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Auto-entrepreneur simplifying setup

From 2009 new status brings easier system for social charges and more help for starting your own business in France.

SETTING up to work as an independent trader in France is set to become simpler.

From January 2009 a new legal status of auto-entrepreneur comes into effect - aimed at simplifying set up and payment of social charges and taxes for new businesses.

Small and Medium-sized Businesses Minister Hervé Novelli said: “Anyone - students, unemployed people, employees, retired people - will now be able to set up in business very easily.”

A user-friendly “kit” explaining everything would-be entrepreneurs need to know will be available from relevant bodies, like chambers of commerce or trades.

The status, part of the Loi de Modernisation de l'Economie bill passed in July is for people who want to work independently as a main activity or in addition to a salaried post or drawing a pension.

It is is not for people who want to form a company (such as a Sarl or SA) but for those opting for the micro-entreprise fiscal regime.

You must earn less than certain thresholds, which correspond to those under the micro-entreprise. Under the new bill, these will rise to €90,000 for commerces (from €76,300) and €32,000 (from €27,000) for services.

Currently new businesses pay basic rate social charges. In the second year they pay a rate based on the first year’s income, plus readjustment surpluses if the first year was more profitable than expected (or deductions if less profitable).

Auto-entrepreneurs will benefit from a micro-sociale regime of payments fixed at 12% of the turnover for commerces and 21.3% for services. This will be declared and paid monthly or quarterly (by choice).

This is to help start-ups, who often find social charges a heavy burden. Currently, income tax is paid during the year after the income is earned.

Auto-entrepreneurs can opt for a new, simpler system in combination with the simplified social charges, paying (monthly or quarterly) a set amount, varying from 1% to 2.2% depending on business type.
Auto-entrepreneurs will register at a Centre de Formalités des Entreprises (chambre de commerce for commerces, Urssaf for professions libérales, Chambre de métiers et de l'artisanat CMMA for artisans).

Employees or pensioners need only fill out and send in a form, available on the internet, saving time and fees.

The auto-entrepreneur can work from home even if they must meet customers and stock merchandise as long as they do it on the ground floor. Currently special permission is needed for this.

Closing a business will also be simpler - through a form available on the internet.

A spokesman for APCE, an official agency promoting entrepreneurship, said the measures would suit many different people.

“It could be a lawyer, who works for a company but wants to offer advice from home on the side - or someone who trades on eBay - as soon as you have a regular activity you should register as a business but some people are not doing so to avoid complications. That can be risky - someone in Strasbourg was hit with harsh penalties recently.”

He said the new payment methods for taxes and charges would be helpful: “In the existing system you can earn some money and then not pay the tax on it for two years.

“This method, where you pay it all straight away - at the same time as your social charges - will avoid people suddenly having a big bill.”

The auto-entrepreneur measures fit well with proposals made by the Attali Commission on economic growth earlier this year, which listed help for small businesses among key aims.

Other Loi de Modernisation sections, such as tighter rules on late payments, will also help small businesses. However some of the commission's ideas, like a one-stop online shop for setting up small businesses, or the creation of a new agency - able to liaise with social or fiscal bodies on behalf of its users - to aid administration have not yet been taken up.

Oxford academic and commission member Dr Theodore Zeldin said: “We discussed the issue of setting up a business at length - new businesses are a source of growth and it was noted that in France it is extremely complicated.

“It was proposed there should be just one body enabling people to complete formalities rapidly but these things get watered down when they go into the legislative system. It is a shame the focus seems to be on how to extract their taxes and charges.

“It is not enough just to focus on administrative procedures - it is necessary to find better ways to get guidance to people who have a good idea but don't know what to do.

“There could also be more effort to help them financially. It is well known many small businesses rapidly fail - they could have considered exempting them from taxes and charges for the first year.”

A third of new businesses in France fold within three years, according to data, relating to 2005, from the national statistics organisation INSEE.

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