A new law to further foster entrepreneurship in France.
In September 2021, the French President proposed an action plan to build a business-friendly environment for individual entrepreneurs to start a business, the « Plan Indépendants ».
This action plan has been translated into a proposed legislation which has been enacted on February 14, 2022.
The objectives are:
- To offer a streamlined procedure for entrepreneurs to rebound;
- To better support entrepreneurs in their journey, from the company creation to its development and transmission.
A NEW LEGAL STATUS MORE PROTECTIVE OF INDIVIDUAL ENTREPRENEURS
The law created a new unique legal status for individual entrepreneurs. They have two classes of assets: personal assets and professional assets.
The individual entrepreneurs’ professional assets
As an individual entrepreneur, your professional assets include:
- Goods, rights, legal and contractual commitments, and sureties that you have and that are necessary for your independent professional activity(ies).
- Professional liabilities including self-employment tax liabilities.
The individual entrepreneurs’ personal assets
The individual entrepreneurs’ personal assets include all of his or her assets other than professional assets.
If you’ve been in business as of May 15, 2022, you may take advantage of the professional and personal assets separation rules for transactions that you enter into from May 16, 2022.
If you start your business from May 15, 2022, the distinction between professional and personal assets will take effect :
- If you incorporate your business, from the date of incorporation.
- If you don’t incorporate your business, from the first act you perform as a professional.
- If you start your business before you incorporate, from the day that you reported as the date you started your business.
If you cannot pay your business bills, your creditors can no longer seize your personal assets, realize them, and pay themselves. However, the French tax administration and the social security administration may seize all of your professional and personal assets:
- If you commit fraud, or
- If you willfully and repeatedly don’t satisfy your income tax and social security tax obligations.
At a creditor’s written request, you may forgo the separation of your assets between professional assets and personal assets.
IMPROVEMENTS IN THE STATUS OF THE ENTREPRENEUR
An improved ability to transmit your activity
If you permanently discontinue your business, the separation between your personal and professional assets is automatically voided. All of your assets become personal assets.
If you dispose of your business or incorporate your company, all of your professional assets will be transmitted to the beneficiary.
An improved tax status for individual entrepreneurs
If you meet certain requirements, you may elect to be taxed as a C Corporation even if you haven’t created a company and are doing business under your name. This election is permanent.
Something to fall back onto if you permanently discontinue your activity
If it doesn’t work out and you permanently discontinue your business, you’re eligible for unemployment benefits. You’re welcome to apply.
The individual entrepreneur is a natural person who is independently running one business or more under his or her own name. France is home for an estimated 3 million individual entrepreneurs. They contribute to the country’s economic growth, create jobs, and enable healthy socioeconomic ecosystems.