Starting a Business in France as a Sole Trader

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The company set-up for a Sole Trader does not have any legal entity and does not own its assets. There is actually no distinction between the sole trader’s own assets and those of the company. This therefore means that property, developed or undeveloped but linked to the Sole Trader, is liable to be seized by creditors. In fact, the financial capacity of the company is only limited to the personal circumstances of the entrepreneur. We therefore advise against this type of set-up for an activity which is relatively capital-intensive.

Article 206 of the Macron law, formed 6^th august 2015 to encourage growth and activity, made it illegal to seize the principal residence of the entrepreneur. The law gives a notary the option of declaring the principle residence as unseizable. However, this law is still compulsory as it protects both built and undeveloped properties which are not considered as professional assets.

Unlike the micro-enterprise, the sole proprietorship does not have a turnover threshold limit. This will allow you to plan a long-term business project remaining with the exact same legal business set-up.

Tax implications

The Sole Trader formation increases taxes on revenue or company taxes – this is only possible if the Sole Trader chooses the French EIRL form (Sole Trader with Limited Responsibility). The following three tax regimes are possible:

1. Le régime réel normal – This tax regime is applied to the Sole Trader when the turnover for the selling of goods passes €783,000 or when the turnover for payable services passes €236,000. In this case, the company is taxed on their net profits. A declaration result must be sent every year, at the latest, by the second working day after 1^st

2. Le régime reel simplifié – This tax regime is applied when the turnover for selling goods is between €82,200 and €783,000. Alternatively, for services, the tax applies to a turnover between €32,900 and €236,000. However, the company can actually choose the option of Le régime réel normal for a minimum of 2 years. The company is taxed on the net profits just as in the previous tax regime. However, the firm can benefit from simplified accounting and reporting obligations if it opts for the “Super-simplified” accounting. This allows the firm to use a cash basis of accounting (Cashing-Withdrawal) and to log the claims and debts to date in the report at the end of the fiscal year. Similarly, this also permits the firm to be exempt from financial statements when the turnover figure does not exceed €157,000 when selling goods or €55,000 when offering services. This option needs to be applied yearly after the declaration of results has been completed.

3. Le régime micro-fiscal – The entrepreneur can choose this tax regime if the turnover is lower than €82,000 for goods or €32,900. In this case, the taxable profit is calculated in an identical way to the micro-enterprise, after the deduction of a lump-sum allowance (71%, 50% or 34% depending on the level of activity).

Social implications

The Sole Trader enters into the category of workers without a salary (travailleurs non-salariés – TNS), just like a micro-entrepreneur. From 1^st January 2020, the option for Le régime micro-fiscal will automatically lead to the micro-social regime for social contributions.  Before this date though, the entrepreneur can freely choose to benefit from the TNS regime in which the social contributions are calculated based on the genuine profit made by the firm.

If you think that this company set-up could be useful for you, it is important to ensure substantial understanding of all relevant information, facts and procedures. Here at Maupard, we would be more than happy to advise you on the next steps and to allow you to make the most of these opportunities.

Do not hesitate to contact us by telephone on +33 (0) 1 53 93 94 20 or by e-mail to [email protected], so we can work out the needs of your business. Our team of experts is here to answer any questions you may have.