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(Entrepreneur Individuel à Responsabilité Limitée or EIRL)
Businnessman, whether craftspeople, traders, farmers or micro-trader, self-employed professionals, may opt to be classified as a sole trader with limited liability (EIRL).
What is the sole trader with limited liability (EIRL)?
By the status of the EIRL, the Contractor's personal property is protected. Indeed, the individual entrepreneur determines, in a statement of assignment, the patrimony allocated to his professional activity.
It responds to one of the main concerns of the individual entrepreneur in his own name: to better protect the family patrimony in the event of bankruptcy.
Creation of business assets
In order to opt for EIRL, the entrepreneur must carry out a declaration of allocation in order to be able to allocate professional assets. He can do so:
Since May 23, 2019, it is possible to create an EIRL without having special purpose assets.
Thus, the entrepreneur creates a professional asset (special purpose asset). Its creditors subsequent to the declaration of asset will only be able to seize this special purpose asset in the case of difficulties.
This asset must be made up of all the goods required for professional activity: business assets, lease rights, equipment and tools, etc. He can also include the items he uses in the course of his activity, for example, mixed-use goods such as a living room or a vehicle.
The declaration must be made at the Formality Center for Companies (CFE) on which the EIRL depends.
The contractor must include in the description annexed to the declaration of special assets, the market value of each asset. The market value corresponds to the price of the item during a traditional sale on the market. In the absence of market value, he can resort to value in use. The entrepreneur has the option of using his last balance sheet as a descriptive statement of the concerned goods when his accounts have been closed for less than 4 months.
It is possible to modify the assets after the creation of the EIRL; for this, an amending declaration must be made as soon as the value of the property withdrawn or added exceeds 30,000€. It must be said that a special purpose asset can be withdrawn to include it in one’s personal assets after building up the professional assets.
When the entrepreneur wishes to include a common or undivided property in his assigned heritage, the express agreement of his spouse (or co-undivided) is required.
Good to know: when the choice of EIRL is made while creating the activity, only the registration fees are due. On the other hand, for a modification during the exercise of the sole proprietorship, the entrepreneur must pay certain costs.
Careful: the allocation of real estate must be the subject toa notarial deed published at the mortgage registry. Since May 23, 2019, it is possible to create an EIRL without having special purpose assets.
Protection of personal assets
EIRL protects personal property separated from professional assets, especially in the case of bankruptcy. Only the special purpose professional assets can be seized by professional creditors.
The tax system is that of the income tax but it is possible to opt for the companies tax (except for the micro-trader).
Since the Macron law of 6 August 2015, the rights of a natural person registered in a register of legal publicity of a professional nature or engaged in an agricultural or independent professional activity on the immovable where his principal residence is fixed are exempt from seizure by creditors whose The rights arise in connection with the person's professional activity (Article L 526-1 of the Commercial Code). The contractor remains as owner of these assets - personal and professional - without having to create company.
Obligations of an EIRL
The EIRL uses a name incorporating its name preceded or followed by the words "individual entrepreneur with limited liability" or "EIRL" to exercise its activity and on all its commercial documents. The latter must also open a bank account dedicated to his/her activity and maintain commercial accounts.
The individual contractor status to limited liability (EIRL) must file their annual accounts with the register where filed their statement of patrimony. The deposit updates the composition and value of the company's affected assets.
Careful: if he were to choose micro-enterprise status, his obligations would be reduced. In fact, he only needs to maintain an accounting book, a purchase register and a statement updating his declaration of allocation on December 31 of each year.
Corporate tax option
Theoretically, an EIRL is taxed on corporate tax (IR) in the category of industrial and commercial profits (BIC) for a trader or craftsman, and in the category of non-commercial profits (BNC) for a liberal profession.
Theoretically, an EIRL is taxed on corporate tax (IR) in the category of industrial and commercial profits (BIC) for a trader or craftsman, and in the category of non-commercial profits (BNC) for a liberal profession.
It should be noted:
Membership in an approved management center (CGA) avoids a 25% increase in taxable income. However, the 2021 finance law provides for the gradual elimination of this increase.
The entrepreneur can opt for corporate tax (IS) :
- while creating the EIRL on the creation form,
- before the end of the 3rd month of the fiscal year during which he wishes to be subject to the corporate tax, through a letter which is addressed to the tax service
Careful: for a self-employed person (micro-entrepreneur), he must first opt for the real tax regime.
With the IS option, the EIRL is tax assimilated to a EURL in IS. In this case, the contractor's income is deductible from the results and taxed at IR.
The social regime of the EIRL
The EIRL falls under the social regime for self-employed workers.
When the entrepreneur has opted for IS, his contributions are calculated on the net income of the entrepreneur. On the other hand, for an EIRL at IR, its social contributions are set on the basis of taxable profit or on the basis of its turnover for a micro-enterprise.
More informations about the sole trader with limited liability?
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