Changing status: when to leave your micro-enterprise behind you, which structure to choose, and how to do it

If you’re reading this article, there is a strong chance you are among the 2.5 million solopreneurs in France who have opted for micro-enterprise status to get their project off the ground (source: URSSAF, January 2023).

Micro-enterprise status is a great starting point for your new business, but after a few months or years of trading, the structure may no longer meet your ambitions for growth.

Whether you’re over the revenue limits, you want to bring an investor or business partner onboard, or your professional expenses are beginning to increase, there can be a wealth of reasons for transitioning to a different company structure.

So, how exactly do you go about it? Which status should you choose? What administrative hoops do you have to jump through? And what does all this mean for your bookkeeping, accounting, and taxes?

This article will cover everything you need to know to make the transition smooth and painless.

Once you got your business up and running, you worked hard to make it a success, and all that effort is beginning to pay off. You’ve grown your client base and your turnover is increasing every quarter. Excellent news!

Don’t forget, though, that the advantages of the micro-enterprise status are only open to you if your earnings stay below a certain revenue threshold. In 2023, 2024, and 2025, that threshold stands at:

• €188,700 of annual revenue excluding VAT for sales and manufacturing activities,
• €77,700 of annual revenue excluding VAT for businesses operating within the professional services industry.

If you go over your threshold, you automatically forfeit the advantages afforded to you by the micro-enterprise status, and you are obliged to opt for a different company structure, such as EI, SASU or EURL (more on these later).

That said, there is a small window of tolerance, which many people don’t know about, but which can be beneficial for micro-enterprises that are experiencing a temporary increase in activity. You can exceed your revenue limit for one calendar year without losing your fiscal benefits the following year. But the tolerance wears off if you exceed the limit for a second consecutive year.

Let’s take a look at an example to try to make sense of this:

As your business develops, so too does your financial investment in it. Your professional expenses may begin to climb to new heights for the following reasons:

• You recruit staff.
• You subcontract certain projects.
• You rent an office or warehouse space for your business.
• You travel to meet clients and suppliers.

One of the main downsides to micro-enterprise status is that you cannot deduct this professional expenditure from your turnover for tax purposes.

In other words, 100% of your turnover – and not just your profits – is used to calculate your taxes. Depending on what proportion of your turnover is reinvested back into the business, this could mean being taxed on significant amounts of money that never actually end up in your back pocket.

Of course, the government knows that entrepreneurs have to invest a certain amount of revenue for their business to flourish, which is why they do already apply a fixed-percentage allowance depending on the type of business you carry out.

Micro-enterprise status is exclusively for sole traders.

If you choose to partner up for your business venture, you first have to leave the micro-enterprise system and opt for a structure that allows for one or more partners, such as a Société à Responsabilité Limitée (SARL, Limited Liability Company) or Société par Actions Simplifiée (SAS, Simplified Shareholder Company).

When the time comes to leave the micro-enterprise status and turn towards a different structure, the most common options are:

• EURL,
• SASU,
• Individual enterprise.

Remember, if you are changing status to take on one or more business partner(s), you should look at SARL or SAS status.

Switching to Entreprise Individuelle (EI, Individual Enterprise) status is the simplest option from a procedural point of view, and since the reform in May 2022, the status has become more attractive as the business owner’s personal property and wealth are considered separate from the company’s assets. Data on the impact this has had is still thin, but time will tell if this reform attracts more solopreneurs to EI status for its relative simplicity and tax implications.

All you need to do to make the switch is fill in a form on the Guichet Unique website and send the requested supporting documents.

An Entreprise Unipersonnelle à Responsabilité Limitée (EURL, Limited Liability Sole Proprietor Enterprise) is similar to an SARL, with the sole exception that it is unipersonnelle (sole-proprietory), meaning there can be only one owner. There’s a host of advantages that comes with EURL status:

• EURLs can easily be converted into SARLs if you need to bring an investor or business partner on board in the future.
• There’s a certain level of fiscal flexibility, as you can choose between paying corporation tax or income tax on your profits.
• The minimum share capital required is just €1.

It’s not all plain sailing, though, as opening an EURL can be a complicated, drawn-out process involving writing articles of association, depositing capital, and publishing the company creation in a Legal Announcements Journal. This can all be perceived as something of a barrier to making the switch.

A Société par Actions Simplifiée Unipersonnelle (SASU, Simplified Single Shareholder Company) is the solo version of an SAS and the advantages are similar to those of EURLs. In fact, solopreneurs often struggle to decide between them when it comes to choosing the next step after their micro-enterprise.

The differences aren’t easy to get to grips with, but the main difference is the social security benefits for the company director.

• SASUs offer better social security coverage as the company director is affiliated with the classic system, as if they were a regular salaried employee. The tradeoff for this is higher social security contributions.
• EURLs offer slightly less comprehensive social security coverage, but social security contributions are lower.

SASUs also offer more freedom when drawing up the articles of association, meaning you enjoy more autonomy in how you run your company.

Bear in mind, too, that if you’re thinking of paying yourself in dividends, the tax implications vary from one status to another.

