You are motivated and ambitious and you have decided to start your own business. Welcome to the entrepreneurial community! You can now become what we call in France a micro-entrepreneur.
The simplest solution to get you started as quickly as possible is the micro-entreprise (also known as « auto-entreprise »). But what is it all about? And what does the creation of a micro-entreprise consist of?
The micro-entreprise is a simplified legal system designed for those who are self-employed. Although it is reduced to the essentials, this legal system implies a number of obligations and entitles you to benefits that you should not overlook.
You want to know more about it? Read the rest of this article carefully!
What is a micro-entreprise?
The micro-entreprise is the little sister of the entreprise individuelle. To say it simply, a micro-entreprise is an entreprise individuelle that benefits from an attractive social system.
An entreprise individuelle with a simplified scheme
✅ The micro-entreprise is an entreprise individuelle that benefits from a social system, a tax scheme and reduced accounting obligations.
✅ As an entreprise individuelle, a micro-entreprise has no legal personality of its own. You and your company are the only one and same legal entity. The obligations and rights of your auto-entreprise are yours.
✅ As you will have understood, if your micro-entreprise is you, then you cannot have any partner in your micro-entreprise.
✅ However, you can have employees, even if the micro-entreprise is not really adapted to hiring.
✅ As it has no legal personality, the micro-entreprise also has no capital of its own. You are responsible for the debts of your micro-entreprise. If your business gets into debt, you get into debt. The micro-entreprise is therefore not adapted to the implementation of risky activities. If your activity presents financial risks, even moderate, consider subscribing to the EIRL option (Entreprise Individuelle à Responsabilité Limitée).
✅ The profits of your micro-entreprise are taxed as part of your income tax in the micro-BIC (Bénéfices Industriels et Commerciaux = industrial and commercial profits) or micro-BNC (Bénéfices Non Commerciaux = non-commercial profits) category.
Turnover: limits that shall not be exceeded
To benefit from the micro-entreprise system, your turnover must not exceed certain amounts.
If you exceed these limits two years in a row, you leave the micro-entreprise scheme and are subject to the traditional entreprise individuelle scheme as of 1st January of the following year (i.e. in 2021 if you exceeded the threshold in 2019 and in 2020).
The limit below which you must stay depends on the activity you are undertaking:
– €72,500 euros ex-VAT for services and self-employed activities.
– €176,200 euros ex-VAT for commercial activities of selling goods and accommodation.
But be careful, the application of these thresholds involves subtleties. Beware, for example, in your first year of activity, these thresholds are prorated !
What activities can be carried out as a micro-entreprise?
As a micro-entrepreneur, you can carry out the following activities:
✅ a freelance activity such as a consultant, coach, designer, iconographer, and so on…
✅ a commercial activity of purchase and resale or sale of services (registration to the Registre du Commerce et des Sociétés – RCS = Trade and Companies Register)
✅ a craft activity (registration in the Répertoire des Métiers) such as carpenter, baker, hairdresser, and so on…
You can also combine several activities. However, in these categories, some activities are not eligible for the micro-entreprise scheme.
In particular, the following are excluded from the micro-entreprise scheme:
🚫 agricultural activities under the MSA
🚫 certain self-employed activities – related to justice, health, accounting or insurance for example
🚫 building rental activities
🚫 certain artistic activities
🚫 activities relating to VAT on real estate
The social scheme of the micro-entrepreneur
The micro-entreprise is a simplified legal system. The rules that apply in terms of taxation and social security contributions are less complicated than those for other businesses.
The micro-entrepreneur’s social contributions
The amount of your social security contributions depends on your turnover. Your social security contributions are a fixed percentage of the money you receive.
Please note that your flat rate of social security contributions differs according to your activity:
• 12.8% of turnover excluding tax for the sale of goods, the provision of accommodation and catering.
• 22% of turnover excluding tax for services and self-employed activities.
To pay your social security contributions, you must declare your turnover to the URSSAF on the following website: autoentrepreneur.urssaf.fr
When you set up your business, you can choose to make your declaration monthly or quarterly.
Do micro-entrepreneurs benefit from ACRE?
When you create a micro-entreprise, you may be eligible, under certain conditions, for the Aide à la Création ou à la Reprise d’Entreprise (ACRE, formerly ACCRE), which means assistance for business creation or takeover.
