When you set up a business, you have to choose a legal form, establish social status and a taxation system. Once you have carried out the market study and have a sound business plan, choosing the legal form is not difficult. There are many legal forms to choose from. Each form has its qualities as well as its defects. Your choice depends on the constraints of your project. You need to know how many partners will work with you and how much capital your business will have.
Why choosing the legal form of a business is important
Choosing the right legal form is part of your business strategy. Indeed, by doing so, you also choose the taxation regime and assets of your company. Some legal forms offer you the possibility of deducting certain expenses. You will be subject to social and fiscal charges using other methods. If your business fails, your liabilities will be limited with some legal forms, protecting your personal assets. Choosing the right form will allow you to protect your personal assets, have a better social regime for managers, regarding taxation and corporate governance as well as the regulation of your activities.
The characteristics of the different legal forms
The most common legal forms are the limited, oneperson limited liability, LLC, simplified joint stock, sole proprietorship and professional civil companies. Note that this list is not exhaustive and that they each have assets and limitations. The structure of a company differs according to the number of partners, the minimum capital, the liability of the partners, the tax regime of the company, and the social regime of the managers. If you take the Société Anonyme for example, the minimum number of partners is 7 individuals. A limited company must have a minimum share capital of 37,000 euros. The liability of the partners is limited. The social security system of the manager(s) is similar to that of employees.
Taxation systems
The profits of your company may be taxed in one of two ways: either under the income tax system or the corporation tax system. Generally speaking, companies have to pay corporation tax, but it is possible to be taxed under the income tax option, but temporarily in most cases. If the legal form of your business is the sole proprietorship one, you have to pay income tax.
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