I was thinking the last time about thinking about moving from the status of employee to that of entrepreneur, a thought that tickles, to my knowledge, a good number of people. Many young people, in particular already employed or with the desire to launch themselves directly into entrepreneurship, want to be free and independent in order to earn a living as they please. To carry out their project, they set off with a freelance status. Is it a good choice ?
To find out, we will first study why a freelance status can be a good choice. We will then consider the questions to ask yourself to choose the right legal status as a freelancer.
Why choose a freelance status?
Motivations for moving to freelance status
As with any business creation, however small, you must first have a precise idea and refine it with a business plan, then decide in what legal form of company it will be able to exist. We can then say that the easiest way to get started is to start by being a freelancer.
What is a freelancer?
According to the Whiktionary, he is a person on his own account, an independent worker, selling his services to a client. But still ?
The freelancer works alone and has no commercial premises. He does not work for a single client but has a portfolio of clients with whom he signs a service contract.
A freelancer can provide expertise targeted to the needs of the company or the client who appeals to him. He often carries out a service activity.
They were 1.9 million in 2020, 25% of whom are between 26 and 30 years old. Since the COVID 19 pandemic, we can say that the freelance revolution is underway: France will probably have between 25% and 30% in 2025 (source freebe.me).
Freelance VS Independent
The two terms are often confused and yet they will not be under the same statutes.
The freelancer works alone, independently, and offers service or commercial contracts. It is declared under a simple legal status with certain limits to be respected.
Self-employed status requires declaring yourself under a self-employed worker number. Moreover, he has no employment contract between him and his clients. Indeed, this status covers a wider range of professions ranging from industrial manager to hairdresser, through farmer or butcher, etc.
Advantages and disadvantages of being a freelancer
As its name suggests, being a freelancer is being free! It’s the dream: To be independent, to be your own boss, to have your own clients, to organize your work and rest time as you wish, to choose your place of work… And your taxable income is the turnover generated by your activity.
Certainly, the freelancer works freely but it is the turnover that will serve as salary! It will therefore be necessary to fill its customer portfolio to find missions to invoice to customers and thus have an income corresponding to its needs. In any case, especially in the beginning of the freelance status, the remuneration can therefore vary greatly from one month to another.
Nowadays, we see that 50% of young people have tried to work freelance and those who have succeeded vote 88% not to become employees again.
We will see that, in order to work, the freelance entrepreneur must have chosen a legal status corresponding to him ; it is therefore necessary that he knows the different points well to refine his choice.
Choosing the right legal status as a freelancer
To know which freelance status to choose, it is normal to ask questions on specific points whose answers will correspond to certain statuses.
1st point: do I need a bet at the start?
Under EI (sole proprietorship) status, there is no minimum capital contribution. So you don’t need personal funds to start freelancing.
Similarly under the regime derived from the EI, the micro-enterprise, no capital deposit is necessary.
2nd point: Will I have a responsibility vis-à-vis my customers?
Under EI status as well as for micro-enterprises, since May 15, 2022 the amount of liability is limited to property useful for professional activity, i.e. professional assets.
Since that date, there is therefore an automatic separation between the personal assets of the entrepreneur and the professional assets.
3rd point: Can I hire associates or employees if my business expands?
The EI and/or micro-entrepreneur status only applies to a person who works alone and has no employee or partner. On the other hand, she can associate with another person who has declared herself to be a micro-entrepreneur.
4th point: How much tax do I have to pay?
The tax system for sole proprietorship is income tax (IR). The income generated by the sole proprietorship is therefore declared by the sole trader in his personal declaration.
You are automatically entitled to the simplified real regime if your turnover excluding tax does not exceed €247,000 for a service provision activity.
You can also ask to be subject to the corporate tax system: IS (see point 9)
The freelance micro-entrepreneur must not exceed:
- a turnover ceiling of €176,200 in commercial activity, to be under the MicroBNC tax regime with 71% of the turnover deducted
- or a ceiling of €72,600 in self-employment or services, to be under the BIC regime with 50% of turnover deducted, or under the BNC regime with 34% of turnover deducted.
