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

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

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.

9 Responses

  1. Avatar
    Paul Soldermann

    One way or another, France is the killing fields of small size entrepreurship in the EU

    • Avatar
      FrenchNews (@FrenchNewsonlin)

      Exactly. As another commenter noted above to take this retrograde step at a time of high and rising unemployment especially youth unemployment is mystifying and perverse. Worse it appears to reflect a craven failure to stand up to the construction and artisan lobbies. Instead of suffocating the easiest way to test and launch a small business of any kind in France, the government should look at ways of reducing the high upfront social costs attached to those firms in the lobby groups — which is why they are complaining. Talk about an a*se-about-face approach!

  2. Avatar
    Alan Hewat

    “let’s remember that “they” are not “us” … this is not something that directly affects tech entrepreneurship in France”.

    Rubbish. An Auto-Entrepreneur is just a different tax status that has indeed “flexibility offset by high tax-rates and revenue caps”. It is only interesting where the value added content of manufacture is high for a small market, which can be typical of technical inovation startups. Yes, it is abused by people who use it to secure social security, work on the “black” etc., but it is these abuses the government should address rather than taking an axe to the whole system at a time of record unemployment. The new rules make France an even more hostile environment for tech startups.

  3. Avatar
    Mike Conte

    All true, but appearances are important and seems against the grain to go backwards here.

    * The income might be low, but there is no minimum wage for these AEs so no doubt this average is weighed down by those who are not successful, (which, for example in the US, is less than 20%).

    * The income might be low, but it grew about 25% over the past three years. That’s a lot better than the rest of France.

    * By definition, the tax revenues affected by the change, in terms of helping France close its budget, are vanishingly small. Why further burden those who make so little?

  4. Avatar
    Tommy Carney

    The autoentrepreneur status is probably the only legal way in France to bootstrap a startup. You have no startup costs, legal costs, minimum social charges etc. If the startup is widely successful, you are in any event forced to moved to a different legal structure. But if you aren’t, you don’t pay cotisations on money you never made.

    Of course, it’s not an attractive status for startups with funding. But it’s perfect for the proverbial “startup in the garage”! 🙂

  5. Avatar
    Jean Maynier

    Commenters seem to forget that auto-entrepreneur was created for workers to make complimentary revenue, not to be a replacement of EURL or other company status. It could be a good status to start as a freelance.

    I can’t really see any situation where this status can apply successfully to a tech startup (funded or not):
    – most of the time a tech startup has several founders.
    – if not, then there’s no point to have a formal status for startup with 1 founder and no employee until it needs to either invoice clients or look for funds.
    – In those 2 cases, the credibility of a company will worth the few bucks to invest to have a decent status.
    – an also important point is that tech startups are eligible for interesting tax exemptions and subsidies (JEI, CIR, Oseo grants, etc.)

    That does not mean I don’t support demands from the Poussins, but Liam is right in saying ‘ let’s remember that “they” are not “us” ‘

    • Avatar
      Tommy Carney

      In France you cannot start a business without registering under one the schemes, even if you don’t invoice a single client. If you don’t and suddenly start receiving money, you may run into trouble with the authorities for not registering before that happened.

      Of course, a thousand euro to start a company along with the minimum social charges running into the thousands each year is no big deal for a funded startup or an experienced entrepreneur.

      However, that amount of money is a lot if you’re running a lean startup out of your parent’s garage! I wanted to be able to test out ideas rapidly without having to set up a company, deal with any paperwork or pay minimum charges on profits I may never see. The autoentrepreneur status was very valuable for this.

  6. Avatar
    FYD

    This is an incredibly elitist article. They are not us?

Leave a Reply

You must be logged in to post a comment.