Since its launch, the auto-entrepreneur scheme has been appealing for its simplicity. Since 2009, more than half of business creators have opted for this scheme. It’s true that it’s fast, in a few days you can start your business. However, in some cases, the auto-entrepreneur scheme is not the best choice.
Especially since the regime will soon be reformed and probably limited in time (see the report on the self-entrepreneur requested by the government and published on 10/04/2013). To create your business without being mistaken, our accountants remind you of the limits of the status of the auto-entrepreneur.
The registration of the activity in auto-entrepreneur is fast (registration via the Internet), there is no accounting to keep, no VAT to invoice and social charges and income tax are calculated very simply as a percentage of the CA.
A tempting formula when one does not master very well the administrative and financial workings of the company. Attention, however, these benefits can in some cases compromise the profitability of the activity.
Auto-Entrepreneur Status: No Deductible Expenses
In sole proprietorship or company, a contractor can deduct from his profit the expenses necessary for his activity. Vehicle expenses, rents, communications expenses, investments, social charges … are all expenses that sometimes make it impossible to impose the executive’s taxation.
As a self-entrepreneur, you cannot deduct any costs from your turnover. You pay social security contributions and income tax on each euro cashed.
Clearly, the more your business requires significant investments (purchases of raw materials, stocks, tools …), plus the calculation of expenses as a percentage of turnovers will penalize you.
In the event of a loss-making activity, it is also impossible to attribute the deficit to your income statement and to benefit from this deferral to reduce your tax liability.
Auto-Entrepreneur Status: No Recoverable Vat
The self-entrepreneur has a “VAT exemption”, he does not charge VAT to his customers, but he does not recover it on his purchases. In the case of large investments this can result in a substantial financial loss.
Self-Entrepreneur Status: Retirement Quarters Validated According
We are moving away from the pure calculation of the profitability of the auto-entrepreneur scheme. Yet retirement planning is an important parameter to evaluate when you launch, especially if you start your independent business at the end of your career.
In fact, to validate retirement quarters, the self-entrepreneur is subject to a turnover requirement. Example, for a sales activity, a self-entrepreneur must release:
- € 6,357 of turnover / year to validate a quarter of retirement
- € 25,433 of turnover / year to validate 4 quarters of retirement
Moreover, the auto-entrepreneur scheme does not allow you to take advantage of the tax benefits offered by the Madelyn insurance contracts. Thanks to these contracts, the self-employed (BIC or BNC) can deduct their insurance contributions from their result. Often an interesting calculation to complete the mandatory pension plan
Before You Start, Compare the Business Creation Status
If you want to become a self-entrepreneur, you must compare these inconveniences with that of a more traditional business creation (sole proprietorship or company). An accountant or business development coaching advisors can help you evaluate the best plan for your launch. In general, remember that the auto-entrepreneur scheme is suitable for self-employed workers who do not wish to associate or recruit and whose activity requires small-scale investments. The scheme is ideal to supervise a small complementary activity or to test an idea before deploying it on a large scale.
As soon as you intend to make your self-entrepreneur activity your main source of income, you have every interest in comparing the different creative regimes at your disposal, especially when your business requires investment from its launch.