legal, startup-costs, entrepreneurship, bootstrappingInterested hearing from you regarding a few questions about a company we are starting.
Background
I am 22 and have been living in France for about three years, I am currently registered as an auto entrepreneur and have a French bank account etc.
About the company
We provide an online language learning platform specifically for people in Europe to learn to speak and write English through online courses with other native English speaking teachers.
The company is 100% online and we simply connect the teachers with the students while charging a percentage of each lesson for administrating the lessons, course-ware and payments.
The teachers come from all over the world.
Questions
Q1 -
We are starting small but expect to exceed the annual revenue limit for Auto-entreprenures (€32,600). Due to our low profit margins we have to move to an EURL registration so that we are taxed on our profits instead of total revenue (which would kill our business).
Has anyone had any experience with the different business structures in France (EURL, SARL etc…)?
I’m specifically interested to know what the hidden costs are and whether I can navigate the registration process my self without paying accounting and legal experts as our business is bootstrapped with very little (read “no”) expendable capital.
Q2-
This quote from an article entitled “The pitfalls of France’s auto-entrepreneur status” got me concerned… it reads:
Although some employers, especially English teaching academies will push you to be an auto-entrepreneur, you should be wary, lawyer Jean Taquet tells The Local.
“The government knows a lot of language schools employ teachers on an auto-entrepreneur basis when really they should be putting them on their payroll. These teachers can suddenly get caught in the crossfire when authorities decide to audit a school,” Taquet says.
“The government is using auto-entrepreneurs (AEs) as bait to go after the companies,” he adds.
Andy Denison, who runs an advice website for Anglophones on all things administrative adds: “We have known of a couple of companies who were only employing AEs when really they should have had salaried people on their books and these businesses have been caught out.”
Under the rules of being an auto-entrepreneur you should have more than one client paying you for your services, because if you don’t then really you should be on a contract and the auditors will be looking out for this.
“If you are constantly working for someone or especially if you sign some kind of exclusivity agreement with them, then that will be an issue with authorities,” Denison warns.
We make it very clear in our Terms of Service that we are not employing teachers, we are simply providing a platform for the teachers to manage and interact with their students as well as a service to manage their payments.
So my question is how exactly will this work, we are not employers, we are service providers and the last thing we need is to be heavily fined and taxed on our already low profit margins.
Interested in hearing from anyone who has walked a similar path, what were the pitfalls, what should we be looking out for? Any resources or articles would also be very much appreciated.
Thanks for your time,
Jethro.
Regarding your first question, and if memory serves, the only practical difference between running an EURL and an SARL are a) the minimum capital and b) the number of shareholders (only one vs two or more: the EU in EURL stands for Entreprise Unipersonelle).
Worry about setting either up when you can no longer qualify as a auto-entrepreneur. The latter status is convenient, in that there’s a ton less paperwork. By then you’ll likely be able to afford an accountant who will walk you through setting up the company, take care of your accounting, and - in my view most importantly - answer whatever questions the fiscal authorities may end up throwing at you when they probe into them. (Aside: do not, under any circumstance, try to set up shop abroad if you don’t have a cofounder living in the foreign country you’re registered in.)
Regarding your second question: yes, it’s a potential issue. If anything, Uber is in a similar boat. They’re a taxi company with employees that is masquerading as an app with contractors. The legal environment will eventually catch up with them and that’s a potentially massive liability. Depending on your setup you may end up being considered a school (which might need to be registered) with employees, rather than an app with contractors. In this respect the article you quoted nails the key issue to be wary about:
“If you are constantly working for someone or especially if you sign some kind of exclusivity agreement with them, then that will be an issue with authorities”
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