If you’ve exceeded the revenue threshold of micro-enterprise status, you’ll automatically be considered an Individual Enterprise and taxed accordingly. You have no other formalities to carry out.

However, if you wish you change status for another reason, you must make your intentions known to your local corporation tax office before the 31 December in order for the changes to take effect on the 1 January of the following year.

If you opt for SASU or EURL status, your administrative tasks are a little more complex.

Before you begin the process of opening a new company, you must first close your micro-enterprise.

Like with most company formalities since January 2023, to notify the authorities of your plans to change status, you have to log in to the Guichet Unique and go to the section called Modifier ou cesser mon activité (Modify or stop my activity).

You’ll be taken to a form to fill in and submit, along with proof of identity.

Once your micro-enterprise is closed, you can begin the process of creating your new company.

Articles of association stipulate how the company will be run and lay out the relationship between any business partners. This makes it rather an important document. It’s best to seek assistance from a professional to ensure that the document is well-written and true to your vision for the company.

Registered companies must deposit capital social (share capital), a sum of money that constitutes the original value of the company. The capital can take different forms:

• a monetary contribution (i.e., a sum of money),
• a deposit in kind (i.e., physical assets such as a company car or intangible assets such as a patent),
• an industry contribution (i.e., your knowledge and expertise).

For EURLs and SASUs, the minimum deposit is just €1, and any monetary deposits must be made into a locked bank account in the company’s name.

Qonto provides a secure account for depositing your share capital and finalizing your company creation in three easy steps.

The funds are available to be used as soon as the registration process is complete and you’ve received your Kbis.

In France, you’re legally required to notify your local community when you create a company. To do so, you have to share a notice in a Journal d’Annonces Légales (JAL, Legal Announcements Journal) that’s published in the same département as where your company is registered. You can find an appropriate publication online (link in French).

Once all of the above steps are complete, all that’s left to do is send your company creation paperwork to the Guichet Unique online.

One of the main advantages of micro-enterprise status it that your legal obligations in terms of bookkeeping and accountancy are more limited than with other types of company. You only have to keep:

• a record of your takings, covering all sources of revenue,
• and a record of your outgoings on professional expenditure.

In the majority of cases, you can take care of your own bookkeeping and would very rarely need help from an accountant.

But giving up micro-enterprise status is synonymous with more rigorous financial management and fiscal obligations. Of course, the exact requirements vary depending on the type of structure you choose to open and the nature of your profits. As an important reminder, the tax system distinguishes between two types of profit:

• BIC: bénéfices industriels et commerciaux (industrial and commercial profits), which generally apply to any sales or manufacturing activities, 
• BNC: bénéfices non commerciaux (non-commercial profits), which apply to professions libérales (professional services), consulting, regulated industries, and any other activity not covered by BICs.

It may seem trivial to separate the types of profits your company can make, but understanding how your profits fit into this distinction is crucial when it comes to your accounting responsibilities and fiscal obligations.

If that all still seems quite opaque, hopefully the following tables will help you understand the options that are available to you depending on what type of profits you make.

If the type of profits you make fall under the BIC category, you can choose between the following tax systems or “régimes”:

• Le régime réel normal (the real, normal regime),
• Le régime simplifié (the simplified regime)

Perhaps some of those terms left you with more questions than answers, so here’s an explanation:

• Cash accounting is a simplified basis of accounting that involves recording revenue and expenses based on actual cash flow. This means that transactions are recorded once they are complete and the money appears in your professional bank account (or when it leaves your account for expenditure).
• Accrual accounting, on the other hand, is a more complex approach that records revenue and expenses when work is agreed upon or carried out, but before any money is received or dispensed. This means that cashflow is not calculated when it enters and exits the company account, but based on the action that generates the theoretical cashflow. For example, a transaction is recorded upon invoicing a client, despite the invoice being settled at a later date.

If the type of profits you make fall under the BNC category, your new tax regime is automatically the déclaration contrôlée (controlled declaration).

Needless to say, when you give up micro-enterprise status, you no longer benefit from the micro-fiscal regime. This means you are now taxed on the profits your company makes and no longer on your overall business revenue.

As a side note, if you were entitled to versement libératoire (fixed-rate income tax payments), you will no longer benefit from this when you give up micro-enterprise status.

Your tax regime and calculations depend on the type of company structure you choose.

With micro-enterprise status, your social security contributions were calculated and deducted every month or every quarter and you had solid social security coverage as you were affiliated with the régime général (general regime) as if you were a regular salaried employee.

When you turn away from micro-enterprise status, you remain protected, of course, but your social security contributions are likely to change, depending on the structure you pick and the type and amount of pay you decide to give yourself (salary or dividends, for example).

Once again, we strongly recommend getting in contact with a professional to help you decide the best options for you.

You should now have everything you need to understand the different options available to you. Above all, you should feel galvanized to boost your business to the next level with peace of mind.

Whether you decide to keep micro-enterprise status or change to a different structure, Qonto is with you every step of the way to accompany you in your growth and offer a professional account with all the tools you need for your freelance business.