Since its creation in 2009 there has been a phenomenal growth in the number of business owners who have chosen run their business as a micro-entrepreneur, with now over 2 million who have chosen this status.
Although simple to understand and operate, the status grants no limited liability, except for the principal home, which is protected from professional creditors.
With the enactment last month of the 'Loi n° 2022-172 du 14 février 2022 en faveur de l'activité professionnelle indépendante' all that changes.
From now on, the personal assets of the individual owner cannot by default be seized by their professional creditors.
Anyone exercising one or more independent professional activities, whether commercial, artisanal, liberal or agricultural, will automatically benefit from this separation of personal and professional assets ('patrimoine personnel' and 'patrimoine professionnel').
As for non-professional creditors, they will only be able to act on the personal assets of the individual owner. However, if this proves insufficient, creditors will be able to exercise their rights on professional assets within the limit of the amount of profit made during the last financial year.
No administrative procedure is necessary. Neither is it necessary to inform creditors.
The personal assets of the individual owner include both fixed and non-fixed assets.
Professional assets are defined as those associated with the activity of the business owner, including those that are part of both the professional and personal assets. More detailed regulations are to follow on this point.
Although personal assets are automatically protected, a business owner may, however, waive the benefit of this separation for a specific professional creditor; for example, to obtain a particular commitment, such as a bank loan.
According to Sophie Vermeille, an avocat specialising in business affairs that is something that is going to occur frequently, failing which a business owner will be unable to secure a bank loan, stating: "The more elusive assets are created for creditors, the more access to financing is reduced."
Although professional assets include tax and social security obligations, the tax authorities may seize all the assets of the individual owner in the event of fraudulent practices or serious and repeated non-compliance with tax or social security obligations.
For those sole business owners who previously chose to operate their business under a limited liability company, called an 'EIRL' (Entrepreneur Individuel à Responsabilité Limitée) nothing will change, although for new business creations the EIRL has been abolished. All new sole traders will now simply have the status Entreprise Individuel (EI).
The reform applies to all business creations from 15th May 2022. For existing businesses, it will only affect debts incurred since this date so as to protect the security of existing creditors.
When a business ceases their activity, the separation of professional and personal assets no longer applies, and there are particular mechanisms in place to facilitate the transfer of professional assets to a new owner on sale or merger of the business.
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