The EIRL is a scheme aimed at facilitating the creation of a business without endangering the personal assets of the entrepreneur.
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The Individual Limited Liability Company (EIRL) scheme is a scheme for one-person companies, which guarantees the personal financial security of the entrepreneur.
But what is it all about?
The EIRL is a scheme designed to facilitate business creation without endangering the personal assets of the entrepreneur (new or already existing, micro-entrepreneur) while continuing to benefit from the status of individual entrepreneur.
The entrepreneur will dedicate an allocation patrimony to his activity without his personal property being able to one day be seized by his creditors .
In fact, when an entrepreneur gains EIRL status, only his assigned assets can be entered. If it is an already existing entrepreneur, already dealing with creditors, he has the obligation to warn each of them of his desire to change status. Its creditors can indeed oppose it.
Assignment assets must be mentioned in the assignment declaration that the individual entrepreneur will submit to the Center des Formalités d’Entreprise (CFE).
The declaration must indicate all the goods essential by nature to the activity of the EIRL: business assets , tools, etc. It is also possible (but not mandatory) to include in the declaration goods which are not essential by nature, but which will still be used for the activity.
All goods brought to the declaration, whether necessary or optional, must be appraised by the entrepreneur (market value or utility), or a professional accountant if the asset is worth more than 30,000 €.
It is possible to transfer all or part of the assigned assets to a natural or legal person. If it is a legal person, the goods are transferred to it but the assignment no longer has any value since a legal person cannot have EIRL status, and vice versa.
Tax regime & social regime
An individual entrepreneur can decide to obtain EIRL status at any time, without this change of status having any impact on the tax level.
In principle, EIRLs are taxed on income (IR), like any sole proprietorship , depending on the category in which they fall: commercial (craftsmen, traders), non-commercial (liberal professions) or agricultural.
Apart from micro-entrepreneurs, EIRLs can choose the option of being assimilated to EURL (Sole Proprietorship with Limited Liability), which means that they will henceforth pay corporation tax (IS). Be careful, because this change of status is final!
Social contributions follow the chosen tax system, and the entrepreneur is not subject in the same way. Under the IR regime, contributions depend on the profits generated by the EIRL, while under the IS regime, they are based on what the entrepreneur pays back: the remuneration, as well as a part of the profits (the share which exceeds 10% of the value of the asset allocation).
EIRL has opted for corporate tax. Its assigned patrimony has a value of € 30,000 and the profit generated this year is € 10,000. Two cases can then arise:
- If the entrepreneur transfers € 3,000 in profits or less: he is not subject to social security contributions on the profits since they do not exceed 10% of the allocated assets.
- If he transfers more than € 3,000 in profits (let’s imagine € 5,000 here): he will have to pay social security contributions on a share of € 2,000, which corresponds to the difference between the 10% of the allocated assets (€ 3,000 ) and what he actually donated (€ 5,000).
The EIRL status therefore allows the entrepreneur to significantly reduce the risks incurred by his personal assets in the event of bankruptcy, and easily build up reserves if he chooses to pay corporate tax.