The EIRL business set-up

Protecting your assets by making your firm an EIRL is relatively simple and may be free.

ANYONE going into business as a sole trader – either as an auto-entrepreneur, traditional micro-entreprise or under the réel tax set-up – should be aware that they potentially have unlimited liability.

Depending on business sector, this may not matter if you are unlikely to incur large debts.

However if in doubt you may want to consider one of two ways of protecting non-business property without the formalities of becoming a company.

The first is a d’insaisissabilité, which is for bricks and mortar property only and completed with a notaire. It costs about €580 - €1,400 or more, depending on the complexity of your affairs.

The other is to structure your business as an Entreprise Individuel à Responsabilité Limitée (EIRL), giving some of the advantages of a limited liability company. It involves a declaration of your business assets, then known as the patrimoine d’affectation.

Other assets are therefore protected from creditors.

Who can take this up?

Any new sole trader business or an existing one.

Who does it protect from?

Any creditors whose claim arises after the creation of the EIRL as well as ones whose claims are earlier if they were informed of the creation of the EIRL and did not lodge legal opposition.

What should be declared?

All property that is vital to running the business and can only be used for this purpose, plus, optionally, any other property used in running it. The former might include a shop or tools or even intangible assets such as a tenant’s right to a lease, or the value of your client base. The latter are things that you also use in your private life, such as a car or
home. If something is in joint ownership then the permission of the other owner(s) is required.

Estimating the value

Items are estimated at their market price, or otherwise the value of their usefulness to the business if this is not available.
However any item (other than cash) worth more than €30,000 must be estimated by a professional such as an accountant or (if it is bricks and mortar) a notaire. In the latter case a declaration is also made at the land registry. Note that sole traders on the réel regime should refer to declared values in their last submitted accounts.

The declaration

This includes a description of the firm and of the items, plus extras like written permission of a joint
owner or an accountant’s report.
Forms can be obtained from your centre de formalités d’entreprises and should also be lodged with them. It will be recorded, as appropriate, on the registre du commerce or répertoire des métiers, on the chamber of agriculture register for farming businesses, or at the office of the commercial court for the liberal professions.

What does it cost?

If done when setting up it is free, apart from for the liberal professions for whom it costs €55.97.

Fees (around €50) are also payable for those setting up a protected assets list for a business that is already running.

A notaire’s work for registering bricks and mortar property costs €139.93 (or more if detailed advice is required), and the same is charged for evaluating its price.

Obligations

You should identify the business as an EIRL in business documents and the business should have its own bank account.

Advantages

Apart from the protection for your assets in case of difficulties, another advantage is the option for firms on the réel basis to be subject to corporation tax instead of income tax, which may be of interest to those making turnovers which could lead to high
income tax. This can also in some cases reduce social charges.

Disadvantages can include having to update the patrimoine affecté and, for some kinds of firm, more complex accounting requirements. Therefore, if considering taking the status up you would be well-advised to take advice from a professional such as an expert-comptable to make sure it is suitable for you.

Photo: Aurémar www.fotolia.com