Entreprise individuelle is one of the easiest business structure to start in France. But its huge downside is that the entrepreneur is liable on his-her personal asset for all debts generated by the business. Indeed there is no distinction between the business and the entrepreneur - this is referred to as entreprise en nom propre. This can have a huge impact on the family, as married or pacsed couples would be both liable for the debt incurred by the business.
A new law was presented to the Conseil des Ministres in January and was being discussed by the Parlement on 17th february. The aim of this new law is to protect entrepreneurs and avoid them going into personal bankruptcy. The EIRL would enable to separate the business asset patrimoine professionnel and personal asset patrimoine personnel. Entrepreneurs would therefore be only liable on their business asset in the even of financial difficulties.
This new law could affect all entrepreneurs registered as entreprise individuelle en nom propre, including existing entreprises individuelles, micro entreprises and auto entrepreneurs. It is expeced that existing businesses will be able to switch to this new business structure - artisans, commercants, professions liberales.
How the EIRL will work
The entrepreneur will declare which part of his-her personal assets are affected to the business and will therefore represent a garantee for the business creditors. Artisans will make this declaration to Repertoire des Metiers, commercants to Registre du Commerce and professions liberales and auto entrepreneurs to Greffe du Tribunal. If a building is affected to the business, a legal document will also have to be written by a notaire.
Key rules applied to the EIRL:
- Accounts will have to be published yearly (bilan), as per the EURL and SARL. Auto entrepreneurs and micro entreprises will have a simplified version (obligations comptables simplifiees)
- No liability on personal asset once the declaration is published
- Option to choose between the Income Taxe (impot sur le revenu IR) or incorporation taxe (Impot sur les societes IS)
- Dividends will also be limited.
This new business structure, which is very much inspired by the EURL, will enable the entrepreneur to decide the level of risk he/she is ready to take. I will keep you posted on the EIRL as and when new laws and decrees are published.