Is your business viable?
Once you know you can practice, the next step is working out whether there is the demand for the service you will be offering. The most popular professions amongst expats appear to be in hospitality (gi^tes, bars and restaurants), building (painters and decorators, builders, electricians etc) and real estate. If you plan to do the same, do your research so you can be sure there is a market that you can tap into.
SOLE TRADER
Under this category are businesses run as an Enterprise Individuelle (EI) or a limited company called an EURL.
Enterprise Individuelle (EI) also known as Travailleur Indépendant: This is a popular status for the selfemployed, such as those categorised as profession libérale or artisan, who anticipate a modest turnover and do
not intend to engage in large-scale financial activities. The latter is important as with an EI personal liability is unlimited (however large the debts you incur, you are liable to cover them). This can put your home at risk but it is possible to protect it by doing a deÅLclaration d’insaisissabiliteÅL through your notaire. Depending on what you do, it may also be a good idea to have professional indemnity cover, called assurance responsabilité civile professionnelle.
With this category, there is no compulsory minimum capital. As well you will pay a progressive rate of personal income tax, rather than company or corporation tax. This means that for tax purposes no distinction is made between the enterprise’s profits and the entrepreneur’s remuneration, giving you the flexibility to move money in and out of your business account. An accountant is not obligatory, so once you understand how they work, you can do your own accounts - the Centre de gestion agréé offers courses in accounting. But only do them yourself if you are confident you can do so correctly.
Entreprise Unipersonnelle à Responsabilité Limitée, better known as a EURL (single person limited company): There is only one shareholder or partner, if more people join then the company will be transformed into another company called the SARL. A EURL is cheaper than a SARL, as there are less formal procedures to comply with.
Since there are no minimal capital requirements you can, in theory at least, set up a EURL with one euro in your pocket. However, in practice, you need at least €1,000 (£833) to set up an account with the bank. You will also need at least another €1,000 to cover other start-up costs.
An EURL is a good idea if you are likely to earn a high amount of money as it allows you to pay yourself a fixed income for living expenses with the remainder of your earnings taken out as dividends, which are no longer taxed at a fixed rate, but added to your personal income and taxed in accordance with your personal income bracket.
The taxation regime, however, avoids double taxation.
A EURL also gives you limited liability (limited to the capital invested). However, there is a lot more paperwork involved, both at the outset and throughout the year, and there are fees associated with owning a business. An accountant is compulsory and you can expect to pay a couple of thousand euros a year.
Multiple Ownership
There are a number of structures for larger companies and an accountant will be able to advise you on what is available. However, the two most commonly used are:
Société à Responsabilité Limitée, better known as a SARL (Limited Liability Company): A common structure for small and medium-sized businesses with between 2-50 shareholders. The conditions are as for a EURL - there is no minimal capital requirement and again you can, in theory at least, set up an SARL with one euro in your pocket. You can become a salaried employee of your SARL, entitling you to all the benefits of owning your own company, plus those of being a salaried employee. You would pay charges on your personal income, drawn from the company, as well as personal tax if you reach the threshold. The company would pay corporation tax of 331/3%.
A reduced rate is available for companies which generate little income. If an employer pays his/her employee a salary of €100, the employer pays social security charges on that €100 to approx 40%, so that employee “costs” the employer €140 in total. The employee in turn pays social security charges on his/her salary (approx 25 to 30%).
These are deducted at source. Therefore the net pay the employee actually receives is €70 to €75.
Société Anonyme, better known as an SA (equivalent of a plc in the UK): The most common structure for larger business. Legislation is in the pipeline stating that from 2009 onwards no minimum share capital is required.