Opening a Restaurant: Which Legal Status to Choose?

Opening a restaurant? Compare the different types of legal structures before you start.

Published on 08/07/2021Cladie Olivier

Before opening a restaurant, it is important to choose an appropriate legal status. This will depend on your taxation, the level of capital required and the level of personal risk you will take on for the structure's indebtedness.

1. The Status of the Sole Proprietorship: A Good Way to Test an Idea

The sole proprietorship is the simplest legal status to adopt for a creator. The formalities are reduced to a minimum and the operating rules are extremely simplified.

The Simplest of All the Statuses: 
  • To register, simply register with the  CFE
  • Registration costs between 60 and 185 euros depending on the activity
  • No  share capital  is required to create the status
  • The accounting obligation  is very low
  • This status is well suited to activities that have a low investment requirement.
But Not Without Drawbacks:
  • In the event of the unforeseen, there is no distinction between your personal and professional assets. Your financial responsibility is unlimited.
  • It is subject to  income tax , not  corporation tax
  • Investment capacity is limited
  • The director's compensation is not deductible from profits

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2. EURL's Status - The Right Choice to Start Alone with the Idea of ​​Growing

The status of EURL (Sole Proprietorship with Limited Liability) is a form of company similar to the SARL , but it is made up of only one partner and its operation is slightly simpler.

Many Advantages:
  • Managing Director's liability limited to the amount of their contributions
  • Personal and professional heritages are distinguished
  • The share capital is freely fixed
  • Subject to income tax (but possibility of opting for corporation tax)
  • Allows an easy transition to the status of SARL
But Also Drawbacks to be Taken Into Account:

3. The SARL - The Status Acclaimed by French Entrepreneurs

The SARL (Limited Liability Company) is the legal form most adopted in France. 57% of business creations had this status in 2014. Here are the reasons for its success, and the points to be aware of.

A Secure Status Suitable for Many Projects:
But there is an Operational Rigidity:
  • The operation in SARL is framed by the Commercial Code, which generates administrative burdens.
  • The main manager is attached  to the scheme for self-employed workers, which is generally considered less protective.
  • There is the obligation to formalize in writing the distribution of roles between co-managers, the common strategy, the amount of compensation, etc.
  • In the event of management fault, the manager may be held liable.
  • The manager does not benefit from unemployment insurance if he leaves his post

4. SAS Statute - A Suitable Choice for Its Flexibility

 Unlike the co-management system in SARL, the management of an SAS (simplified joint-stock company) is provided by a single chairman, with a direct hierarchical link to the general manager. If you want to run your company alone, this is the most suitable status. In addition, the SAS is the legal status acclaimed by young designers for its flexibility in terms of organization, while the SARL is more rigid in terms of regulations. Here are the pros and cons to consider before getting started:

Pros:
  • The share capital freely set by the partners
  • The distribution of powers within the company is free, and not based on the share of capital held as in SARL
  • The manager benefits from the general  social security scheme and employee pensions
  • They have the possibility to choose between payment and dividends for his remuneration
  • Entry into the capital of new partners is facilitated
  • The transfer of shares in SAS is simpler than the transfer of shares in SARL
  • The director's compensation is deductible from profits
Cons:
  • The drafting of the statutes is complex and requires the help of a specialist for a serious document (at least 3000 €)
  • The manager's  “employee assimilation” plan  can be more costly in terms of social contributions
  • There is no special status for the spouse unlike the LLC
  • The flexibility of SAS can be double-edged, and pose a risk for some associates