Sole traders get more protection

A NEW business status for sole traders would allow them to shield their personal property from creditors if they got into debt.

At present people who trade in their own names with an entreprise individuelle, including auto-entrepreneurs, risk everything they own if they fall into financial difficulty.

The new status, similar to a limited company, could allow them to protect personal property, if it becomes law.

The measure, called the entreprise individuelle à responsabilité limitée (EIRL), would make sure their home and belongings cannot be seized in the event of bankruptcy.

It would enable them to have protection without the necessity of forming a société (company).

Small Business Minister Hervé Novelli said: “To allow risk-taking and to make sure entrepreneurs can bounce back, it is necessary to limit the personal consequences of professional failure.” The measure would avoid “personal, morale and family ruin,” he added.

Currently sole traders can only protect their possessions by drawing up a déclaration d'insaisissabilité with a notaire, a legal procedure costing several hundred euros that allows you to protect land and buildings not used for the business.

Mr Novelli said the new status will be available to people creating new businesses. Those with an existing one will also benefit if they sign up with their local registre du commerce or répertoire des métiers (depending on the type of activity) at the chamber of commerce or trade. Here they will state their “professional property” which would stand as a guarantee to creditors.

It is not yet clear how the new system would work for auto-entrepreneurs but a spokeswoman for Mr Novelli said they would also be concerned by the new status.

People opting for an EIRL will have a choice between paying income tax or impôt sur les sociétés (corporation tax). The new status will be part of a law to be be debated this year.