The choice of legal structure is a fundamental decision when setting up a business. This decision has a direct impact on your taxation, asset protection and administrative obligations, which often require the involvement of professional accounting services. Each legal form offers specific advantages and constraints that need to be analyzed in relation to your project. This guide will help you understand the different legal options available, so you can make an informed choice.

What is a corporate legal structure?

A company’s legal structure is the legal framework within which you carry out your professional activity. In concrete terms, it determines how you will be taxed (income tax or corporation tax), whether your personal assets can be seized in the event of difficulties, and the amount of your social security contributions. For example, a consultant invoicing €80,000 will keep around €45,000 net in a micro-business, compared with €52,000 in a SASU, thanks to the optimization between salary and dividends.

This initial choice is of strategic importance, as changing your structure costs between €1,500 and €5,000 in legal and tax fees. In France, 65% of new businesses are set up as micro-enterprises, 20% as SASU/SAS and 10% as SARLs. Three main criteria differentiate these structures: the level of asset protection (separation or separation of assets), the manager’s social security status (self-employed or assimilated employee), and the applicable tax regime (progressive scale of IR or proportional rate of IS). Each type of company meets specific needs, depending on your personal situation and development objectives.

The main legal forms for entrepreneurs

The French legal landscape offers several options for setting up your own business. Each form meets specific needs in terms of administrative simplicity, asset protection and tax optimization. Your choice will depend mainly on three factors: the number of partners envisaged, the level of formalism required and your development objectives. There are three main types of business structure: sole proprietorships for individual entrepreneurs, single-person companies for those wishing to separate their assets while retaining full control, and multi-person companies for associative projects.

Sole proprietorships and micro-businesses

A sole proprietorship is the simplest way to start a business. You operate in your own name, without creating a separate legal entity. Since the 2022 reform, your personal assets are automatically protected against business debts. However, your principal residence may still be seized by creditors, and this protection remains less watertight than that offered by corporate structures, particularly in the event of confusion of assets.

Micro-enterprises are a simplified form of sole proprietorship, favored by around 65% of business creators. It is suitable for activities with low sales: €188,700 for commerce and €77,700 for services in 2024. The advantages are numerous: VAT exemption, accounting obligations reduced to a simple book of receipts, simplified calculation of social security contributions and application of a flat-rate deduction for expenses (71% for sales, 50% for commercial services, 34% for professional services).

Despite these advantages, micro-business has some important limitations. You cannot deduct your actual expenses, which penalizes activities requiring significant investment. You can still hire employees, but this makes management considerably more complex. If you exceed the thresholds for two consecutive years, you automatically switch to the real tax regime, with more onerous accounting obligations, including the need to keep annual accounts. This transition often requires the support of a chartered accountant, and may justify switching to a corporate structure to optimize your tax situation.

Single-member companies: EURL and SASU

The EURL (Entreprise Unipersonnelle à Responsabilité Limitée) allows you to create a SARL with a single shareholder. You protect your personal assets while retaining full control. The EURL’s social security system varies according to whether or not the manager is a partner.

The SASU (Société par Actions Simplifiée Unipersonnelle) offers great statutory flexibility. The chairman benefits from the general social security system, which is more protective but generates higher social security contributions than the self-employed workers’ system. This type of company is particularly suited to innovative projects or those with high development potential.

Joint-stock companies: SARL and SAS

The SARL (limited liability company) is the most common form of company for French SMEs, although the SAS (simplified joint stock company) is gradually gaining ground, accounting for more than 45% of new company creations in 2023. It requires between 2 and 100 partners and a minimum legal share capital of one euro. In practice, a capital of €5,000 to €10,000 is strongly recommended to ensure credibility with banking and commercial partners. The majority shareholder is covered by the self-employed workers’ scheme, while the minority or equal shareholder is covered by the general scheme. This structure is particularly suited to traditional commercial activities, crafts and family businesses.

