In France, there’s a huge difference between an Entrepreneur and an Auto-Entrepreneur

Jun 13, 2013
Vote on Hacker News

results

In recent weeks, the “Auto-Entrepreneur” status has been in the forefront of political discussions, as the government assesses whether to lower the revenue cap that auto-entrepreneurs can make. The status was created by previous president Nicolas Sarkozy in order to enable out-of-work and independent workers to begin making money more easily; the seemingly simple (as it is in the US) process of invoicing a client is a bit more difficult in France – a country which strongly favors full-time employment over short-term contract work or freelance work – and was seen as a new era of pro-business activity in France.

Though many believed that the status was put in place to falsely reduce the official unemployment figures (auto-entrepreneurs are not counted in the figure, even if they do not make any money), the real kicker came when a study was released looking at the average income of auto-entrepreneurs was just 539€/month, which really puts a dent in the argument for the status.

And so this past week, the government passed a regulation that lowers the cap of revenue an entrepreneur can make from €30,000+ down to €19,000; if an auto-entrepreneur’s revenue surpasses €19,000 two years in a row, they will be asked to take a more traditional scheme (more information on ThisFrenchLife).

An “Auto-Entrepreneur” is not necessarily an “entrepreneur”

By “entrepreneur,” I refer to a startup entrepreneur, differentiating from SME creators (restaurants, artisanal manufacturing, etc.), and I don’t think many entrepreneurs (including myself) have signed up for this status. The status’ flexibility is offset by its high tax-rates and revenue caps, as well as the fact that having the status opens you up to essentially working below minimum wage, as I’ve heard many reports of smaller tech companies hiring “interns” using the auto-entrepreneur status (even forcing them to sign up in order to get hired), as you can pay an auto-entrepreneur a few hundred bucks per month for their “service,” despite the fact that they work full time.

Most entrepreneurs set up either an EURL (a one-person limited liability company), or an SARL (roughly, an LLC) with their business partner; the most popular tech startup status is an SAS, which is both cheap (minimum required capital: 1€) and flexible (other status have fixed clauses, where as the SAS can be written to split equity, do vesting, etc. and is the VC company status of choice for early investment).

So, you may hear talks about how the change of this status is going to ruin entrepreneurship in France, and yes, this is a tough break for auto-entrepreneurs; however, let’s remember that “they” are not “us”, and that, while we can try to defend their rights, this is not something that directly affects tech entrepreneurship in France.