You have been in business as an auto-entrepreneur for a little while and are getting closer to the turnover threshold for 2011 or are forecasting to go over this limit in 2012. You may wonder when and how you are supposed to come out of the auto entrepreneur regime and what will be the impact in terms of TVA, social and fiscal charges. This article gives you an overview of the two options available: remaining as an entreprise individuelle or starting a limited company (SARL).
In this article I will cover your first option, which is to remain as an entreprise individuelle, but switch regime to reel simplifie.
Reasons for coming out of the auto-entrepreneur regime
The key reasons making it worthwhile to come out of the auto-entrepreneur regime are the following:
- You have reached the turnover threshold of 32,600€ for services and 81,500€ for trade
- You are planning to invest heavily and it is best to depreciate your company’s asset (car, van, workshop)
- Your activity involves high expenses (travelling, shows, raw materials, production costs, subcontracting)
- You need to hire staff
So whatever your reasons, the 2 options available to come out of the auto-entrepreneur are:
- Remain as an entreprise individuelle but switch from auto-entrepreneur to regime reel simplifie
- Close your auto entrepreneur down and start a limited company SARL or EURL
Option 1: switching from auto-entrepreneur to regime reel simplifie
Regime refers to the way your social charges are calculated and paid. Auto-entrepreneurs have a fixed rate of social charges applied on their turnover. Regime reel simplifie means that your social charges will represent 46% of your net profit, i.e turnover minus expenses. This is the figure you have to bear in mind not to have any bad surprises. In practice, you will pay a forfait or set amount of social charges on a monthly or quarterly basis, which will amount to about 3000€ for your first year in business. You will then pay a balance payment called regularisation de charges sociales one year down the line (October, November time), once you have confirmed your net result.
Impact on your social charges and income tax
A switch from auto-entrepreneur to regime reel simplifie cannot be done halfway through the year. You have to apply for the switch before the 31st december, in order for the change to be applicable on 1st January the following year. You will therefore remain under the regime micro social until the end of the current calendar year, i.e. you will pay your social charges on a fixed rate of your turnover (12%, 18.3% or 21.3%). However your income tax called regime fiscal will be back dated to the start of the current year. Basically this means that if you did opt to pay your income tax at source, your regime will be BIC or BNC reel from 1st January of the current year. The amount of income tax you will have already paid with regime micro fiscal will be deducted form your next income tax bill.
Impact on TVA
You will become liable to French TVA from the first day your turnover goes over the turnover threshold. This implies that you will either need to add 19.6% on your current prices or reduce your actual margin.
How do you switch from auto-entrepreneur to regime reel simplifie?
According to your activity you will need to go and see the Centre de Formalite des Entreprises at the Chambre de Commerce for trade and tourism, Chambre de Metiers for crafts and manual activities or URSSAF for professions liberales. You will be charged a small amount to be listed on registre des metiers or registre du commerce. Artisans will also have to take a 5 day training course costing about 200€.
Centre de Formalite des Entreprises will register the new regime and pass the information onto RSI or URSSAF and Impots. Since your legal structure remains as an entreprise individuelle, your SIRET number will remain the same. Impots will issue you a TVA number.
So to summarise, switching from auto-entrepreneur to regime reel simplifie has to be planned ahead, as the switch will be fully effective (from a social charges point of view) with the new year. Your second option to come out of the auto entrepreneur is to close your auto-entrepreneur down and start a limited company called SARL. I will cover this option in part 2.