Are you currently operating under the micro-enterprise scheme and planning to convert to a sole proprietorship (EI) under the “régime réel”? This transition represents an important step in the development of your business. It involves significant tax and accounting changes that you need to anticipate. Understanding the mechanisms of the micro-business regime and its alternatives will enable you to make an informed decision.

What is the transition from micro-enterprise to EI?

The change from micro-enterprise to sole proprietorship is really a change of tax regime, not of legal structure. Contrary to popular belief, a micro-enterprise is already a form of sole proprietorship. The difference lies solely in the method of taxation: the micro system applies a flat-rate deduction to your sales, while the actual system allows you to deduct your actual business expenses. This change becomes relevant when your actual expenses exceed the flat-rate deductions, or when your business exceeds the micro regime thresholds.

Reasons for switching to the real-estate system

There are a number of situations that justify a switch to the actual tax system. An analysis of your personal situation will determine the appropriateness of this change. This change often involves more structured accounting to support the growth of your business.

Sales thresholds exceeded

The micro-business ceilings are set at €188,700 for sales activities and €77,700 for services in 2024. If you exceed these amounts for two consecutive years, you will automatically switch to the actual system. Exceeding these limits for a single year will not result in immediate exit from the scheme.

High business expenses

The flat-rate deduction available under the micro-business system (71% for sales, 50% for BIC services, 34% for BNC) does not always reflect your actual expenses. If your business expenses exceed these percentages, the real regime becomes more advantageous, since you can deduct all your real expenses (rent, equipment, insurance, etc.). This deduction of actual business expenses reduces your tax base and therefore your overall tax liability.

VAT recovery

As a micro-enterprise, you don’t have to charge VAT, but you can’t reclaim VAT on your business purchases. For businesses requiring substantial investment in equipment or supplies, this impossibility represents a significant cost that weighs on your profitability. By switching to the actual VAT system, you can invoice your customers for VAT and reclaim it on all your business expenses. This considerably improves your cash flow, especially if you work with VAT-registered customers who can deduct VAT themselves.

The practicalities of changing regime

The transition to the real-estate system requires specific administrative procedures. There are two situations, depending on whether the change is voluntary or compulsory. To facilitate these steps and avoid errors, the support of a specialized accounting firm can prove invaluable, particularly in setting up your new accounting procedures.

Voluntary exit from the micro scheme

You can opt for the actual regime even if you do not exceed the thresholds, by submitting your request to the company tax department (SIE) before February 1st of the year for immediate application. This option binds your company for a minimum of two years: you will not be able to return to the micro regime before the end of this period, unless your sales fall back below the thresholds.

Automatic exit after overrun

If you exceed the thresholds for two consecutive years, you automatically exit the micro-tax regime. You switch to the actual system on January 1 of the year following the second year in which the thresholds are exceeded, and the tax authorities generally notify you of this change. This automatic transition requires rigorous anticipation: you need to set up compliant accounting and, if necessary, call in a chartered accountant before the deadline to ensure optimum management of your new tax situation.

Tax and accounting consequences

Switching to the actual tax system radically alters your reporting obligations and your method of taxation. You leave behind theflat-rate tax system of the micro-business and adopt an accounting system based on your actual results. These changes have a direct impact on your day-to-day management, both in terms of tax and social security contributions.

More stringent accounting requirements

Under the “régime réel” system, you are required to keep full accounts, including an annual balance sheet and income statement. These obligations generally require the services of a chartered accountant, the cost of which should be factored into your business case for changing regime.

Income tax calculation

Your taxable profit is now the difference between your revenues and your deductible expenses. This amount is included in your personal tax return, in the BIC (industrial and commercial profits) or BNC (non-commercial profits) category, depending on your activity. Your final tax assessment will depend on your family situation and your total income.

VAT management

By switching to the actual VAT system, you are obliged to invoice your customers for VAT and file regular returns. In return, you deduct the VAT paid on your business purchases, which improves your cash flow if your investments are substantial.

Social security contributions after the change

Your social security contributions are now calculated on your actual profit (after deduction of professional expenses) rather than your sales, at an overall rate varying between 40% and 45%. Contributions are provisionally called up during the year on the basis of N-2 income, then regularized the following year, which means you need to have the cash flow to absorb this time lag.

Comparison with other legal structures

Switching to the “régime réel” is not the only option for developing your business. Other legal structures, such as the SARL, EURL or SAS, may be just what you’re looking for, especially if you’re looking for comprehensive asset protection. However, these alternatives are beyond the scope of this article, which is devoted specifically to the transition from micro-enterprise to EI.

Maintaining a sole proprietorship or setting up a company

EI au régime réel keeps management simple, while allowing the deduction of actual expenses. You remain liable for your personal assets, unless you opt for EIRL (entrepreneur individuel à responsabilité limitée) status. The net taxable profit is calculated after deduction of all your professional expenses, which can be more advantageous than with a micro-enterprise.

Rigorous bookkeeping is essential under the real-estate system. Hiring a professional accountant greatly facilitates this management and secures your tax returns.

Setting up a SARL, EURL or SAS offers comprehensive asset protection. Combining different structures also enables you to optimize your situation according to your multiple activities.

Differences with auto-entrepreneur status

The terms micro-entreprise and auto-entrepreneur have referred to the same regime since 2016. Switching to the EI real regime is simply a tax change to your initial status, without creating a new entity: your SIRET number remains the same.

Anticipate and make a success of your transition

Preparing for this change conditions its success. There are a number of key steps you need to take to ensure a smooth transition.

Start by accurately assessing your annual expenses and comparing them with the standard deductions. Simulate your taxation under both systems, and consult a tax lawyer or chartered accountant for a personalized analysis. Set up your accounts several months before the actual changeover, familiarize yourself with VAT-inclusive invoicing software, and build up sufficient cash flow to absorb the time lag in payment of social security contributions. You should also inform your customers of the application of VAT on future invoices, and adjust your prices if necessary to maintain your competitiveness.