The SAS (Société par Actions Simplifiée – simplified joint stock company) offers exceptional flexibility. You are free to define the rules of governance and decision-making, as well as approval, pre-emption and lock-up clauses. Directors are treated as employees, which means higher social security contributions but better social protection. This structure makes it considerably easier to raise capital, thanks to the free trading of shares and the possibility of creating different classes of shares with specific rights (preference shares, warrants). Technology start-ups, innovative companies and projects with high growth potential all prefer this legal form.

The choice between SARL (limited liability company) and SAS (simplified joint stock company) depends mainly on your objectives: SARL offers a proven legal framework and moderate social costs for majority managers, while SAS allows tailor-made structuring for external investors. A specialized firm can help you make this strategic decision. In the event of the company going out of business, liquidation procedures are similar for both forms, with identical taxation on any liquidation surplus.

Criteria for choosing a legal structure

Choosing your legal structure is not a matter of chance. This strategic decision is based on several fundamental criteria that will determine your entrepreneurial success. You need to analyze your personal situation, your development objectives and the specifics of your business to identify the most appropriate form.

Nature and size of business

The nature of your business naturally leads you to choose certain structures. A simple commercial activity with modest sales is best served by a micro-enterprise. Conversely, a project requiring major investment or the hiring of employees calls for a more robust corporate structure. Regulated professions call for specific forms, such as the “société d’exercice libéral”.

The expected volume of business also influences this choice. Micro-business thresholds quickly limit growth. If you anticipate rapid growth, choose a company that will support your expansion without requiring costly transformation.

Start-up and management costs

Costs vary considerably according to the structure chosen. A sole proprietorship requires a minimum investment of €200 to €300, while a company involves set-up costs of €500 to €1,500. These costs include legal formalities, the drafting of articles of association and compulsory publications.

Running costs are a recurring budget item. A company requires full accounting and generally the services of a chartered accountant. The cost of an accounting firm varies between €1,000 and €3,000 per year, depending on the complexity of your business. A sole proprietorship simplifies management, reducing these costs.

Tax and Optimization

The tax system is a decisive factor in determining your net profitability.Direct incometax is suitable for businesses generating modest profits, with progressive rates of up to 45%. Corporate income tax offers more advantageous rates for larger profits: 15% up to €42,500, then 25% beyond that.

Tax-privileged companies make it possible to optimize remuneration by combining salary and dividends. This flexibility reduces the overall tax burden while building up social rights. You also need to anticipate exit taxation: the sale of a company generates capital gains that are taxed differently depending on the structure and length of ownership.

Credibility and Professional Image

Your legal structure influences the perception of your business and financial partners. A company generally inspires more confidence than a sole proprietorship, particularly when it comes to major contracts or relations with key accounts. Banks are more inclined to grant financing to corporate structures with significant share capital.

This credibility also facilitates the recruitment of qualified staff and the establishment of strategic partnerships. In some sectors, legal status is even a prerequisite for bidding on tenders or gaining access to specific markets.

Personal asset protection

The separation of personal and business assets is a decisive criterion when choosing your legal structure. Companies (SARL, SAS, EURL, SASU) create a separate legal entity, limiting your liability to the contributions you make. In the event of financial difficulties, your business creditors cannot seize your personal assets, except in the event of proven mismanagement that could lead to a tax reassessment or an extension of liability.

The sole proprietorship now offers similar protection since the reform of February 2022, which automatically establishes a separation of assets. However, this protection remains less watertight than in the case of a company, particularly in the event of confusion of assets or serious management shortcomings. The executive’s principal residence may also be subject to seizure in certain situations, in contrast to companies where protection is more robust.

Tax and social security

Your tax system has a direct impact on your net profitability. Sole proprietorships and EURLs are subject to income tax by default, with a sliding scale of rates: 0% up to €11,294, 11% up to €28,797, 30% up to €82,341, 41% up to €177,106, then 45% above that. Companies are subject to corporate income tax, with a reduced rate of 15% up to €42,500 profit, then 25% thereafter.

