Economic Motivations

To develop his individual business, the head of company must increase his personal financial investment or call on the bank credit. This is a suitable solution when the capital to be injected into the project is minimal and can be provided by the contractor. On the other hand, this may represent a brake the development of larger-scale projects requiring large volumes of funding.

The passage in business allows the contractor to welcome other partners or shareholders. It can thus pursue the development of the company more easily thanks to the entrance of new funds and/or new skills. This framework also promotes closer ties between the companies through the creation of joint subsidiaries or equity investments.

In addition, in individual business, the head of company must finance development without being able to pay his cash advances. On the other hand, in the businesses, advances made by a member may benefit from the tax regime of interest on associates' current accounts. The interest paid to the partners is, under certain conditions, deductible from the profits of the business.

Legal grounds

Since May 15, 2022, personal and professional assets of the individual entrepreneur are separate. The head of company is no longer fully responsible for the debts of his individual business on all his personal property. From now on, his personal property is protected from all actions by professional creditors.

Nevertheless, the individual entrepreneur can waive this protection at the request of one of its creditors. For example, a bank may ask them to waive this protection before granting them a loan.

In comparison, business benefits from legal personality and has a own heritage. It creates a partition between the assets of the entrepreneur and those of the company. The risk incurred by the partners, except businesses of persons (SNC, SCS, civil businesses ...),) shall be limited to the amount of contributions which were carried out by each of them when the business was constituted.

The choice to exercise as a business may therefore prove to be more advantageous at this level.

Tax incentives

The profits of an individual business are in addition to other income earned by the company manager (financial investments, real estate capital gains, pensions, etc.) and are subject to theincome tax (IR). These profits obey the progressivity of the tax scalehindering self-financing of the individual business.

In addition, the individual entrepreneur cannot deduct any remuneration from its taxable profit. This is particularly the case for the money it pays itself through its company.

The passage into business may allow the individual contractor to distinguish personal taxation from company taxation by choosing thebusiness tax (IS), at the standard rate of 25%.

Without switching to business, the individual entrepreneur can opt for assimilation to the EURL from a tax point of view and thus be subject to business tax (IS). In this case, the entrepreneur can benefit from the tax neutrality regime that allows him to defer taxation of capital gains. For more information, refer to the fact sheet move from income tax to business tax.

Social motivations

The individual entrepreneur is a self-employed person (TNS). It is attached to the social security for self-employed persons (SSI) an integral part of the general social security system.

Instead, the head of the equity business (SAS, SA, SCA ...) and the minority manager of SARL are equivalent employees and contribute to the general social security system. Their social protection is almost identical to that of an employee (except unemployment insurance).

The employee-equivalent manager bears a social security contribution rate higher that the self-employed person (TNS) but benefits in return from a better pension and a supplementary pension more important. It should be noted that the gap between the two statutes (in particular the weight of social contributions) widens as the executive's remuneration increases.

Heritage motivations

In the event of the death of the operator, the individual business shall be undivided heirs who must unanimously give a mandate to one of them to manage the family business. In the meantime, the family company may be paralyzed.

The passage of ISIS in business can help prevent the consequences of this division. In fact, the heirs will no longer have to share the company's heritage but the social rights held by the head of company.

In addition, the transmission of a business during the lifetime of the head of company is also facilitated. The head of company has the opportunity to give up his social rights in a progressive manner, and the registration fees to be paid shall be limited (0.1% sale price in SAS/SASU, SA, SCA...).