An EIRL is a sole proprietorship with limited liability. The status is very interesting for individual entrepreneurs since it allows them to carry out their activity in their own name while protecting their personal assets. How does the EIRL scheme work? What are its advantages and disadvantages ? Here's everything you need to know about the status.
A sole proprietorship with limited liability (EIRL) allows you to carry out an independent activity. Agricultural, craft, commercial and liberal professions can be exercised under the EIRL regime. What characterizes this status is the possibility for the entrepreneur to protect his personal property in the event of debts related to his activity. The EIRL is aimed at individual entrepreneurs, whether they are in a micro-enterprise or not, but also at self-entrepreneurs.
The creation of an EIRL is done in 3 steps.
To protect his personal property, an individual entrepreneur with limited liability must make a declaration of assignment of his property to professional practice. Thanks to this procedure, only the affected assets will be usable to proceed with the reimbursement of professional debts.
The Business Formality Center (CFE) allows you to do this. In addition to providing contractors with assignment declaration templates, the CFE sends the documents to the following establishments.
An EIRL is subject to income tax (IR). Entrepreneurs must declare their income either in the category of:
It is quite possible for an EIRL to opt for corporation tax (IS). The tax rate is then 15% up to 38,120 euros of profit and 33.33% beyond. Whether subject to IR or IS, the individual entrepreneur with limited liability is subject to the social security schemes for the self-employed.
The advantages of a sole proprietorship are numerous. The first is of course that this status allows you to protect your personal assets in the event of professional debts. The operator can allocate assets to his activity. This consists, for example, of the commercial premises, equipment, machinery and possibly vehicles.
Another major asset, an entrepreneur who chooses the legal form of EIRL is very free. This freedom is explained by the fact that he is the only master on board. He makes all the decisions and develops his activity as he wishes. In addition, if necessary, it can hire employees.
The choice of tax regime is also an advantage to be taken into consideration. Depending on the nature of the activity, but also the amount of income, the entrepreneur can choose between income tax and corporation tax. This choice has an impact on social security contributions, so you have to opt for the most attractive tax system.
Finally, the EIRL is a status that can be combined with that of auto-entrepreneur. Thus, the benefits are cumulative. Conditions exist for this accumulation to be possible. The entrepreneur must not exceed the turnover limits and must not be a business manager at the level of the Social Security of the Independents (formerly RSI).
The declaration of assignment is a process that protects the personal assets of an entrepreneur but can also be complex. Indeed, this declaration is demanding and may require the intervention of a notary to assess the value of real estate. The accounting rules are also stricter if a declaration of allocation is made. For example, it is imperative to open a bank account dedicated to professional activity and to establish annual social accounts. If the obligations are not respected, the liability of the operator becomes unlimited and therefore extends to all of its assets.
Finally, an EIRL has little opportunity to develop. Its growth is quickly limited. In the event of a change of status, taxation of your professional capital gains and losses applies. The formalities are numerous and tedious. The EURL is a status close to EIRL which offers a better possibility of evolution since it is easy to evolve an EURL into a SARL.