Social security contributions vary considerably according to status, and make up a significant proportion of compulsory deductions. A self-employed worker (majority manager of a SARL, sole proprietor) pays around 45% in social security contributions on his or her remuneration, including sickness, retirement and family allowances. A manager treated as an employee (chairman of a simplified joint-stock company (SAS), minority manager of a limited liability company (SARL)) pays around 82% in total social security charges: this rate includes employee contributions (around 22%) and employer contributions (around 60%), which are added to net remuneration. This difference has a significant impact on your disposable income.

To illustrate these differences in concrete terms, let’s take the example of a €100,000 profit: in a sole proprietorship subject to personal income tax, after €45,000 in social security contributions and around €15,000 in income tax (depending on the family situation), you’re left with around €40,000 net. In a SARL with a majority shareholder paid €60,000, social security contributions amount to €27,000, income tax to around €8,000, leaving €25,000 net plus €40,000 taxable profit (around €30,000 after tax). In an SAS with a salaried chairman at €60,000, total expenses reach €49,000, leaving a net of €11,000 plus around €30,000 profit after corporation tax, distributable as dividends.

The distribution of dividends in companies subject to corporate income tax optimizes overall taxation. This income is subject to the 30% flat tax, which combines income tax (12.8%) and social security contributions(17.2%). You can also opt for the progressive income tax scale if your marginal rate is below 30%, with a 40% allowance on dividends. This flexibility allows you to choose between remuneration and dividends according to your personal situation.

Development prospects

Your structure needs to keep pace with the growth of your business. Micro-businesses are suitable for modest beginnings, but quickly reach their limits. Companies make it easier to bring in new partners or investors. The SAS is particularly well-suited to fund-raising, thanks to its statutory flexibility.

There are a number of legal formalities that can help your business structure evolve. You can transform a sole proprietorship into a company, or change from a EURL to a SARL when new partners join.

Special Structures for Special Activities

Liberal Practice Companies

Regulated professions (lawyers, doctors, architects) are required to set up “sociétés d’exercice libéral ” (SEL). These structures take the classic forms: SELARL, SELAS, SELAFA. They allow you to benefit from corporate income tax while respecting the ethical rules of the profession.

The SEL facilitates the gradual transfer of the practice and the optimization of remuneration between salary and dividends. It does, however, impose specific constraints on the composition of capital and the exercise of the profession. In the event of cessation of activity, the liquidation of the structure follows special rules adapted to the liberal professions.

The Family LLC

The SARL de famille is an advantageous tax option for commercial, craft or agricultural activities carried out between members of the same family. It makes it possible to opt for income tax while retaining all the advantages of a partnership. This tax transparency avoids the double taxation of profits that normally characterizes companies subject to corporation tax.

Partners must be direct relatives or siblings, as well as their spouses and civil-union partners. This structure optimizes family inheritance while protecting the family’s assets.

Liberal Practice Companies

Regulated professions (lawyers, doctors, architects) are required to set up “sociétés d’exercice libéral ” (SEL). These structures take the classic forms: SELARL, SELAS, SELAFA. They allow you to benefit from corporate income tax, while respecting the ethical rules of the profession. SELs require rigorous bookkeeping in line with the obligations of commercial companies.

The SEL facilitates the gradual transfer of the practice and the optimization of remuneration between salary and dividends. It does, however, impose specific constraints on the composition of capital and the practice of the profession. The majority of associates must practice their profession within the structure, thus guaranteeing the liberal nature of the business.

The Family LLC

The SARL de famille is an advantageous tax option for commercial, craft or agricultural activities carried out between members of the same family. It makes it possible to opt for income tax while retaining all the advantages of a partnership. This tax transparency avoids double taxation of profits, and enables associates to benefit from progressive income tax rates.

Partners must be direct relatives or siblings, as well as their spouses and civil-union partners. This structure optimizes family inheritance while protecting the family’s assets.