Important clarification: in order to benefit from ACRE, you must also not have already benefited from ACCRE or ACRE in the three years preceding your business creation.
Thanks to ACRE, your social security contributions are reduced by 50% during one year.
After this period, you contribute at the normal rate.
As a micro-entrepreneur, what social protection am I entitled to?
Micro-entrepreneurs pay social contributions, so they benefit from social protection.
In particular, you benefit from a health insurance similar to that of employees. Reimbursement of health expenses is covered in the same way and under the same conditions for freelancers and employees.
Your possible maternity or paternity leave is also eligible (under certain conditions) for assistance.
You also benefit from pension insurance, family allowances, invalidity and death insurance (to a certain extent), and daily allowances in the event of sick leave (under certain conditions in the case of self-employment).
Since 1st November 2019, self-employed persons can potentially and under certain conditions, benefit from unemployment insurance!
Please note that these different benefits may be subject to conditions and differ according to your situation.
The tax system of the for micro-entrepreneur
In terms of taxation, micro-entreprises benefit from a simplified system: the micro-fiscal system.
The income taxes of the micro-entrepreneur
As a micro-entrepreneur, you benefit from a simplified tax system. The income you earn from your business is taxed as part of your income tax.
You have two options for paying your income tax:
1 – You are subject to withholding tax
In this case, advance payments are debited from your bank account every month or every quarter. If necessary, a regularisation takes place in September following the filing of your annual income tax return in the spring.
You are subject to the progressive scale of income tax.
Your tax rate is determined by the amount of your turnover, from which the administration deducts a lump sum allowance for professional expenses.
The rate of this allowance varies according to your activity:
• 34% of turnover for the BNC self-employed activities
• 50% for craft and commercial services (BIC)
• 71% for buy-sell and housing supply activities.
Your tax rate for the current year is determined on the basis of your previous annual tax return.
2 – You have opted for the payment in full discharge (subject to conditions)
If you have made this choice, your income tax is deducted monthly or quarterly from your account, at the same time as your social security contributions.
You pay your income tax directly when you declare your turnover to URSSAF (see above, section « social security contributions »).
The amount of your income tax depends on your turnover.
If you have opted for the payment in full discharge you are taxed at a fixed rate. This flat rate varies according to your category of activity:
• 1% of turnover excluding tax for the activities of selling goods and accommodation supplies (BIC)
• 1.7% of turnover excluding tax for craft or commercial activities (BIC).
• 2.2% of turnover excluding tax for service activities and the self-employed services (BNC).
Summary of social and fiscal charges of the micro-entrepreneur in 2020
As a micro-entrepreneur, am I subject to VAT?
As an auto-entrepreneur, you are subject to VAT but, below a certain amount of annual turnover, you benefit from a VAT exemption which makes you not liable for VAT. If you take advantage of the VAT base exemption, that means that you do not collect VAT from your customers. You therefore do not have to charge VAT. Therefore, you do not remit tax to the State, so you do not have to report it.
Here again, the thresholds not to be exceeded in order to benefit from this VAT « exemption » vary according to your category of activity:
• € 94,300 for commercial or accommodation activities.
• € 36,500 euros for service activities.
From the first day of the month in which you have exceeded the thresholds, you must charge VAT to your customers in order to remit it to the State.
Please note that there are also low thresholds:
• € 85,800 euros for commercial or accommodation activities.
• € 34,400 euros for service activities.
If you exceed these low thresholds two years in a row, but remain below the high thresholds, you lose the benefit of the VAT exemption. You become liable for VAT on 1st January of the third year.
If you exceed these limits, or if you apply for it, you no longer benefit from the exemption of VAT.
All the information on exceeding VAT thresholds and turnover limits is explained in our dedicated article.
To declare your VAT, you must notify your Service des Impôts des Entreprises (SIE = Corporate Tax Department) and subscribe to the VAT payment service in your professional area on the impôts.gouv.fr website.
You will then have to declare and remit VAT on a regular basis. Two instalments will be deducted in July and December. You will make the final payment at the beginning of May, after you have made your annual VAT return.
Please note that if the VAT to be paid for the previous year is less than € 1,000, you will not have to pay the two instalments.
Cotisation foncière des entreprises (CFE), as an auto-entreprise, do I have to pay it?
