Starting a business first requires choosing a legal status. This defines its structure and operation. Several criteria must be taken into consideration in order to guide this choice. In particular, the number of partners, the amount of their contributions, the taxation of profits, the social or tax regime of the partners.
How to choose a type of business?
To choose the type of business best suited to his activity, the entrepreneur must consider a certain number of criteria :
- His desire to join
- The protection of its heritage
- The scope of his project
- The business tax system
The desire to join
First of all, the number of people contributing to the business creation project should be considered. If the project leader wishes to work alone , he can opt for the following legal statuses:
- Sole proprietorship (IE)
- Sole proprietorship with limited liability
- Sole proprietorship with limited liability (EURL)
- Simplified one-person joint-stock company (SASU)
Good to know : The EURL or the SASU are interesting legal statuses because they allow other partners to enter the company during its social life and this without having to transform the company.
If the project leader wishes to associate with other people , he must opt for a societal structure, in particular:
- The limited liability company (SARL)
- The simplified joint stock company (SAS)
- The public limited company (SA)
- The general partnership (SNC)
The protection of its heritage
If the entrepreneur has private assets that he wishes to protect from the vagaries of his professional activity, he can go to:
- A proprietary structure such as a sole proprietorship
- A corporate form where liability is limited to the amount of contributions (such as SARL/EURL, SAS/SASU, etc.)
Please note : In this case, it is important not to opt for a structure where the partners are jointly and severally liable for the social debts. Example: the SNC.
The scope of his project
When choosing the type of business, you should also consider the scale of the project . Indeed, capital companies such as SAS or SA are particularly suitable for projects requiring significant investment.
Other criteria to take into account
Each type of business has its own basic tax regime . However, it is sometimes possible to opt for another method of taxing profits.
In addition, some regulated activities require recourse to a legal status imposed by law. Indeed, it is impossible to exercise the activity of lawyer in auto-entrepreneur. As for the EURL or the SARL, they cannot carry out insurance or savings capitalization activities.
There are several types of businesses each with different characteristics with advantages and disadvantages.
Sole proprietorship (EI)
The sole proprietorship has the particularity of allowing the entrepreneur to exercise his activity without having to create a legal entity . It is a legal form indicated for craftsmen, traders, industrialists or liberal professionals.
The main advantage of the sole proprietorship lies in the simplicity of its management and its creation process. In addition, it allows the entrepreneur to benefit from the micro-enterprise regime, provided that he respects certain annual turnover thresholds.
However, IE has a drawback because of the importance of the contractor’s liability . Indeed, his private and professional assets are one, which can lead creditors to demand the reimbursement of social debts on his personal assets in the event of bankruptcy. However, it is important to specify that the professional and personal assets of the individual entrepreneur will be distinguished from May 15, 2022.
Good to know : The entrepreneur can still make a declaration of exemption from seizure in order to protect part of his personal assets.
The limited liability company (SARL)
The SARL allows the creation of a legal person, more precisely a company with two or more people (up to 100 partners) in order to carry out an activity.
Its operation is very framed by the commercial code, which offers a certain security to the partners. As for their liability, this is limited to the amount of their respective contributions within the company.
The disadvantages of the SARL lie in the complexity of the formalities for setting up the structure, which are much heavier than those of sole proprietorships .
Single-member limited liability company (EURL)
The EURL corresponds to the unipersonal form of the SARL, as such, it is composed of a single and unique partner.
This legal status has the advantage of being clear and reassuring due to its strict framework. In addition, the partner’s liability is limited to contributions made to the company’s capital.
The formalities for the creation of the EURL are more important than those of an EI. In addition, the entrepreneur must proceed with the drafting of the statutes intended to supervise and secure the company. However, this task can prove to be particularly restrictive if he does not have adequate legal skills .
Good to know : The single associate manager of the EURL subject to IR has the possibility of choosing the tax regime of the micro-enterprise since the Sapin 2 law.
The private practice company with limited liability (SELARL)
The SELARL generally takes over the operating rules of the SARL, with an adaptation to the needs of the liberal professions.
It brings a certain level of security within the framework of the exercise of a liberal profession. Given that the liability of its partners remains limited to the amount of their contributions within the company. In particular, this allows them to protect their personal assets in the event of bankruptcy.
The disadvantage of this legal form is that it is only suitable for liberal professions . In addition, the steps related to the creation of the company are more important than those of a sole proprietorship .
The public limited company (SA)
The SA is suitable for a large-scale project because it allows the realization of contributions in industry and the entry on the stock exchange . However, dividends are not subject to social charges .
The disadvantage of the SA is that it requires a minimum capital of 37,000 euros. In addition, its incorporation formalities are particularly important and it requires the appointment of an auditor as well as several governing bodies .
The simplified joint stock company (SAS)
The SAS is a societal form with several shareholders adapted to projects foreseeing the imminent entry of investors.
It has the advantage of offering more flexibility compared to the SARL and allows the partners to define themselves the mode of operation of the company. In addition, the formalities related to the entry of investors and the distribution of dividends are simplified.
The disadvantage of the SAS lies in the importance of the formalities of creation . In addition, the operation of the structure necessarily requires the appointment of an auditor.
It should be specified that this obligation only applies when the company exceeds 2 of the 3 legal thresholds set or when the articles of association so require.
Good to know : If you hesitate between an SAS or a SELAS, know that a SELAS can, like the SAS, be created in the single-person form (SELASU).
The one-person simplified joint-stock company (SASU)
The SASU corresponds to the unipersonal form of the SAS. As such, it has the same characteristics as the latter.
This form of company has a certain flexibility, just like the SAS. However, the liability of the sole shareholder is limited to his contributions to the company .
As for its disadvantages, we find the same as those of the SAS, namely: significant costs of formalities, the obligation to appoint an auditor, etc.
The general partnership (SNC)
Within the SNC, the partners are jointly and severally liable for the social debts. This is why this legal form is rarely used .
It has the advantage of not requiring a minimum share capital . In addition, partners can make different types of contributions (in kind, in cash or in industry) and are qualified as merchants. This explains why it is an obsolete social form.
Finally, the formalities for the creation of the SNC are quite important, in particular concerning the drafting of the statutes . In addition, the partners of SNC are jointly and severally liable for company debts. In other words, in the event of bankruptcy, the personal assets of the partners are not protected.
The professional civil society (SCP)
The SCP is particularly suitable for entrepreneurs who jointly exercise the same liberal profession.
It does not impose a minimum share capital and its profits are taxed at the level of income tax partners .
The disadvantage of this corporate form is that its partners are indefinitely liable for the debts of the company . Consequently, their personal assets are not protected in the event of bankruptcy.
Summary table of the different types of companies
In order to better understand the differences between the different types of companies , it is appropriate to present the main characteristics in this comparative table.
Type of business Number of partners Liability Minimum share capital Sole proprietorship (EI) 1 Unlimited None Limited liability company (SARL) Between 2 and 100 Limited €1 Single-member limited liability company (EURL) 1 Limited €1 Exercise company liberal with limited liability (SELARL) From 2 Limited.