Under EI status, you must pay social charges including at least the following contributions deductible from your profits:
- Family allowances
- CSG and CRDS
In micro-enterprises, they are deducted by URSAFF up to 22% of declared turnover.
6th point: Am I entitled to unemployment?
No, under EI or micro-enterprise status. However, if you were unemployed before declaring your business, you can continue to collect the rights you had before, but the sums may be limited depending on the income received under EI.
On the other hand, by creating a SASU company (see point 9) or by being in wage portage (see point 10), you can benefit from unemployment benefit.
7th point: Am I subject to VAT?
The sole proprietorship pays VAT on its purchases of goods but invoices its customers on its sales. Unless the turnover for this activity is < €85,800. Similarly, for service and liberal activities, if the IE has a turnover <€34,400.
In the case of the micro-enterprise, you are not subject to VAT and must indicate it on your invoices.
8th point: do I have to have an accountant?
Under EI status, all you have to do is keep the journal, general ledger and inventory book up to date.
It is now necessary to carry a mandatory mention “EI or individual entrepreneur” in front of your name on all commercial documents.
For the micro-enterprise, the receipts journal is mandatory.
The answers to these 8 questions show that the best freelance status will be the sole proprietorship or its particular micro-entrepreneurship scheme.
Note: As of February 14, 2022, there is only one kind of sole proprietorship whose properties we have seen are featured in this Legalstart video.
9th point: What if I wanted to be “the President” of a freelance company?
You must then create a SASU: Single -member simplified joint-stock company. Its creation and operation are less simple than IS, but you are its President! On the other hand, you are subject to corporation tax: the tax rate will be 15% of your profits between €0 and €38,120 and will increase to 25% from €38,120 of profits. You can also, in some cases, opt for income tax.
10th point: Can I be a freelancer and have the advantages of an employee?
Yes, it is possible by choosing wage portage. You sign a contract with services for the clients of an umbrella company. You don’t need to create a business, you keep your freedom and your autonomy while having your own clients and missions at the same time. The umbrella company pays you a fixed income with your taxes and social charges deducted from your salary. In addition, you are freed from very time-consuming administrative burdens.
Administrative processes for obtaining freelance status
We have therefore seen that the status of independent freelancer in liberal or commercial activity can choose to declare themselves:
- as a sole proprietorship either with EI status or as a micro-entrepreneur
- in SASU with the statutes of a single-member company
The administrative processes for obtaining these statuses have notable differences. In any case, it will be necessary to take steps that can be simplified, safer and faster with the help of service companies specializing in freelance status.
Administrative procedures to create a Sole Proprietorship (IE)
For a liberal freelance activity, you must contact the URSAFF to declare your company no later than 8 days from the start of your activity.
For a freelance commercial activity, you contact the Chamber of Commerce and Industry on which the company depends.
An “Individual entrepreneur” formalities file must be compiled to be submitted to these organizations, including:
- their identity documents
- a sworn statement of non-conviction and parentage
- proof of business address
- a business registration application form
- other documents adapted to the personal situation
- the payment of administrative costs except for the micro-entrepreneur whose creation is free.
Following the registration of his company, we obtain:
- a SIREN number which is the legal entity of the company
- a SIRET number which is the geographical entity of the SIREN
- a K extract (not a Kbis) which brings together all the information about your company and can be consulted by any public.
Administrative procedures to create a SASU
The creation of a one-person simplified joint-stock company is more complex and much more expensive.
The steps are done in several stages:
- drafting of the articles of association of the company (it is better to seek advice)
- deposit of share capital at least equal to €1 and proof
- Publication of a legal announcement of the constitution of the SASU following a form plus personal documents
- Sending to the Registry of the Chamber of Commerce to request the registration of the Company.
We then obtain a Kbis which represents the SASU as a legal person registered with the Chamber of Commerce. It is publicly viewable and contains all company information.