Automatic separation of assets

When the individual entrepreneur (including the micro-entrepreneur) creates a business (EI), his or her assets are automatically separated. It then has two assets:

• One professional heritage composed of all the elements useful to the activity or to the independent professional activities
• One personal assets composed of elements not included in the professional heritage

This separation shall be carried out automatically from one of the following times:

• on the date of registration of the activity in a register: RNE: titleContent, RCS: titleContent etc.
• on the declared date of commencement of activity, where the activity is prior to the date of registration
• or at the time of the first use of the name. This corresponds to the name or common name of the individual contractor accompanied by the words “individual contractor” or the initials “EI”. This date is considered to be the start date of activity.

Composition of professional assets

The composition of the professional patrimony is provided for by law. It shall include the following elements:

• Business premises, or craft funds, or agricultural funds, with all the tangible or intangible assets that constitute them as well as the right of presentation of the clientele of a liberal professional
• Movable property : goods, equipment and tools, agricultural equipment, vehicles, etc.
• Immovable property used for the activity (including the part of the principal residence of the individual contractor used for professional use)
• Goods intangible : customer data, patents, licenses, trademarks, designs, intellectual property rights, trade name and brand name

• Cash Fund, sums kept at the place where the professional activity is carried out and sums entered in the bank accounts dedicated to that activity.

The collateral, rights (for example receivable of a rent) and debts are also part of the professional assets of the individual entrepreneur.

The separation of professional and personal assets prevents the individual entrepreneur from carrying on bail on his company.

If he needs a deposit in the exercise of his activity, he has the following possibilities:

• Using another person: a relative who will be surety in his place
• Use a mutual guarantee business

Composition of personal assets

Personal assets are made up of items not included in the professional assets. These are:

• Elements of the asset : principal residence and possibly other immovable property (secondary residence or land)
• Liabilities: borrowing to purchase a personal vehicle, etc.

The principal residence of the contractor is automatically protected. On the other hand, to protect personal real estate other than the principal residence (for example, secondary residence), it is necessary to contact a notary to make a declaration of exemption from seizure. . The notarial deed must indicate whether the property concerned is a well clean, common or undivided.

The deed must be published in the land advertising service and in a legal advertising register (RCS: titleContent, special register of commercial agents, special register of companies with limited liability or RNE: titleContent).

To do this, you must make a declaration on the website of the company formalities office:

Window of company formalities

The property declared is exempt from seizure only for professional debts born after the publication of the declaration.

For more information, you can consult our fact sheet: Can the principal residence of the individual contractor be seized? .

Principle: protection of personal assets

The separation of assets protects the personal assets of the individual entrepreneur. Professional creditors (suppliers, lessors, banks for professional activity) can request the settlement of their claims only on professional assets of the individual contractor. This means that they cannot seize personal property (such as the principal residence, movable assets or the entrepreneur's personal car) when the professional property is insufficient.

In case of recovery or bankruptcy from the individual contractor, two situations must be distinguished:

• When the personal and business debts of the contractor are quite distinct, the commercial court or the tribunal des activités économiques (TAE) shall open a bankruptcy procedure to deal with the professional liability and refer the matter to the over-indebtedness commission to process personal liabilities. The agreement of the head of company is necessary. The professional creditors cannot therefore request the sale of the assets of the personal assets of the individual entrepreneur since the assets are separated.
• If personal and professional debts are not strictly separate, the commercial court or the TAE shall open a bankruptcy procedure which concerns both professional and personal assets. We are talking about procedure bi-patrimonial. In this case, the liquidator appointed by the commercial court (or the TAE) deals with the 2 assets. It may request the sale of assets of personal assets to the judge commissioner for personal creditors.

In case of bankruptcy, the court may order the individual contractor to repay part of his debts from his personal assets where he has committed a mismanagement (e.g. late declaration of cessation of payments) which aggravates the company's liabilities.

Exceptions for public creditors (tax authorities and social security bodies)

The tax authorities and social security bodies can demand payment of their debts on professional assets and contractor's staff for certain taxes and contributions and in cases of fraud and serious breaches.

Taxes and social contributions

The tax administration may seize all the assets of the entrepreneur (personal and professional) for the payment of:

• income tax
• property tax on goods useful for professional activity.

The social security bodies may also seize all the professional and personal assets of the entrepreneur for the payment of social contributions (for example, the CSG: titleContent).

Fraud and other serious breaches

The tax administration may seize the personal assets of the contractor in the following cases:

• Fraudulent schemes : for example, in order to avoid tax, the company resorts to fraudulent schemes, such as reporting outside the prescribed time limits, keeping fictitious accounting records, carrying out an activity in secret, making a false domicile abroad. When a contractor commits one of these fraudulent schemes with intent to commit an offense, there is tax fraud.
• Serious and repeated non-compliance with tax obligations : for example, a company provides irregular accounting or does not pay tax over a lengthy period of time.

The social security bodies (National Health Insurance Fund, National Family Allowance Fund, etc.) may require the recovery of social contributions from the personal assets of the entrepreneur in the following cases:

• Fraudulent schemes which make it impossible to collect social security contributions: for example, the company avoids paying social security contributions by not declaring all the hours worked by its employees.
• Serious and repeated observations social obligations which are:
  
  • No settlement or partial settlement social contributions and contributions in excess of €1,000 , in the following cases:
    
    • At least 2 of the last 4 half-yearly deadlines
    • At least 2 of the last 8 quarterly deadlines
    • At least 6 of the last 24 monthly installments
    • At least 2 of the last 6 split calls (excluding deadlines covered by a clearance plan or payment schedule respected for more than 3 months) 
    • At least 4 payment deadlines for a clearance plan or a payment schedule for outstanding social security contributions
  • Non-compliance with deadlines, deposit conditions, incomplete or erroneous declaration a registered company declaration (DSN) that gave rise to the application of increases or penalties for an amount greater than €1,000. These facts must relate to at least 2 statements in the last 4 years.
  • Failures leading to, after checks or inspections, observations or adjustments in an amount greater than €1,000. These failures must concern at least 2 reports in the last 5 years.

Use of personal assets to guarantee professional debt

The individual contractor may decide to use an element of its personal assets as collateral a professional debt, for example to obtain a loan for the needs of the company.

These include, for example:

• Mortgage of personal real estate (except the main dwelling): a bank takes a guarantee (i.e. a mortgage) on personal real estate. In case of difficulty in repaying a professional debt, the bank can sell the property.
• Pledge of life insurance

Waiver at the request of a professional creditor

To finance a major investment, a creditor a professional (e.g. a bank) may ask the individual contractor to give up the separation of its assets. For example, a bank asks him to give up the protection of his personal assets. In this case, the bank has as a guarantee part of the personal assets of the entrepreneur.

This waiver can be requested to finance a large investment or to buy a professional premises.

The individual entrepreneur then signs a waiver with the professional creditor.

A model waiver is available:

Model act of waiver of the protection of personal assets

Legifrance

Pour en savoir plus

From the date of signature of the waiver, the individual contractor shall have a 7-day reflection period to change your mind. A handwritten mention in the waiver may reduce this period to 3 clear days.