Practical Aspects of Creation

Share capital and contributions

Share capital represents the initial resources contributed by the partners when the company is created. You can make contributions in cash (money), in kind (tangible or intangible assets) or in industry (skills and know-how). The payment of capital refers to the actual payment of the promised funds: you are not obliged to pay in full immediately. For a SARL (limited liability company), you must pay up at least 20% of the capital in cash on creation, then the balance within a maximum of 5 years. For a SAS, the initial requirement is 50%, with a further 5 years to pay up the remainder. If your capital is too low, you may find it easier to set up your business, but it will considerably reduce your credibility with financial partners, and may limit your borrowing capacity.

Banks generally require a significant amount of capital to grant business financing. The amount varies according to your sector of activity: €5,000 to €10,000 is sufficient for a service or consultancy business, but €15,000 to €30,000 for a commercial activity requiring stocks, and even more for industry or catering. Banks consider that capital representing at least 30% of your financing needs demonstrates your personal commitment to the project. Beyond the financial aspect, a substantial amount of capital strengthens your image in the eyes of potential suppliers and customers, who see it as a guarantee of the seriousness and durability of your business.

Incorporation formalities

Setting up a company involves a number of compulsory steps. First, you draw up the articles of association, which define the operating rules, then deposit the share capital with a bank or notary. The publication of a legal announcement in an authorized newspaper officially informs third parties of the creation of your structure.

Registration is carried out at the “guichet unique des formalités des entreprises” (one-stop shop for business formalities), which now centralizes all procedures. Timescales vary from a few days to three weeks, depending on the structure chosen and the complexity of the file. The total cost ranges from €200 for a sole proprietorship to €500 for a company with legal publication.

Possible accumulations

Under certain conditions, you can combine several types of status. An employee can set up a micro-business in parallel, unless there is an exclusivity clause in his or her employment contract. A company director can also run a separate self-employed business.

Combining two or more activities gives rise to multiple reporting obligations and a complex tax system. Each activity generates its own social security contributions, and may involve different social security contribution regimes. You must be careful not to create confusion between activities, and to comply with non-competition rules. The support of a tax lawyer can make these arrangements more secure.

Tax Optimization and Choice of Structure

Arbitrage between remuneration and dividends

Companies subject to corporate income tax allow you to optimize your manager’s remuneration. You combine a salary subject to social security contributions with dividends taxed at the flat rate of 30%. This distribution reduces the overall tax burden, while building up pension rights. The optimization strategy must also take into account thecapital gains tax applicable to income from assets.

Interim dividends enable you to receive part of your profits during the year. This technique improves personal cash flow, but requires a sound financial situation and, in some cases, certified interim accounts.

Current account management

A partner’s current account is a flexible financing tool. You lend funds to your company, which pays you tax-deductible interest. The interest rate must remain within the limits set by the tax authorities to avoid a tax reassessment.

Current account overdrafts in an SAS present significant tax risks. The tax authorities may reclassify these advances as distributed income, generating immediate taxation. This practice must remain exceptional and governed by regulated agreements.

Arbitrage between remuneration and dividends

Companies subject to corporate income tax allow you to optimize your manager’s remuneration by combining salary and dividends. Salaries generate social security contributions (around 82% for assimilated employees, 45% for self-employed workers), but also give rise to pension rights. Dividends are subject to the 30% flat tax (12.8% income tax and 17.2% social security contributions), or to the progressive tax scale if this is more advantageous. This strategic allocation reduces the overall tax burden.

Let’s take a concrete example: a manager of an SAS makes an annual profit of €80,000. If he pays himself all in salary, after 82% social security contributions, he receives around €44,000 net and pays around €6,000 income tax, i.e. €38,000 available. With a mixed strategy (€30,000 salary + €50,000 dividends), he pays €24,600 in social security charges on the salary, then €15,000 in flat tax on the dividends, for final disposable income of around €40,400. The savings achieved amount to €2,400, while preserving minimal pension rights.

However, there are legal limits to this optimization. Remuneration that is too low in relation to the dividends distributed runs the risk of being requalified by the tax authorities, particularly in cases of clear abuse of rights. The courts consider that an active director should receive normal remuneration commensurate with his or her duties. In addition, insufficient remuneration has a negative impact on your pension rights and social protection (daily allowances, unemployment benefits).

