Guide to Micro-Entrepreneur Business in France
- What is a Micro-Entrepreneur?
- Business Registration
- Social Security
- Income Tax
- Business Rates
- Status of Spouse/Partner
- Should You Elect for Micro-Entreprise Status?
- Payment of Taxes and Social Insurance
- Business Accounting
- Running a Chambre d'Hôte
- Multiple Business Activities
- Professional Insurance
1. What is a Micro-Entrepreneur?
A simple business status is available to someone who wishes to establish a small business in France.
The status was originally called auto-entrepreneur, but it is now called micro-entrepreneur.
Those adopting this status run the business as a micro-entreprise.
The popularity of this status is generally because the formalities of business registration are easy to accomplish and the tax and accounting rules are less painful than other forms of business status.
What then is a micro-entrepreneur? We can distinguish a number of key characteristics.
i. Tax Status
First, a micro-entrepreneur is not a legal business structure – it is a specific tax status that benefits from simple tax and accounting rules.
It is only available to someone who is self-employed as an Entreprise individuelle (EI). That is to say, someone running the business as a sole trader, not through a limited company.
So, if someone says to you they have micro-entreprise status, what they mean is they are actually an Entreprise Individuelle (EI) that has chosen to be taxed as a micro-entrepreneur, rather than being taxed under the other main form of business taxation, called the regime réel.
ii. Pay As You Go
There is no minimum level of social security contributions payable, in the same manner as occurs with other business statutes.
You pay your social insurance as you go, based on sales, and if you do not have any sales in a particular period then you will pay none for that period.
Only if you declare no turnover for a period of two years do you lose the status.
However, the business must be 'real' and not 'incidental' or you risk disaffiliation.
A micro-entrepreneur is not required to keep any books of accounting, other than a day-book giving details of income received, although commercants (traders) are also required to keep a book registering their expenditure.
This simple accounting rules is often cited as one of the main advantages of running the business as a micro-entrepreneur, as there is no need to employ an accountant. That said, the use of an accountant is never compulsory; you can do it yourself if you feel you are competent enough to do so.
iv. Turnover Limits
The fourth important characteristic is that micro-entrepreneur tax status is only available if the business does not exceed certain turnover (actual receipts) limits.
These turnover limits depend on the type of business activity you pursue.
In this respect the rules make a (rather bizarre) distinction between those whose business activity is 'trade' or ‘professional’ based, and those main activity is 'commercial'.
Broadly speaking, a commercial activity is one where the business is mainly to buy or sell (trade) products and services; trade (artisanal) and professional activities are service based. However, as will be evident, the distinction is not entirely clear.
The maximum turnover thresholds (2023) are as follows:
- In a service based business, or a 'professional' activity, and for unclassified gîte accommodation the turnover cannot exceed €77,700 per year.
- Those whose main activity is either commercial sales based, cafe, restaurant, hotel, chambre d'hôte and classed furnished accommodation, have a turnover limit of €188,700 per year.
If the business does both types of activities (service and sales) then it can still retain micro status, provided total business revenues do not exceed €188,700, and the specific service based activity does not exceed €77,700 a year.
This is notably the case with those in the building trades, where the sale of building materials receives the upper limit, whilst the building construction activity itself is restricted to the lower rate.
If you exceed these turnover thresholds you cannot retain micro-entrepreneur status; you are obliged to adopt the tax status of regime réel . However, a period of tolerance is granted for up to two consecutive years if you temporarily exceed these limits.
This tolerance is not available in the first year of the business, when the turnover limits are also applied pro-rata to the length of time the business has been in operation. Thus, for a service based business starting on 1st May 2023 the turnover maximum is €77,700 X 245/365 = €52,154.
These turnover thresholds are, however, deceptive, due to the lower turnover limits for VAT exemption.
Prior to 2018 a business adopting the tax status of micro-entrepreneur could not charge VAT on their goods or services, and neither could they recover VAT paid on purchases.
If you wished to charge VAT you could not use micro-entrepreneur tax status.
However, since 2018, whilst the turnover limits to retain micro status have been doubled, the turnover limits for VAT have remained relatively unchanged; they are half that of those for micro status - either €36,800 or €91,900 (2023), depending on the nature of your business activity, as above.
Accordingly, if your turnover limits are greater than either €36,800 or €91,900 (depending on business activity) you are obliged to charge VAT, even though you may still retain micro status.
You can read more in our section on VAT.
vi. Limited Liability
Prior to 2022 there was no limited liability for micro-entrepreneurs in the same way as would be the case with a limited company. Only the principal home was protected.
A micro-entreprise does not have a separate legal identity to that of the owner of the business.
Nevertheless, from 15th May 2022, for all new business creations, and for new debts created by an existing business, all personal property and effects are now granted protection from seizure, although it grants no such protection if you have from borrowed against personal assets from a bank. You can read more about it at Micro-entrepreneurs Secure Limited Liability.
Finally, certain types of business activities are excluded from micro-entrepreneur status.
They include those who buy and sell property on a professional basis, estate agents, developers, finance companies, health professionals, accountants, insurance agents, and agricultural professions, with certain other limits on artists, writers, scientific and sports based activities.
In addition, the letting of unfurnished accommodation is taxed under rules of revenus fonciers, which you can read about in our pages on Letting Property in France, with no business registration possible.
Similarly, where you are proposing to engage an employee, the status is really not suitable.
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