Even before registering your company, you’ve probably incurred essential expenses. These preliminary costs can represent a substantial investment. You may be wondering whether you can recover these sums once your company has been set up. The answer is yes, under certain strict conditions. The reimbursement of expenses incurred prior to the creation of the company is a legal and fiscal mechanism. It enables you to have your company pay for expenses incurred on its behalf prior to its legal existence. This possibility applies to different corporate legal structures, but the terms and conditions vary according to your status.

What is the reimbursement of expenses incurred before setting up a business?

The reimbursement of expenses incurred prior to the company’s incorporation refers to the assumption by the company of expenses incurred by the founders prior to registration. Company law provides a mechanism for taking over these commitments: acts performed on behalf of a company in formation can be taken over by the latter after registration, subject to a formal decision by the management bodies. The French Commercial Code strictly regulates this procedure, which must be carried out within two years of the company’s creation.

The expenses concerned must be directly related to the company’s future activity, and necessary for its creation or start-up. You must keep all original supporting documents (invoices, receipts, contracts). Without solid documentary evidence, reimbursement will be refused by the tax authorities in the event of an audit.

What expenses can be reimbursed?

Reimbursable expenses fall into three main categories. Legal and intellectual fees cover all expenses related to the creation and preparation of the project. They include :

• Incorporation costs: lawyer’s fees, court registry fees, legal publication, registration fees
• Study and consultancy costs: consultancy fees, market studies, due diligence, business plan, project-specific training
• Accountant ‘s fees for initial support

Operational investments are the second eligible category. You can be reimbursed for the purchase of professional equipment (computers, furniture, software, specific tools) as well as business development expenses (website creation, marketing materials, trade show participation, initial advertising campaigns). These expenses must be supported by detailed invoices demonstrating their usefulness to the business project.

Certain expenses remain excluded from reimbursement. Personal expenses with no professional connection, and sumptuary or disproportionate expenses will be systematically rejected by the tax authorities, who carefully examine the nature and amount of each expense.

Refund conditions and procedure

Expenses must be incurred between six months and one year prior to setting up the business. Beyond that date, you’ll need to justify the link with your business project. Keep all original supporting documents: invoices, receipts, contracts and bank statements. These documents must be made out in the founder’s name and clearly indicate the nature of the service or good acquired.

In the case of a company, the partners must approve the assumption of liabilities at a general meeting or collective decision, within two years of registration. This decision must be recorded in minutes, detailing the list of costs and their amounts.

From an accounting point of view, you must record these expenses in the company’s annual accounts: as expenses or fixed assets, depending on their nature. The founder is reimbursed by bank transfer.

Tax and accounting treatment

Reimbursed expenses are deductible from the company’s net taxable profit, thereby reducing your tax base. This deductibility requires that the expenses be incurred in the interests of the company, supported by documentary evidence and properly accounted for. Set-up costs can be capitalized as formation expenses and amortized over a maximum of 5 years, or expensed directly. For example, €5,000 in reimbursed costs can generate tax savings of around €1,250 for a company subject to corporation tax (reduced rate of 15%), or up to €2,200 depending on your marginal tax bracket. An accounting firm can optimize this treatment according to your situation.

Other expenses are accounted for according to their nature: fixed assets appear on the assets side of the balance sheet, while services are recorded as operating expenses. This classification determines your taxable income and your tax reporting obligations.

If your company is subject to VAT, you can reclaim the VAT charged on preliminary expenses, provided the goods or services are used for taxable transactions. You must request that these invoices be transferred to the company’s name, either by means of a rectifying invoice from the supplier, or via the VAT transfer procedure.

The reimbursement itself does not constitute taxable income for the founder. It is simply a reimbursement of expenses that does not have to be declared in your personal income. If you are entitled to a tax deduction for your professional income, this reimbursement is not included in the calculation of this benefit.

Special cases depending on legal structure

The treatment of preliminary expenses differs considerably depending on your legal status. For a micro-enterprise, the system does not allow the deduction of actual expenses. You benefit from a flat-rate deduction from your sales (71% for purchase/sale activities, 50% for BIC services, 34% for BNC). Expenses incurred prior to setting up your business cannot therefore be reimbursed for tax purposes. This limitation is a major drawback for projects requiring initial investments in excess of €5,000.

For a SARL or SAS, the procedure is much more favorable. These companies can take over prior commitments by decision of the partners within two years of registration. The costs then become deductible expenses for the company. For example, if you have incurred €15,000 in costs (studies, equipment, incorporation), your company can reimburse you and deduct them from its taxable income. This reversal must be formalized in minutes and validated by a chartered accountant.

Sole proprietorship under the actual tax system also offers an interesting solution. You can deduct all business expenses incurred before the start of your business, considered as expenses for the first year of operation. These expenses must be declared in your tax return and comply with the general deductibility rules. Around 35% of EI founders deduct between €3,000 and €8,000 in preliminary expenses on their first tax return.

Mistakes to avoid and practical recommendations

Four mistakes frequently jeopardize the reimbursement of out-of-pocket expenses. Failure to keep original receipts makes reimbursement impossible, and submitting dubious invoices exposes you to tax and criminal penalties. Incurring expenses more than a year before the start-up weakens the justification of the link with the entrepreneurial project. Mixing personal and business expenses compromises the credibility of your claims. Finally, failure to formalize the assumption of commitments by a decision of the partners renders repayment legally unenforceable.

Rigorous documentation is your best protection. Keep all original supporting documents and scan them systematically. Open a bank account dedicated to the project from the outset to ensure clear traceability. Write an explanatory note for each major expense, specifying its link with the future business.

The support of a chartered accountant or tax lawyer secures your approach and optimizes the tax treatment of your expenses. This professional advice, which generally costs between €500 and €2,000 depending on complexity, represents a worthwhile investment given the financial stakes involved in reimbursement.

Reimbursing expenses incurred prior to setting up a business requires meticulous preparation and strict compliance with legal procedures. Each legal structure has its own specificities, which must be mastered to take full advantage of this mechanism.