The choice of legal status is an obligatory step when setting up a company. This step is essential for any creator of a company or individual sign. The legal form has an impact on the tax system and the liability of the founder or partners. What are the different possible statuses for a sole proprietorship?
THE CLASSIC SOLE PROPRIETORSHIP
The individual company scheme is the most popular status in France. Indeed, this legal form is easy to set up. To set up a business under this scheme, the entrepreneur can choose between the various types of sole proprietorship, including the classic sole proprietorship. The latter is governed by a real tax system. Contrary to a company that has a legal personality, it implies the physical personality of the founder. The latter is the legal responsible of his firm. The specificities of a sole proprietorship are mainly based on taxation. The latter as well as the contributions will be deducted from the actual profits made. In order to determine his profit, the sole proprietor must therefore keep accounts. The presentation of the financial statements of a sole proprietorship is, however, more simplified compared to that of a corporation.
THE MICRO-ENTERPRISE AND THE AUTO-ENTREPRENEUR
Micro-enterprises are also one of the different types of sole proprietorships. Compared to the tax regime for sole proprietorships, the tax regime for this status is much simpler. Taxation and contributions are levied on profits. However, it is not up to the entrepreneur to determine this profit. It is decided by the tax authorities according to a flat-rate formula. As a result, no actual expenses are recognized. Be aware that the micro-enterprise can do without corporation tax. Moreover, it is not subject to VAT.
The status of a self-entrepreneur is almost similar to that of a micro-enterprise. However, its social regime is more flexible. This legal form allows the entrepreneur to pay social security contributions according to staggered periods (per month or per quarter) and according to the turnover achieved. In the absence of cash income, the business will not pay social security contributions.
THE SOLE PROPRIETORSHIP WITH LIMITED LIABILITY
Another form of sole proprietorship is the sole proprietorship with limited liability. This status may complement the other schemes mentioned above. It limits the entrepreneur’s liability by means of a special-purpose asset. The assets of the company are different from those of the operator. Thus, the combination of the scheme with one of the above-mentioned statuses can give rise to a self-employed person with limited liability. By way of information, for micro-enterprises investing in certain sectors, such as crafts and commerce, policies to reduce social security contributions are currently being revised.