A French phenomenon: the new auto-entrepreneur business stat
December 2010
Since January 2009, it is possible in France to create a company with only some clicks on internet thanks to a new status: the auto-enterprise. Since that, more than 400 000 auto entrepreneurs ...
Since January 2009, it is possible in France to create a company with only some clicks on internet thanks to a new status: the auto-enterprise.
Since that, more than 400 000 auto entrepreneurs took that opportunity. More than an economic reality, it seems that we are facing a social phenomenon.
Implemented by the French government in 2008, in the context of the Law for the modernization of the Economy, this new status should be according to Henri Novelli, State secretary “the answer to all of those who have an idea but who still hesitate… Students, employees, retired people, state agents, young people can henceforth dash into the entrepreneurial adventure only thanks to a simple business declaration. The formalities and the associated costs to the start-up company creation are extremely reduced. The relationship with the administration is really facilitated. The social and fiscal charges are calculated on the basis of the declared turnover only. The tax payment is liberator and can be done on one hand or monthly or quarterly and on the other hand through internet. This means that no turnover = no tax and no social charge. To access to this status of auto-entrepreneur, only one condition must be satisfied: do not exceed the annual turnover limit.” The limit is today € 32500 for services and €80000 for trade.
Thanks to the three principles of the simplicity, the speed of the processes and the free access, French people confided an entrepreneurial vocation, and this, sometimes under the constraint of unemployment, sometimes on the impulsion of a choice of life, and also sometimes with the wish to build a complementary activity.
Eighteen months after its implementation, the success of this new status is too much massive, too much long-lasting not to be considered as a new social phenomenon. It seems that this status has made free the entrepreneurial energies in France, which was for a long time considered as a country in which administrative processes and social charges were too heavy. Nevertheless, all this absolutely does not mean that the auto-enterprise has become a new business model for the companies. But it can be seen as a tool to enable the wish of starting-up a business.
Strengths of the status:
- To make easier the evaluation of the charges,
- To ensure a social protection and the validation of the rights to retirement
- To avoid the fixe basis of calculation for tax and social charges during the start-up period, and the non anticipated regularizations,
- To allow more competitive prices thanks to the VAT franchise,
- To authorize lighter accounting constraints.
Weaknesses of the status:
- In case of exceed of the limits or status modification, in case of wish to sell-out the business or to have a new shareholder, it will then be necessary to rebuild the accounting history,
- The bank hesitations facing the absence of accounts especially in case of loan request,
- The payment of social charges and taxes even in case of loss, and the non carry forward loss on the global fiscal revenue.
- Social charges can sometimes be higher than the fix basis in the start-up process,
- The non recoverable VAT of assets and expenses.
For sure the number of new companies has shown records with on 2009, Nov the 30th, some 528,399 new companies to be compared to 327,000 in 2008 and 321,478 in 2007. Auto-entrepreneurs count in 2009 for 291,921. This means therefore 236,500 new other companies.
Definitely some of these auto-enterprises will become real solid companies, but for that, hey will have to generate not only turnover, but also profit for the auto-entrepreneur.
Now, only 40% of these auto-entrepreneurs have declared business, and have really join the economic cycle creating wealth. With an average monthly turnover of € 1,400, auto-entrepreneurs cannot live from their business. Their average profit is estimated to be € 775, this means the poverty line in France. And it is not always a complementary activity : 39% of them have this exclusive activity and remain therefore in the precariousness.
This status would have generated for the State some € 200,000 fiscal revenue. It is far from the government’s hope of 1 million., but in this crisis period, it is of course better than nothing.
Some criticize this new status: especially the building SME’s who are speaking about unfair completion even if only less than 10% of the auto-enterprises belong to that sector, with for the most part, low added value activities that are often not accepted by the craftsmen.
Some other reproach to this status to be a potential substitute to the work contract. Some witnesses indeed revealed that companies could prefer sign a trade contract that a work contract.
We all know for a long time that the start-up business curves are closed from the unemployment ones. We also are aware that the 1st anniversary is often difficult to reach for a new business. More of the auto-enterprises have no yet passed this stage. And we will have to wait until 2015 to know how many auto-enterprises have become solid and valuable.
We don’t know if in 2015, the 2010 auto-enterprises will have disappear as staying in that status would imply that they have not been able to develop strongly.
Nadine Blain
General Manager
ADMINEX France