Starting a business first requires choosing a legal status . This defines the structure and operation of the business. Several criteria must be taken into consideration to guide this choice. In particular, the number of partners, the amount of their contributions, the taxation of profits, and 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 forces
• Protecting your heritage
• The scale of his project
• The company’s tax regime

The desire to join forces

First of all, it is important to consider the number of people contributing to the business creation project. If the project leader wishes to work alone , he or she can opt for the following legal statuses :

• Sole proprietorship (EI)
• Limited liability sole proprietorship
• Single-member limited liability company ( EURL )
• Single-member simplified joint-stock company (SASU)

If the project leader wishes to join forces with other people , he must opt ​​for a corporate structure, in particular:

• Limited liability company (SARL)
• The simplified joint-stock company (SAS)
• The public limited company (SA)
• General partnership (SNC)

Protecting your heritage

If the entrepreneur has private assets that he wishes to protect from the risks of his professional activity, he can turn to:

• A sole proprietorship 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.)

The scale of his project

When choosing the type of business, it is also worth considering the scale of the project . Capital companies such as SAS or SA are particularly suitable for projects requiring significant investments.

Other criteria to take into account

Each type of business has its own basic tax regime . However, it is sometimes possible to opt for a different method of taxing profits.

In addition, certain regulated activities require the use of a legal status imposed by law. Indeed, it is impossible to practice the activity of lawyer as a self-employed entrepreneur. As for the EURL or the SARL, they cannot carry out insurance or savings capitalization activities. Similarly, if you wish to become a tobacconist , you will be required to create a SNC .

What are the different types of businesses?

There are several types of businesses, each with different characteristics with advantages and disadvantages.

The sole proprietorship (EI)

The sole proprietorship has the particularity of allowing the entrepreneur to carry out his activity without having to create a legal entity . It is a legal form suitable for artisans, traders, industrialists or liberal professionals.

The main advantage of a sole proprietorship is its ease of management and its creation procedures. In addition, it allows entrepreneurs to benefit from the micro-enterprise regime, provided they meet certain annual turnover thresholds.

The EI, however, has a disadvantage due to the significant liability of the entrepreneur . Indeed, his private and professional assets are one and the same, which can lead creditors to demand the repayment of social debts from his personal assets in the event of bankruptcy. It is important to note, however, that the professional and personal assets of the individual entrepreneur will be distinguished from May 15, 2022.

Limited liability company (SARL)

The SARL allows the creation of a legal entity, more precisely a company with two or more people (up to 100 partners) in order to carry out an activity.

Its operation is strictly regulated by the French Commercial Code, which provides a certain level of security to partners. As for their liability, this is limited to the amount of their respective contributions to the company.

The disadvantages of the SARL lie in the complexity of the formalities for setting up the structure, which are much more onerous than those of individual companies .

The single-member limited liability company (EURL)

The EURL corresponds to the single-person form of the SARL , as such, it is made up of a single partner.

This legal status has the advantage of being clear and secure due to its strict framework. In addition, the partner’s liability is limited to the contributions made to the company’s capital.

The formalities for creating an EURL are more extensive than those for an EI. Furthermore, the entrepreneur must draft the articles of association intended to regulate and secure the business. However, this task can be particularly burdensome if the entrepreneur lacks adequate legal expertise .

The limited liability professional practice company (SELARL)

The SELARL generally follows the operating rules of the SARL, with an adaptation to the needs of the liberal professions.

It provides a certain level of security in the context of exercising a liberal profession . Given that the liability of its partners remains limited to the amount of their contributions to the company. This allows in particular 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 procedures involved in setting up a business are more extensive than those of a sole proprietorship .

The public limited company (SA)

The SA is suitable for large-scale projects because it allows for contributions in kind and entry into the stock market . However, dividends are not subject to social security contributions .

The disadvantage of the SA is that it requires a minimum capital of 37,000 euros. In addition, its incorporation formalities are particularly extensive and it requires the appointment of an auditor as well as several governing bodies .

The simplified joint-stock company (SAS)

The SAS is a corporate form with several shareholders suitable for projects planning the imminent entry of investors.

It has the advantage of offering more flexibility than the SARL and allows partners to define the company’s operating mode themselves. 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 creation formalities . In addition, the operation of the structure requires the appointment of an auditor .

It should be noted that this obligation only applies when the company exceeds 2 of the 3 legal thresholds set or when the statutes require it.

The single-member simplified joint-stock company (SASU)

The SASU corresponds to the single-person form of the SAS. As such, it has the same characteristics as the latter.

This form of company offers 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 formality costs, the obligation to appoint an auditor, etc.

General partnership (SNC)

Within the SNC , the partners are jointly and severally liable for the company’s debts. This is why this legal form is rarely used .

Its advantage is that it does not require a minimum share capital . In addition, partners can make different types of contributions (in kind, cash, or industry) and are classified as traders. This explains why it is an outdated legal form.

Finally, the formalities for creating a SNC are quite extensive, particularly regarding the drafting of the statutes . Furthermore, the partners of an SNC are jointly and severally liable for the company’s debts. In other words, in the event of bankruptcy, the partners’ personal assets are not protected.

Professional civil society (SCP)

The SCP is particularly suitable for entrepreneurs jointly exercising the same liberal profession.

It does not impose a minimum share capital and its profits are taxed at the level of the partners under income tax .

The disadvantage of this legal form is that its partners are indefinitely liable for the company’s debts . Therefore, their personal assets are not protected in the event of bankruptcy.

Summary table of the different types of businesses

In order to better understand the differences between the different types of businesses , it is appropriate to present their main characteristics in this comparative table.

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