Embarking on an entrepreneurial adventure with your spouse, children or siblings is a real challenge. It’s a long-term project. This famous “family business” is governed by very specific regulations, those of the SARL de famille.
It’s important to note that such a company is first and foremost a variant of the classic SARL. It has the same legal structure, but with a few special features that we’ll detail here.
SARL similarity with LLC
SARL (Société à Responsabilité Limitée) in France is very closed to LLC (Limited Liability Company) in the US. Both legal forms share several common features, including:
- Limited Liability: In both cases, owners are typically only liable for the company’s debts and obligations up to their initial investment. Their personal assets are protected in the event of bankruptcy or business disputes.
- Management Flexibility: Both SARL and LLC offer a degree of flexibility in business management. Owners have the option to establish management agreements that suit their needs, allowing them to customize how the business is run.
- Pass-Through Taxation: Both structures are generally subject to pass-through taxation, meaning that business profits are taxed at the owner’s level, avoiding double taxation at both the corporate and shareholder levels. However, it’s important to note that the exact tax treatment can vary depending on the jurisdiction and specific tax choices.
Conditions for setting up a family limited liability company
Creating a SARL de famille follows the same steps as creating a conventional SARL. The only difference is that the partners must be from the same family.
This notion of family is perfectly defined by law:
- Direct relationship (parent-child, sibling)
- Civil relationship: marriage certificate or Civil Solidarity Pact (PACS)
Family ties such as uncles or aunts, nephews or nieces, first cousins, brothers-in-law and sisters-in-law… are therefore not authorized to form a family SARL.
The advantages of a family limited liability company
Partners benefit from the same protection as in a conventional SARL. Their liability is limited to the amount of their contributions, should the company run into financial problems.
The specific advantages of the SARL de famille relate to taxation and the transfer of shares.
Taxation of the SARL de famille
A family SARL can opt to pay income tax (impôt sur le revenu, or IR) for an unlimited period of time (a traditional SARL can only benefit from IR for the first five years).
While income tax is often much more advantageous for partners, it is important to note that this is an option, not an obligation. The SARL de famille can decide at any time to switch to corporate income tax (Impôt sur les Sociétés – IS).
The disadvantages of the SARL de famille
The SARL de famille has “the disadvantages of its advantages”, which you need to be aware of.
Restriction on the entry of new associates
To continue to benefit from SARL de famille status, the company can only accept new partners who are directly related to the current partners. This prevents the entry of non-family members, but can also create problems when it comes to transferring shares.
Example:
Two brothers who have set up a family limited liability company want to pass it on to their children. This is not possible because the new partners are cousins, which is not considered a direct family relationship.
The only possible alternative is to forgo the SARL de famille status and adopt the SARL classique status, which imposes no restrictions on the links between associates.
Non-deduction of the managing partner’s remuneration
SARLs that have opted to pay income tax cannot deduct the remuneration paid to the managing partner from the company’s income. This is considered to be part of taxable profit.
There are therefore situations in which the corporate income tax regime may be more advantageous for the SARL de famille. Each family business must be examined on a case-by-case basis.
Limiting possible activities
Little-known restrictions on the type of activity carried out are not very restrictive, but should be known:
- A SARL de famille can be set up for industrial, commercial or craft activities.
- A family limited liability company cannot carry on a liberal or civil activity
⚠️ Point of attention :
In principle, the SARL de famille cannot replace an SCI (Société Civile Immobilière) for the management of real estate assets. However, both LMNP (Location en Meublé Non Professionnel) and LMP (Location en Meublé Professionnel) are considered commercial activities. A SARL de famille (family-owned limited liability company) can also be a highly suitable legal structure, provided that it is used exclusively for furnished rentals.
In this case, a family limited liability company (SARL de famille à l’IR) qualifies as an LMNP (under certain conditions). This system is also advantageous in terms of taxation on capital gains from property sales (progressive deduction based on the length of time the property has been held).
Is the SARL de famille a good solution for your business?
While the SARL de famille offers obvious tax advantages for associates, it is not always the most appropriate structure for every situation. particularly because of the restrictions it imposes on links between partners and the status of the managing partner’s remuneration.
SARL classique, SARL de famille, SCI?
All these structures have their advantages and disadvantages, depending on the nature of the company and its business. The Altermès team is ready to help you with your project, whether it involves setting up a business or changing the status of a company.
🔍 Contacting the Altermès teams can help you analyze your situation and study the various options available to you.
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