to your remuneration, etc.
Be careful though, micro-entrepreneurs (ex-automotive entrepreneurs) are excluded from certain schemes.

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

There is no denying that for approaching certain markets, the establishment of the company in the form of a company with significant capital will be recommended.

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