Legal & Accounting Requirements for Micro-Entrepreneurs in France
The beauty of setting up your business activity as a micro-entreprise (ME) lies in its relative simplicity: you don’t need to keep complicated accounts; are exempt from charging VAT (so charge HT) until turnover exceeds set amounts; yet you can sub-contract (within certain parameters). However, you do still have legal obligations to fulfil.
Although limited in some respects by not being able to offset expenses (your social charge is applied as a percentage of turnover), a ME is a great way to get your business feet wet before moving onto another type of Ltd company structure such as a SARL.
Only suitable for sole-traders (if expenses and purchases are relatively low), it is not actually a legal business structure as such, rather it refers to the tax status of the sole trader - a micro-enterprise is actually simply an 'entreprise individuelle' (EI). Yet it is not without legal obligations in terms of bookkeeping and invoicing. Knowing what you need to do and why keeps the inspectors happy and lets you keep an eye on expenditure and income - which should help keep your business healthy.
1. Keep a Daybook for your Micro Enterprise
Called a ‘Livres de Recettes’, this had nothing to do with cooking but is a record of financial transactions as they occur. In reality, you don't need to do this every day, though not a bad idea if you have a shop for example. Weekly or monthly for service-based MEs is fine. The main aim is to record income in chronological order: what you charged, to whom, for what, when and how the bill was settled (cheque, cash, transfer, etc) and any other type of income (a repayment or reimbursement for example).
if you mainly sell goods or foodstuffs or provide accommodation you are legally obliged to also keep a purchase register detailing purchases made, how paid, and reference supporting documents such as receipts (which also need to be kept).
If you use a till, you need to get advice from the Chambre de Commerce to see if you require a certified model for your activity or not.
Which brings me to the next main point...
2. Get your receipts and invoices in order
Each time you sell a service/s or item you must provide a receipt or invoice written in French to the customer or client and keep a copy for your records (unless the item or service is for a private person and is under 25 euros and is VAT exempt). These must contain your name and address, the client or buyers names and address, the date, details of the item/s or service provided, a clear chronological reference number (this can be carbon-copy receipt book), your SIRET, the price (per unit) without VAT (HT – hors taxe) and, assuming you are not VAT registered and under the threshold, the following statement: "VAT not applicable, art. 293 B of the CGI” (TVA non applicable: Article 283 B du Code Général des Impôts).
These should be in a non-modifiable format (e.g., accounting software, shop-bought book, specific reference style or a hard copy printed out). You need to keep paperwork and invoicing, etc for 10 years.
For full details of invoicing requirements see here: https://entreprendre.service-public.fr/vosdroits/F31808
Oh, and there is a little-known but potentially hugely important tip for those who wish to purchase an item on behalf of their client and pass the exact purchase cost onto them WITHOUT being subject to social charges on the item in question. Called ‘debours’ do note that 'debours' must be clearly marked on the invoice; you can obviously not add a profit margin; and you absolutely must keep a copy of the receipt for your records (which must be in the client’s name - which makes it a bit of a pain but doable).
3. Know if you need a dedicated bank account for your Micro-enterprise or not
If your turnover is under 10K you do not need a separate bank account. Over 10K, and you need to get one set up in during the first two years of registering your ME. This is a ‘dedicated’ account used solely for your business activity but does not need to be a 'professional' account which does incur additional charges. Remember, the account is in your name, not the business name, and payments are made to you in your name.
In theory you should use this accountant only for all expenses and payments related to your business activity but, as one cannot offset expenses, I find this sometimes a little annoying. I do however use it almost exclusively for client payments, and to pay for my social charges, advertising, consumables, office equipment, professional insurance and subscriptions for online tools, etc and then transfer my 'salary' into my personal account. But I have been known to buy unrelated stuff with the card now and again, and I am not going to stress about that!
4. Know the regulation and insurance requirements for your business
Make sure you know if professional insurance of any type is an obligation or a recommendation, and do check to see if your business activity is subject to qualifications requirements or other types of regulations. Ignorance in these cases is not likely to be bliss. Search for information or call your CFE (centre formalities entreprise
5. State your regime correctly (new legal requirement from May 2022)
If you are a micro-entrepreneur (ME), from 15 May 2022, all MEs must add either ‘Entrepreneur Individuel’ or ‘EI’ after their personal name on all commercial documentation, as well as to the account name of their dedicated bank account e.g. Jenifer Smith EI or Jenifer SMITH Entrepreneur Individuel.
This is due to a new law (Décret n° 2022-725 du 28 avril 2022) which has the added bonus of now automatically protecting all your personal assets as an ME/EI from debts arising from your business activities.
For those who want to understand a little more, here are some bite-size explanations:
A micro-entrepreneur is not a legal business structure but rather a tax status, therefore you could not limit your liability in the way a SARL, for example, (similar to a Ltd company) can protect certain assets.
From 2016 la loi Macron disallowed a debtor from being able to seize your primary home to settle any business debts – even for MEs – but they could still seize personal assets such as savings. So, Macron did good; but this new change goes further to protect all personal assets as an EI - though bear in mind, debtors can still seize business assets, and unpaid social charges are considered personal debts.
Remember, if your turnover exceeds 10K you must open a ‘dedicated’ (separate) bank account (un compte bancaire dédié) but not necessarily a ‘business’ account (un compte bancaire professionnel) which carries additional charges.
The speed with which each banking organization can – or will – allow this account-name change to what is essentially a ‘normal’ bank account is “à voir!”. Some will refuse due to system issues (their database won’t allow); others will use it as an excuse to try to make you to open a (more expensive) pro account; and some will be ignorant of the new law. In many cases, a simple email request citing the requirement should get them to make the change, in others you may have to change banks. Just maybe take care to ask if there is likely to be any issues while the change-over is taking effect.
‘Entreprise Individuelle (EI) and Micro-Entreprise (ME) have always been interchangeable: they are one and the same thing, akin to ‘self-employed’ or ‘sole-trader’. But, until now, you didn’t need, as an ME, to state that you are also an EI. Now you do.
Commercial documentation includes your website or Facebook page; your invoices, letter heads and T&Cs (yes you should have these too); and, it would seem therefore, all promotional material too. Relatively easy for certain amendable documents; for those who have just ordered 1000 new business cards before this sudden announcement, it is going to be a bit of a faf and potentially add additional costs.
I personally will ease myself into it and show willing; changing as much as I can with immediate effect, and deal with the other aspects over time.
I would be surprised if the French administration put anyone’s head on the chopping block as long as you start the process now.
Check for any changes the French Government make to the above requirements on the links below
FRENCH WORDSMITH INFORMATION:
This information sheet is copyrighted and owned by Jenifer Smith© EI, French Wordsmith© May 2022,
any illegal copying or distribution to third parties will result in a claim made against the individual or business.
