Find the ideal legal status for your business

Today, I'm going to talk to you about a crucial subject for your business: how to choose the right legal status? This is a major choice that will have consequences:

• on the life of your company
• and on your own legal and fiscal situation.

This is why it is important to understand:

• the different existing legal statutes
• as well as the criteria to take into account

to make the best choice.

In this article, I will help you better understand:

• the legal status of your company,
• the important criteria to take into account
• and the mistakes to avoid.

I will also give you tips on how to choose the legal status that best suits your business and your situation. But before I start, let me introduce myself. I am a blogger with a passion for entrepreneurship and new technologies. I have created my own business and I know how important it is to make the right choices from the start.

That's why I chose to collaborate with PayFacile an online business platform that supports entrepreneurs in all stages of their activity, including the choice of legal status.

In this article, I will give you practical advice on how to choose the right legal status for your business, based on PayFacile's expertise. So, are you ready to discover how to choose the right legal status for your company? Let's go!

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.

Now that we have seen the different types of legal status available, it is time to talk about the criteria to consider for choosing the right legal status for your business. Here are the five most important criteria to consider:

The nature of the business activity:

The choice of legal status will depend largely on the business activity. For example:

• Iyou work in a regulated profession (doctor, lawyer, architect, etc.), you must choose a company with limited liability (LLC, SJSC, etc.).
• If you are a individual entrepreneur and you carry out a commercial activity, you can opt for an auto-entrepreneur status or create a company.

The number of partners:

The number of partners you have or plan to have can also influence your choice of legal status.

• If you are alone, you can opt for an auto-entrepreneur or micro-business status.
• If you have several partners, you will have to choose a company status such as a LLC, SJSC or SP.

The amount of social capital:

The social capital is the amount of money that the partners bring to the company to create it. It can be significant or symbolic.

• If you need to raise large amounts of money, you should consider corporate forms such as the SJSC or SP, which can attract investors.
• If you want to create your company with little funds, the auto-entrepreneur status may be more suitable.

The responsibility of the partners:

The responsibility of the partners is an important factor to take into account.

• In an individual enterprise, the entrepreneur is responsible for all the debts of the enterprise with his personal assets.
• In a company, the liability is limited to the contributions of each partner. For example, if you choose a limited liability company, your liability will be limited to the amount of your contributions.

The taxation of the company:

Finally, the taxation is a parameter not to be neglected in the choice of the legal status. Each legal status has its own tax system.

The auto-enterprise benefits from a particular tax system that allows you to pay:

• social contributions
• and taxes on the turnover.

Companies, on the other hand:

• are subject to company tax (CT)
• and must keep accounts.

By taking these different criteria into account, you will be able to choose the legal status best suited to your business. But to help you see things more clearly and make the right choice, it is recommended that you call on the services of experts.

Step 1: Analyze the criteria of choice

Now that we understand the importance of choosing the right legal status for your business and the parameters to consider, let's move on to the first step in our decision-making process: analyzing the criteria.

It is important to ask yourself the right questions to understand the needs of your business.

• What is the nature of your business?
• What is your objective?
• How many partners do you have?
• How much capital do you have?

The answers to these questions will help you determine the most appropriate legal status.

Step 2: Evaluate the benefits and drawbacks of each legal status

Once you have an idea of what your business needs, it's time to evaluate the pros and cons of each legal status.

• If you are a small business, you could opt for the auto-entreprise or micro-entreprise, which are simple and inexpensive legal forms. However, these statutes are not suitable for all businesses.
• If you have several partners, you could opt for a LLC or SJSC. If you want to limit your personal liability, you could opt for a ISJSC or SJSC. If you want to take advantage of tax benefits, you could opt for a ILLC or a LLC.

Step 3: Choosing the right legal status for your business

Once you have assessed the advantages and disadvantages of each legal status, you can choose the one that best suits your business. Keep in mind that this choice may have significant long-term tax and financial consequences, so it is important to take the time to think about your decision.

If you still have doubts do not hesitate to contact professionals to advise you on the choice of the most appropriate legal status for your company, such as lawyers or accountants.

In short, the choice of legal status is an important step in the creation of a business. It is important to understand the criteria to be considered and the advantages and disadvantages of each legal status. By following the steps of analysis, evaluation and choice, you will be able to choose the legal status that best suits your business.

Don't forget that PayFacile is here to help you simplify and manage your business activity, including the choice of your legal status.

Choosing the wrong legal status can be costly for a company. Unfortunately, this is a mistake that many beginners entrepreneurs make. In this section, I will present the most common mistakes to avoid in order to make the right choice.

Choosing the wrong legal status

First of all, the main mistake to avoid is choosing the wrong legal status for your business.Unfortunately, this is a mistake that many beginners entrepreneurs make. This choice can have important consequences on the management of your business, its legal liability and its taxation. It is therefore important to take the time to analyze the criteria and advantages of each legal status before making a decision.

Forget to take into account certain important criteria when choosing the legal status

Next, it is crucial not to forget to take into account certain important criteria when choosing the legal status of your company. These criteria include:

• the nature of the business,
• the number of partners,
• the amount of share capital,
• the liability of the partners
• and the tax system.

Ignoring one of these criteria could lead to a poor decision in choosing a legal status.

Not being accompanied by professionals

Finally, not being accompanied by professionals is another common mistake in the choice of legal status.

Professionals such as:

• lawyers,
• accountants
• or business creation consultants

can help you understand:

• the criteria,
• advantages
• and disadvantages

of each legal status.

They can also help you assess your business needs and make an informed decision.

Choose the wrong legal status can inhibit the development and the success of your business. Choosing the legal status of your business is therefore a crucial step in its creation. Avoiding these common mistakes can help you make an informed decision that will allow your business to thrive.

It is important to precise that PayFacile does not replace a legal or tax advisor, but proposes tools which allow to facilitate the implementation and the management of the legal status of your company.

Indeed, PayFacile proposes online payment solutions, but also tools of invoicing and accounting management, which can be of a great help in the process of creation and management of your company.

Thanks to its expertise in the field of online payments, PayFacile is able to accompany its customers in the choice of their legal status by offering them solutions adapted to their specific needs.

Indeed, there are legal solutions more adapted than others depending on:

• the nature of your activity,
• the number of partners,
• the amount of the share capital,
• the taxation of your company,
• etc.

PayFacile provides its customers with valuable resources and information to help them choose the most suitable legal status for their company.

Indeed, PayFacile's customers benefit from:

• a personalized follow-up,
• a quality technical support
• as well as an exhaustive knowledge base

which allows them to better understand the stakes related to the choice of their legal status.

In conclusion, choosing the legal status of your company is a crucial step in the creation and management of your business. To succeed in this undertaking, it is essential to:

• understand the different types of legal status,
• know the criteria to take into account when choosing your legal status
• as well as the mistakes to avoid.

By calling upon PayFacile, you benefit from a personalized follow-up and from solutions adapted to your specific needs, which will enable you to choose the legal status the most adapted to your company.