Choosing the right legal status for your car garage

Among all the decisions you need to make to set up your business, the one about the legal status of your car garage is not the least of them. You can't dedicate yourself to vehicle repair until you've chosen the right form for your future business. Each legal form has its own advantages and disadvantages in terms of tax, governance, management and social rules. Before you drown in a sea of information that is difficult to summarise, here is a short practical guide to grasp the subject and choose the right legal status for your car garage.

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You're a solo entrepreneur

If you decide to create your garage alone, you can do so in the form of a microenterprise, EIRL, EURLor ASASU. You do not take on partners, as your structure is attached to your person.

These legal forms have the advantage of flexibility. The management of the company is simple. You are the sole proprietor or shareholder and your decisions are not subject to any voting or arbitration.

The microenterprise

It's not often that a garage owner opts for this status, unless you want to operate as a home mechanic.  

The microenterprise allows you not to spend too much time on all kinds of administrative formalities.

The EIRL

The EIRL regime was created in 2011. Intended to complement the sole proprietorship scheme and to fill in some of its gaps, it is however little used.

SASU or EURL

The SASU and the EURL are companies, which means that you have to draw up statutes. We strongly recommend that you contact a chartered accountant to help you with this complex process.

If the SASU is subject to corporation tax (i.e. profits are taxed), the EURL can choose its tax regime: IS or IR (income tax).

You are several : the status for your car garage

SARL or SAS?

The match here is going to be between the SARL (Société Anonyme à responsabilité Limitée) and the SAS( Simplified Shares Company) for your future car mechanics business. Both of these legal forms are companies, which implies the drafting of statutes. The drafting of these articles of association as well as their publication incur costs.

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About £300 for the compulsory administrative formalities and around £500 if you use an online service provider, to help you with the formalities. If you prefer the advice and expertise of a law firm or accountant, the cost will be multiplied by 3 or 4.

Finally, the use of a commissaire aux apports (to evaluate your contribution, especially if more than half of it is made up of contributions in kind) also raises the bill by several hundred euros.

These two types of company also require you to choose a company name (unlike an EIRL and an Æ).

Advantages and disadvantages

Creating your company gives your project some consistency. Although the minimum share capital is set at £1, it is advisable to bring in much more, for the obvious sake of credibility.

The SAS is a legal form regularly chosen for business creation. It can be a perfect fit for your future mechanic workshop. It is particularly suitable for projects intended to grow, as it is fairly easy to bring in partners to the capital.

The SARL is perfect for family projects (SARL familiale). It is secure for the partners and offers - under certain conditions - a more advantageous tax regime.

In both cases, at least two partners are required.

The status of your spouse

What about your spouse? Whether you are married, in a civil partnership or in a common-law relationship, your significant other can share the entrepreneurial adventure with you. Since 2005, the role of the spouse has been firmly regulated by law. These legal provisions make it possible to avoid abuses, but also to fully value the involvement of your partner in the creation and growth of your garage.

Each status must be studied precisely, because it has advantages and disadvantages, particularly in terms of social protection and cost to the company.

• The collaborating spouse regularly participates in the company's activity, but does not receive any remuneration for this. Affiliated to the social security system for the self-employed, he/she can also pursue his/her own professional activity.

• The partner spouse holds shares in the company and is affiliated to the same scheme as the entrepreneur.

• The employed spouse is a full employee of the company. Your obligations remain the same as those towards your other employees. This includes social protection (general regime), an employment contract and a salary that cannot be lower than the minimum wage. This can represent a significant cost when launching a young company.

The website of the Ministry of the Economy and Finance provides you with all the elements and documents to be taken into account to determine with certainty the status you wish to choose for your spouse.

The declaration of your spouse's status is made to the CFE (Business Formalities Center) on which you depend.

Image sources:
Marie CHASLES / Author: Olivier Le Moal / License ID: #15084438 -  stock.adobe.com