Micro-entreprises are subject to the Cotisation Foncière des Entreprises (CFE).
However, the good news is that in the year of the creation of your company, you do not pay the CFE!
You will then have to pay the CFE each year before December 15th.
The amount to be paid in respect of the CFE depends on the municipality in which your company is located, your turnover and the surface area of your premises.
Please note that if you work from home or at your clients’ premises and do not have premises dedicated to your activity, you must still declare a minimum surface area (1 square metre) and are liable to pay the CFE.
Am I liable for the tax for Chamber of Commerce fees?
The accounting obligations of the micro-entrepreneur are lighter than those of other forms of businesses.
As a micro-entrepreneur, you do not have to produce annual accounts, which frees you from a lot of hassles.
On the other hand, you do have to:
✅ keep all your accounting documents (estimates, invoices, revenue books, receipts…) for 10 years.
✅ respect the rules of invoicing (estimates, mandatory mentions, VAT in particular).
✅ keep a book of the receipts you have collected, a register of purchases made on behalf of your company and a police book detailing the list of items put on sale.
Please note that the register of purchases does not concern micro-entrepreneurs providing services that do not involve the purchase of equipment and the policy book only concerns the purchase and resale of goods.
✅ above € 10,000 turnover for two consecutive years, you must create a bank account dedicated to your professional activity.
How can I set up my micro-entreprise?
You are now convinced about it, the micro-entreprise is made for you! It is time to discuss the necessary steps to create your micro-entreprise.
Create my auto-entreprise on my own
The steps to create your business can be done in person, by mail or online.
The website guichet-entreprises.fr allows you to get information and centralise your procedures, whatever your category of activity. To set up your micro-entreprise independently, you will need to:
✅ find out about professional qualification requirements, prior authorisations, insurance and regulations related to the activity you wish to carry out.
✅ complete the declaration of beginning of activity via an online form.
✅ provide the necessary supporting documents online, in particular: a copy of your ID card, a proof of occupancy of your premises or a proof of residence if you work at home, a declaration of non-condemnation.
Your request will then be forwarded to the relevant Centre de Formalité des Entreprises (CFE) according to your sector of activity:
• URSSAF for self-employed activities,
• Chambre du Commerce et de l’Industrie (CCI) for traders,
• Chambre des Métiers et de l’Artisanat (CMA) for craftspeople.
Once your activity declaration has been received and processed by your relevant CFE, you will receive a letter from INSEE within 1 to 4 weeks. This letter entitled « Certificat d’inscription au Répertoire des Entreprises et des Établissements » (SIRENE = Company Register) will give you your SIRET number and your SIREN number (the first 6 digits of your SIRET). Remember to keep this letter in a safe place!
Within a few weeks, you will also receive a letter entitled « notification of affiliation » confirming your affiliation to the Sécurité Sociale pour les Indépendant (SSI, social security for the self-employed) and the CPAM. Please allow about 3 weeks after receipt of this letter. You will then be able to create an online account on the URSSAF website in order to make your turnover returns.
Create my micro-business online with Hello My Business
You are stressed, in a hurry or a little lost when confronted with the different steps to be taken to create your own business?
Hello My Business assists you step by step in the creation of your business. Identifying your category of activity, finding your relevant CFE or gathering admissible supporting documents will no longer be a hassle. Hello My Business does it all for you! All you have to do is complete an online form and provide us with some documents.
And to give you the best chances of success in your new activity, you can count on your administrative assistant who pampers you every day!
You now know everything you need to serenely launch your business as an auto-entrepreneur!
Are you still a little worried about so many new things? Don’t stay alone! Join our community to keep you informed.
The micro-entreprise is a very open scheme. You can be either a minor (over 16 years old), or a foreigner, a student, an employee, unemployed, retired and micro-entrepreneur.
However, depending on your profile, you will have to meet different conditions to be able to create your micro-entreprise.
Moreover, the creation of a micro-entreprise can change your situation. Before you start, carefully study the constraints and implications of such an approach.
This is THE question that every new auto-entrepreneur asks himself when setting up his business, when declaring his turnover or when making every stressful call to the URSSAF.
Keep calm, we give you all the keys to know what your category of activity is in this dedicated article.
No. Unlike a classic self-employed person, you cannot deduct your expenses or professional costs from your turnover.