(Re) New Sole Proprietorship Status

Adoption of the law in favor of independent professional activity provides a new status for the individual entrepreneur. Effective May 15, 2022, his professional debt liability excludes his personal assets, which his creditors will not be able to take legal action on.

Strengthening the protection of the contractor’s personal property

The creation of one more protection system for an individual entrepreneur is one of the main measures of Law 2022-172 of February 14, 2022. The principle is to distinguish between his personal assets and those declared useful to his professional activity(s) (x). This distinction is de jure, which means that no specific declaration is required. This protection is added to the exemption from the seizure of the principal residence, and the action taken before a notary to make property built or not built and not used for his business unfit for appropriation.

Note: for greater convenience, self-employed workers can resort to remuneration transfer. This mode reconciles the freedom of the freelancer with the benefits of the employee. Without the dependency relationship, the wage-transfer freelance worker benefits from an employment contract with the carrier, thus giving him an employment contract and all the social protection offered to a traditional employee. Thus a private business owner finds himself fully protected in his personal belongings, while remaining a businessman.

Thanks to this change, it is possible to take advantage of the simplicity of the status of an individual entrepreneur and the security that an individual entrepreneur with limited liability (EIRL) provides. Moreover, since February 15, the day after the publication of the law, this legal form can no longer be used to start a professional activity. Likewise, it is no longer necessary to incur the costs and complete the complex procedures of setting up a single person limited liability company (EURL), which also makes it possible not to confuse personal and professional assets.

Thus the corresponding provisions were added to Book V of the Commercial Code under the title “Protection of the Individual Entrepreneur” (C. com. Article L 526-22 to L 526-26 new; Law 2022-172 Article 1). Thus, personal assets are protected from any financial risks related to their business, in particular expropriation, unless the entrepreneur chooses to waive this right. It will come into effect on May 15 for new individual entrepreneurs and those who are already in practice, but without retroactive effect. Only claims arising on that date that subsequently fall within the scope of the Scheme. An executive decree shall highlight the handling of claims arising between February 14, 2022 and May 14, 2022.

Consequences of the new system on transmission

An individual entrepreneur who wishes to transfer his activity to a natural person (in the course of succession) or to a company can transfer his entire professional assets (goods, rights, obligations and securities), and only partial transfer is authorized. Even a potential commercial lease could be included in the waiver even if said contract contained a clause prohibiting it.

This mass transfer can be made by donation, sale or contribution to a corporation and no longer requires prior liquidation. In the case of a shareholding in a company that involves property other than a monetary amount, the intervention of the shareholder auditor is obligatory. Publicity is obligatory before such transfer so that the creditors of the individual entrepreneur are informed of the operation and oppose it if necessary.

New rules applicable during suspension

The retirement or death of a sole proprietorship brings the business to a halt and puts an end to the separation of his professional and personal assets. Therefore the business of professional creditors is no longer confined to his personal property with the exception of his principal residence and property which he has declared not to be seized. It should be noted that the reunification of assets after the cessation of activity does not take place in the case of receivership or compulsory liquidation.

This content was produced in partnership with Integrated Technology Group (ITG). The BFMTV editorial staff was not involved in the production of this content.

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