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What is LLC or a Limited Liability Company?
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It is common for entrepreneurs to mainly consider two options when creating a company: register as a freelance or create a limited liability company. But what does this term really mean? In this article, we are interested in what the law says about the liability of partners and administrators in an SL.

Partner Liability: A protected heritage

One of the main reasons that make many entrepreneurs choose to create a limited liability company (SL) is because of the characteristic that gives its name to this legal form, that is, that the partners are responsible for the debts of the company only at the level of the capital contributed in it.

That’s the big difference with a freelancer. For an individual entrepreneur, there is no difference between personal and professional assets (because the same individual is both a person and a company). This implies that if debts are contracted in the exercise of economic activity, the self-employed person will have to answer for them with everything he has. The partner of an SL, in exchange, at most would lose the capital invested in the company.

SARL is a legal form of a limited liability commercial company formed by at least two partners (or by a single partner when it takes the form of a one-man SARL). In LLCs, the partners’ liability is limited to the amount of their contributions.

The LLC is a limited liability company , it is a form of commercial company which allows partners to limit their liability to the amount of their contributions.

An LLC must be formed by at least 2 partners (or only one partner in the case of the creation of a one-person SARL or EURL ), which can be natural or legal persons. The share capital is compulsory but no minimum is set by law. The share capital is divided into shares between the partners, in proportion to their contributions.

To create an LLC, it is necessary to draw up statutes and complete all the registration procedures. We discuss this point in the next paragraph.

Almost all activities can be carried out in LLCs (with the few exceptions provided for by law), provided that they are lawful. When the activity is regulated, all the exercise conditions must be fulfilled.

The LLC is managed by at least one manager. It must be a natural person, associated or not.

The Creation of an LLC

The creation of an LLC is carried out by accomplishing several very specific steps. To create an LLC, it is necessary:

To draft statutes . The statutes of an LLC aim to organize the functioning and organization of the company. They must be written in writing and signed by all partners.

To appoint the officers . When they are not designated directly in the articles of association, the managers of the company (or the manager) must be appointed after the signing of the articles of association as soon as possible.

To realize the contributions. Each partner must make the contributions that he has undertaken to make it to the LLC. These contributions may correspond to contributions in cash (contributions of money) that must be paid or to contributions in kind (contributions of goods other than money) which must be assessed and transferred ownership to society. Sometimes a contribution commissioner must intervene.

To publish a notice of incorporation in the newspaper of legal announcements. This advertising formality is mandatory.

To request the registration of the LLC in the commercial and companies register. The statutes of an LLC are regulated by several laws. First of all, they must contain several mandatory information.

The Managers of SARL

An LLC must have a manager, responsible for legally representing it . It is also possible to appoint several managers . The manager of an LLC must be a natural person, associated or not within the company.

The operating conditions of the manager position are largely defined by the partners of the LLC. This is particularly so:

  • In terms of compensation : the manager may receive compensation, consisting of a fixed and / or variable. There is no minimum remuneration, it is even possible to provide no remuneration.
  • In terms of term of office : the mandate of the manager of sarl can be fixed or indefinite.
  • In matters of powers (within certain limits): with regard to third parties, the manager legally represents the company. On the other hand, vis-à-vis the partners, power limitations may be provided. For example, an authorization procedure can be put in place for important decisions.

In terms of social protection, the manager of sarl is:

  • Affiliated with the social security of the self-employed when he is the majority managing partner,
  • Affiliated to the general social security scheme in other cases (non-associated manager, minority or equal partner manager).

Taxation of profits in LLC

The profits made by an LLC are in principle subject to corporation tax, except when the partners decide to opt for the partnership regime (taxation of profits directly in the name of the partners). The application of the partnership regime is temporary (5 financial years maximum) unless the LLC is composed only of members of the same family (no limitation in this case).

Under the corporate tax regime, the partners of an LLC may decide to distribute dividends in the presence of distributable profits. The majority managers pay social security contributions on part of their dividends.

Partners of SARL

Partners of SARL have several rights : political rights (voting rights in particular), information rights and financial rights (right to dividends and liquidation bonus).

The decisions of the partners are taken collectively. The quorum and majority conditions depend on the nature of the decision (ordinary or extraordinary).

The partners of an LLC must be convened within 6 months of the end of each financial year to deliberate on the approval of the accounts for the financial year and the allocation of the result.

For any modification of the statutes of the company, such as a change of corporate name , a capital increase or a change of corporate purpose for example, a decision of the partners is necessary (with exceptions).

When a partner plans to transfer his shares to a third party, he must obtain the approval of the partners to carry out the transfer.

The Advantages of SARL

SARL has several advantages for business creators:

  • LLC is a legal form that allows associates to protect their personal wealth.
  • The operation of LLCs is largely framed by law, which provides a secure legal framework for partners.
  • The majority managers are affiliated to the social security of the self-employed. Social protection costs less than the general system.
  • Regarding the taxation of profits, the partners of an LLC have the choice between corporate tax or direct taxation of profits in their name.
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