Sole traders saved from ruin

A NEW business status that allows sole traders to benefit from protection of their property from creditors is attracting plenty of interest.

More than 1,000 people have visited the website www.eirl.fr, which explains how to set up (or change an existing business to) an entreprise individuelle à responsabilité limitée (EIRL, limited liability sole trader business), a status
with similar protections of personal property to a limited company.

Until now, in the case of business failure, sole traders’ homes and other private assets have been at risk. The EIRL comes on top of previous schemes that have not had as much take-up as hoped: the EURL, a one-person company, and the déclaration d'insaissibilité, under which bricks-and-mortar property can be declared "not liable to seizure" via a notaire.

The owner of an EIRL continues to trade in his own name, but makes a declaration of what parts of his property are related to the business (and therefore at risk of creditors): le patrimoine affecté (the designated property).

The status is open to all sole traders including auto-entrepreneurs and the aim, the government says, is to "encourage a spirit of enterprise while avoiding bankruptcy being synonymous with personal and family ruin".

Small Business Minister Frédéric Lefebvre said: "It is a revolution the president wanted to undertake: sole traders are from now on being treated like other company bosses whose firms have gone bankrupt."

The government has been consulting notaires and chambers of commerce or trade to make sure businessmen who approach them get the help they need. Your declaration is made at:

- The chamber of commerce for a traditional (non-auto-entrepreneur) commercial business.

- The chamber of trade for a traditional artisan or an auto-entrepreneur of a type requiring traditional registration.

- At the office of the commercial court if you are a liberal professional or an auto-entrepreneur dispensed from trade registration.

- If you are a farmer, at the chamber of agriculture.

The procedure is free (where done on setting up the business) for people in traditional sole trader set-ups requiring registration or costs €55.97 for other auto-entrepreneurs and for traditional liberal professionals.

For a business already set up, the costs are: €42 (artisans), €55.65 (commerces) and €55.97 for auto-entrepreneurs and liberal professionals.

You must designate all property that is necessary to do your work and is used exclusively used in connection with it (eg a tradesman’s tools). You can optionally list property you make use of incidentally in the course of work (eg. a
car).

Items should be estimated at market price, though any worth more than €30,000 (apart from money in accounts) need to be evaluated by a professional such as an accountant or commissaire aux comptes (auditor) or (for bricks and mortar property) a notaire (designation of land also requires a registration by a notaire on the mortgage registry).