Now that we have seen the importance of the choice of legal status for your company, let's look at the following question: what is the legal status of a company?
Definition of legal status
The legal status is the legal form under which your company is registered and recognized by the authorities. It determines:
- your company's operating rules,
- your legal and tax obligations
- as well as the relationships between your company's various partners (partners, managers, etc.).
The different types of legal status
There are several types of legal status for businesses in France, each with its own specificities and implications. Here are the main ones:
- The Sole Proprietorship (SP):
This is the simplest and most common form for auto-entrepreneurs. The SP is a legal status that allows you to create your business quickly, without heavy formalities and without minimum capital. However, the manager of the SP is responsible for his debts on his personal assets.
- The Individual Limited Liability Compagny (ILLC):
This status allows to protect the personal assets of the manager by separating them from the professional assets. Thus, in case of financial difficulties of the company, only the professional assets are engaged.
- The Limited Liability Corporation (LLC):
This legal form is the most common for SMEs / VSEs. It allows to limit the liability of the partners to the amount of their contributions. The formalities of creation are heavier than for the SP, but the LLC offers a greater legal and fiscal protection.
- The Public Limited Company (PLC):
This legal form is reserved for larger companies. It is characterized by the separation between the shareholders, the managers and the employees. The PLC offers great freedom in the organization of the company, but the formalities of creation and management are more complex.
- The Simplified Joint Stock Company (SJSC):
It is another possible legal form for companies. It is more flexible than the LLC and can be adapted to more complex situations. Unlike the LLC, the SJSC does not require a minimum share capital. The partners have a limited liability to the amount of their contributions, and can be natural or legal persons. The SJSC also allows the creation of shares with different rights, which can be useful to attract investors. However, the creation and management of an SJSC are more complex than for a LLC, and it is recommended to be accompanied by professionals to avoid mistakes.
The pros and cons of each legal status
Each legal status has its advantages and drawbacks, which depend on:
- your activity,
- your personal situation
- and your short and long term goals.
For example, if you are an auto-entrepreneur, the SP may be the simplest and most suitable solution for you. On the other hand, if you plan to create a company with several partners, the LLC or PLC may be more appropriate.
It is therefore important to know the different legal forms in order to make the best choice for your business. This will allow you to:
- limit the risks,
- benefit from a better legal and fiscal protection
- and optimize your long-term development.