French Expat News: Tracy Leonetti talks business options
AUTO ENTREPRENEUR or NOT AUTO ENTREPRENEUR
IS THAT THE QUESTION ?
It’s widely known that access to the healthcare system is easier if you have a salaried position or a business activity but there so many questions around what options exists for small businesses that many people tend to spend hours on the internet, only to find that they are back to square one. Over the years I have found there are many reasons why people don’t actually take that next step into creating their small business but don’t let lack of good information be one of them!!
Ask the right questions
Before deciding which is the right business structure for you. It’s important to ask the right questions and it’s a process that I go through with every client. What is your estimated earnings for the first year? What are your estimated costs? Do you have assets to protect and are you working with associates or looking for investment?
The responses to these questions (and others) will help determine which direction to go with the business structure. Most people start off by thinking of the Auto Entrepreneur option as it’s known for being the easiest form of business. This is true, however bear in mind it is a business and as such there are legal implications that need to be respected.
With over one million Auto Entrepreneurs in 2016 according to INSEE, it is obviously a popular option. Let’s take a look at some of the key highlights that makes this business structure so popular.
Good to test your idea for a certain period
Simplified book keeping but no accountant needed
Quick to set up
Easy to close down or modify
Access to health care in France
Fixed social charges based on your earnings
Fixed reductions for taxes
You do not need to pay an accountant
Limited earnings !
No reduction of running costs (very important for commercial or artisanal
business where materials or products are bought to be transformed or sold on
Difficult to get investments from banks
No VAT charge. This can be a disadvantage if dealing with corporates and/or buying products
You are solely responsible for your business
From 1st January 2018 the earnings limit for ME’s have gone up however the VAT levels have not so you could find yourself having to charge VAT half way through the year.
What are the earnings limits?
When President Macron announced the new higher earnings limits from 2018 for this regime, there were shouts of joy from many corners. However, do be aware that the VAT limits did not follow. This means many auto entrepreneurs, originally part of a simplified system, find themselves in a hybrid situation of having to declare VAT half way through the year but paying social charges as an auto entrepreneur. This is often the time to start thinking of other business structures that better suit your situation.
New Earnings Limits & VAT from 1st January 2018
To benefit from the fixed rate of social charges, your earnings limits must stay within the auto entrepreneur limits:
70,000: for artisanal (manual) activities and services (since 1st January 2018)
170,000: for trading companies: buying & selling products, (since 1st January 2018)
Where can I register as an Auto Entrepreneur?
Online with http://www.lautoentrepreneur.fr/ or directly with the appropriate CFE (Centre de Formalités d’Entreprises) below:
How much will I pay in Social charges?
The simplified system of AE means that you only pay your social charges on what you invoice, one of the key advantages for many people setting out into business. So you would just need to apply the below percentages, based on your activity, to the amount that you have invoiced. I have rounded them up to take into account the additional taxes for training and CFE costs.
Commercial activities (ie trading, sales, gites, B&B) : 12.9%
Manual activites (ie electriciens, hairdressers etc) : 12.9%
Liberale activities ie (consultants, sales reps, architects) 22,2%
Will I pay income tax?
That depends on your declaration and your other household income. You would certainly need to declare your auto entrepreneur earnings, along with your other sources of revenue for your household. As a Micro Entrepreneur under the simplified system, you would benefit from a fixed reduction against your business earnings. The government recognizes that you cannot reduce your business expenses as an AE and therefore they give you a big tax reduction to compensate for this:
Commercial activities (ie trading, sales, gites, B&B): reduction of 74%
Manual activites (ie electriciens, hairdressers etc): reduction of 50%
Liberale activities ie(consultants, sales reps, architects): reduction of 34%.
Do I get healthcare cover?
You are covered from your first day of business set up in France however the paperwork can take a bit longer to catch up. So remember, if you go to the doctors in the meantime, keep your ‘feuille de soins’ safely for reimbursement afterwards.
Since January 1st 2016 if you have earnt less than an average of 3,698 over the past 3 years, you will see your health service coverage reduced for maternity.
You can add your dependent children to your healthcare cover but your spouse/partner would need to make a request in their own right via the PUMA.
If you need help with your business set up or help managing your small business, contact LBS and ask about the Serenity Club.
Providing up to date Information, Resources & Support for Entrepreneurs in France
Tel: +33(0)6 59 04 01 51