Interim dividends enable you to receive part of your profits during the year. This technique improves personal cash flow, but requires a sound financial situation and, in some cases, certified interim accounts. The optimal choice depends on your marginal tax bracket, your cash flow needs and your social protection objectives.

Current account management

A partner’s current account is a flexible financing tool. You lend funds to your company, which pays you tax-deductible interest. The interest rate must remain within the limits set by the tax authorities to avoid a tax reassessment.

Current account overdrafts in an SAS present significant tax risks. The tax authorities may reclassify these advances as distributed income, generating immediate taxation. This practice must remain exceptional and governed by regulated agreements.

Evolving your legal structure

Your initial structure is not definitive. The evolution of your business often requires you to adapt your legal framework. According to industry statistics, around 30% of companies change their structure within the first five years of existence. This transformation is in response to needs for growth, tax optimization or opening up of capital.

Typical Transformation Cases

There are a number of common situations when switching from one form to another. If you exceed the micro-business thresholds (€188,700 or €77,700, depending on your activity), you automatically switch to the real tax system. In this case, you must decide whether to remain a classic sole proprietorship or set up a company.

Converting a sole proprietorship into a EURL is the most common change. It enables clear separation of personal and business assets, while retaining full control. The business is transferred to the newly-created company. Unrealized capital gains are conditionally deferred, avoiding immediate taxation.

The change from a EURL to a SARL is necessary when new partners join the company. All that’s required is to amend the articles of association and register the new partners. Similarly, a SASU can be transformed into a SAS as soon as a second shareholder joins the capital.

The Concrete Steps of Transformation

The transformation of a legal structure follows a structured process. You must first call an Extraordinary General Meeting to approve the principle of transformation and the new Articles of Association. This decision generally requires the unanimous agreement of the partners for substantial modifications.

Drafting the new articles of association is the central stage. These documents define the new structure’s operating rules, capital distribution and governance arrangements. The involvement of a tax lawyer secures the drafting process and anticipates future problems.

Administrative formalities include registering the deed of conversion with the tax authorities, publishing a legal announcement and filing a dossier with the guichet unique des formalités des entreprises. The entire process takes between 4 and 8 weeks, depending on the complexity of the operation.

Tax Costs and Impacts

The cost of a transformation varies according to the complexity of the operation. Count on between €1,500 and €3,500 for a simple transformation (EI to EURL), including lawyer’s fees, legal announcement costs and registration fees. A more complex transformation involving the contribution of goodwill can cost between €5,000 and €8,000.

Particular attention should be paid to the tax implications. The transfer of a sole proprietorship to a company potentially generates capital gains on the assets. The preferential tax regime set out in article 151 octies of the French General Tax Code allows you to defer taxation if you keep the company shares for at least five years. This optimization avoids a major cash outflow at the time of conversion.

A change of tax regime (from income tax to corporation tax or vice versa) profoundly modifies your taxation. This decision needs to be analyzed over several years, to measure the real impact on your net profitability. Professional support is essential to optimize this strategic choice.

Finally, when a company ceases trading and is wound up, a liquidation surplus or deficit is generated, depending on whether or not the net assets exceed the share capital. This specific tax situation needs to be factored into your overall wealth management strategy.

Choosing the right structure for your project

The choice of your legal structure is the result of a trade-off between asset protection, tax optimization and management flexibility. No single form is universally superior: each situation calls for a personalized analysis based on your objectives and constraints. Individual entrepreneurs prefer administrative simplicity, while ambitious or collaborative projects require corporate structures offering greater flexibility.

The support of a tax lawyer secures your decision and optimizes your situation from the outset. He or she analyzes your personal situation, your development objectives and the specific features of your business sector, to guide you towards the most appropriate structure. This expertise prevents costly mistakes and enables you to anticipate future developments in your business. Don’t hesitate to seek professional advice before committing yourself to a structure that will condition your entrepreneurial success and your tax situation in the long term.