The auto-entrepreneur, also called micro-entreprise, is a great legal structure for your first business in France. This pay-as-you-go system gives you time to understand how the French administration works, sets your healthcare into place, while enabling you to test your market. As and when the business grows, you may then move to a different legal structure in France.
There is however a strict rule called prorata temporis that you should be paying attention to. This is very important as ignoring the rule may push you out of the auto-entrepreneur business as soon as your business starts it's second year.
Prorata temporis rule for auto-entrepreneurs
The prorata temporis rule means that your auto-entrepreneur turnover is going to be assessed on a pro rata basis for your first calendar year in business. In 2017 all auto-entrepreneurs have a yearly turnover limit of 33,200 euros for profession liberales and artisans (i.e. manual services) and 82,800 euros for trade. But if you start your business anytime during the year, then the pro rata temporis rule is applied, meaning that you will have a smaller turnover threshold relating to your exact starting date.
Examples of the auto-entrepreneur pro rata temporis rule
- A website designer starting an auto-entrepreneur on 4 April 2017 would have a maximum turnover of 25,014€ euros, i.e. (33,200 euros / 365) times the number of days in business in 2017.
- A gite business registered as an auto-entrepreneur on 1 June 2016, would have a maximum turnover of 48,546 euros.
How to calculate your maximum auto-entrepreneur turnover in year one
The Agence France Entrepreneur (AFE) have a useful online tool enabling you to calculate your pro rata turnover for your first year in business. Simply enter your business starting date, choose your activity type (trade, food, accommodation, manual services, profession liberale) and click calculer. Make sure you write that number down if you don’t want to have a bad surprise in 2018.
Unfortunately you cannot run the test for 2016. So if you registered your business in 2016, you would have to count the exact number of days you were in business and use the formula I mentioned above.
Know your maximum auto-entrepreneur turnover in year one
If your auto-entrepreneur business turnover is higher than the maximum pro rata number for your first year in business, you will be coming out of the auto-entrepreneur business the following calendar year. This means that régime social des indépendants (RSI) will automatically switch you from the auto-entrepreneur business to the régime réel simplifié.
You will keep your existing business and SIRET number, but you will have different accounting rules and different taxes rates. You will for instance need to be TVA registered and you will receive call for social charges appels de cotisations.
If you go over the authorised pro rata turnover in your first year in business, RSI will not allow you to stay under the auto-entrepreneur business regime. Not quite the answer you would like to hear if the auto-entrepreneur business regime fitted you perfectly.