Automatic separation of assets

Individual business When the individual entrepreneur (including the micro-entrepreneur) creates a automatically separated. It has two heritage areas:

• One occupational heritage composed of all elements relevant to the independent professional activity or activities
• One personal assets composed of items not included in the professional estate

This separation is carried out automatically as from one of the following moments:

• either on the date of registration of the activity in a register: RNE: titleContent, SCR: titleContent , etc.
• on the declared date of commencement of activity, where that date is earlier than the date of registration
• or when the name is first used. This corresponds to the name or usage name of the individual contractor accompanied by the words “individual contractor” or the initials “EI”. This date shall be considered as the date of commencement of activity.

Composition of professional assets

The composition of professional assets is provided for by law. It shall include in particular the following:

• Trade fund, or craft fund, or agricultural fund, with all the tangible or intangible assets which constitute them and the right of presentation of the customers of a liberal professional
• Movable property : goods, equipment and tools, agricultural equipment, vehicles, etc.
• Real property used for the activity (including that part of the sole trader's principal residence used for professional use)
• Assets intangible : customer data, patents, licenses, trademarks, designs, intellectual property rights, trade names and brands

• Cash Fund, sums held at the place where the professional activity is carried out and the sums entered in the bank accounts dedicated to that activity.

The collateral, rights (e.g claim of a rent) and the debts are also part of the professional assets of the individual entrepreneur.

The separation of professional and personal assets prevents the individual entrepreneur from carrying out his activities surety on his company.

If he needs a surety in the exercise of his activity, he has the following possibilities:

• Having recourse to another person: a relative who will be surety in his place
• Use a mutual guarantee business

Composition of personal assets

Personal assets consist of items not included in the professional estate. These are:

• Items from assets : principal residence and possibly other immovable property
• Liabilities: borrowing to purchase a personal vehicle, etc.

The heritage real estate personnel (for example, a second home or land) is automatically included in personal property.

The sole proprietor is no longer obliged to make a declaration of immunity from seizure of his principal residence with a notary.

Principle: protection of personal assets

The separation of assets protects the personal assets of the individual entrepreneur. The professional creditors cannot therefore obtain the settlement of their claims on the principal residence, the movable assets or the personal car of the individual entrepreneur.

Professional creditors (suppliers, lessors, banks for the professional activity) can request the settlement of their claims only on professional assets the individual contractor. This means that they cannot seize property from the entrepreneur's personal assets when the professional assets are insufficient.

In case of recovery or judicial liquidation, only the assets forming part of the professional assets of the individual entrepreneur are exposed to legal action by the professional creditors. However, the court may order the sole trader to repay part of his debts on his personal assets where he has committed a mismanagement (e.g. late declaration of cessation of payments) which aggravates the company's liabilities.

Exceptions for public creditors (tax authorities and social security institutions)

Only professional assets may be used to pay professional debts.

In principle, the settlement of social and fiscal debts related to the professional activity of the individual entrepreneur can only be settled on the professional assets.

However, the tax administration or social security bodies may claim payment of their debts on the contractor's professional and personal assets for certain taxes and contributions and in the event of fraud and serious infringements.

Taxes and social contributions

Tax administration can seize all the entrepreneur's assets (personal and professional) for the payment of:

• income tax
• property tax on goods used for business purposes.

The social security bodies may also seize all the professional and personal assets of the entrepreneur for the payment of social contributions (for example, the CSG: titleContent).

Fraud and other serious infringements

Tax administration may seize the contractor's personal assets in the following cases:

• Fraudulent maneuvers : for example, in order to avoid paying tax, the company resorts to fraudulent schemes such as filing outside the prescribed time limits, keeping fictitious accounting records, carrying on a hidden activity, false residence abroad. When the entrepreneur commits one of these fraudulent schemes with the intention of committing an offense, there is tax fraud.
• Serious and repeated non-compliance with tax obligations : for example, a company provides irregular accounting or does not pay tax over a long period of time.

The social security bodies (National Health Insurance Fund, National Family Allowance Fund, etc.) may require the collection of social contributions from the personal assets of the contractor in the following cases:

• Fraudulent maneuvers which make it impossible to collect social contributions: for example, the company avoids paying social contributions by not declaring all the hours worked by its employees.
• Serious and repeated findings social obligations which are:
  
  • No settlement or partial settlement social contributions and contributions in excess of €1,000 , in the following cases:
    
    • At least 2 of the last 4 semi-annual maturities
    • At least 2 of the last 8 quarterly maturities
    • At least 6 of the last 24 monthly installments
    • At least 2 of the last 6 split calls (excluding maturities covered by a clearance plan or a payment schedule that has been respected for more than 3 months) 
    • At least 4 payment deadlines for a clearance plan or a payment schedule for outstanding social contributions and contributions
  • Failure to meet deadlines, deposit conditions, incomplete or erroneous declaration of a registered social declaration (NSD) which has given rise to the application of surcharges or penalties for an amount greater than €1000 . These facts must relate to at least 2 statements in the last 4 years.
  • Failures which led, after verifications or checks, to observations or adjustments for an amount greater than €1000. These breaches must relate to at least 2 reports in the last 5 years.

Use of personal assets to guarantee a professional debt

The individual entrepreneur may decide to use an element of his personal assets as collateral of a professional debt, for example to obtain a loan for the needs of the company.

These include, for example:

• Mortgage of personal property (except the main dwelling): a bank takes a guarantee (i.e. a mortgage) on personal property. In case of difficulty in repaying a professional debt, the bank can sell the property.
• Pledge life insurance

Waiver of a claim by a professional creditor

To finance a major investment, a creditor professional (e.g. a bank) may ask the individual entrepreneur to give up the separation of its assets. For example, a bank asks him to waive the protection of his personal assets. In this case, the bank has as security a part of the personal assets of the entrepreneur.

This waiver may be requested to finance a major investment or to purchase a business premises.

The individual contractor then signs a waiver with the professional creditor.

A model waiver document is available:

Model of waiver of personal property protection

Legifrance

Pour en savoir plus

As from the date of signature of the waiver, the individual contractor has a 7-day reflection period to change your mind. A handwritten entry in the waiver may reduce this period to 3 free days.