Chingis Business How to choose the legal form of your business?

How to choose the legal form of your business?



You have decided to get started, your market research is conclusive, your business plan well advanced, and you must now choose the legal form of your future business.

The choice of the legal form is not an easy task because in France there are a large number of possibilities, and in this jungle of legal statutes, it can sometimes be difficult to navigate.

Your choice will depend in part on the constraints of your project (number of partners, amount of capital required for the activity) and will have implications at many levels (administrative complexity, tax regime, social regime of the manager (s), protection of the private assets of the entrepreneur, mode of decision-making, etc.).

The purpose of this guide to choosing legal status is to help you see things more clearly. It is divided into two parts, in the first we will see all the points to anticipate to choose the right legal form for your business, and in the second we will present a comparison of the most popular legal forms.

The importance of choosing the legal form of the company

Choosing the legal form of your company is above all a fiscal, financial and strategic choice.

It is a fiscal choice because depending on it, you will have the possibility or not to deduct certain expenses, and will be taxed at the social and fiscal level in different ways.

It is also an asset choice because certain legal forms will allow you to limit your liability to contributions to society while others will expose your personal assets in the event of professional debts.

Finally, it is a strategic choice because on this will depend the ease that you will have to make quickly decisions, to raise capital from investors if necessary, and to carry out or not certain activities.

Protection of personal assets

Depending on the legal status of your business, you may or may not be sued on your personal assets for your professional debts.

That is to say that in certain cases, if the company has difficulties and cannot honor its debts, your creditors will be able to seize your house or your car to repay themselves.

The social regime of the manager (s).

Your social security plan will depend on the legal form, you will be attached:

  • either to the general scheme if you are an employee (or assimilated employee)
  • or the social security scheme for the self-employed if you are a self-employed worker.

When you depend on the general scheme, as a manager, you benefit from a level of social protection that is roughly equivalent to that of employees.

On the other hand, when you depend on the social system for self-employed workers, you benefit from reduced social coverage in return for lower contribution rates.

It is possible to compensate for the lower social coverage of the social security scheme for self-employed workers by setting up additional insurance (some of which entitle to tax reductions).