General partnership (SNC): what you need to know
Verified 19 December 2023 - Legal and Administrative Information Directorate (Prime Minister)
SNC is a rare social form. It is characterized by shared responsibility of partners and the flexibility of its operation.
The general partnership (SNC) is a commercial business that can exercise any type of activity, with the exception of certain regulated sectors (insurance, savings).
CNS is distinguished by great freedom left to the partners to draft the articles of association and organize the operation of the business.
His associates, at the minimum number of 2, all have the merchant status. Partners may be natural persons (individuals) or legal persons (businesses).
FYI
SNC is based onintuitu personae, i.e. the personality of each member plays a decisive role in the formation, operation and dissolution of the business.
Two spouses may, alone or with third parties, be members of the same partnership. A spouse can therefore claim the status of partner for half of the shares subscribed when his spouse employs common assets to make a contribution in a partnership.
However, the claim of partner status by the spouse of a partner in name is subject to the unanimous consent of the other partners.
Moreover, SNC is not obliged to file its social accounts with the commercial court registry, unless all its partners are businesses of limited risk (SAs, SAS or SARLs, for example). The management report must simply be available for inspection at the head office by any interested party.
Please note
You are considering create a SNC ? We explain how build a step-by-step business.
Formation of share capital
The amount of the share capital is freely determined by the members (€1 minimum). The share capital may be constituted by contributions of cash (money) and contributions in nature (goods: equipment, vehicles, buildings, goodwill, patents, etc.).
The contributions in industry (know-how, competence) are also permitted but are not part of the share capital.
There is no legal requirement for the immediate release of shares in SNC. The articles of association may stipulate that the shares shall be paid up as and when required by the business.
Financial liability of members
Each member of the SNC shall be indefinitely social liabilities, and all of them are solidarity between them. In other words, the creditors of SNC may sue each member (or even only one of them) on his personal assets in order to pay all a debt.
This obligation is only subsidiary in nature, i.e. the business must be pursued for the settlement of the debt before the members.
Please note
Such an obligation on members enhances business in the eyes of third parties and may facilitate the granting of a credit.
Management bodies
The organization of the management of partnerships is freely organized by the statutes.
In principle, all partners have the quality of managers however, the articles of association may provide that management is to be entrusted to one or more members or to persons outside the business.
In the course of social life, the manager or managers are appointed under the conditions of majority laid down by the statutes or, failing that, by unanimity. The dismissal of the managers presupposes the unanimous agreement of the other partners. If they are removed without just cause, they are entitled to damages.
The manager has the greatest powers to to act in all circumstances on behalf of the business (e.g. subscribing to professional insurance, sending of invitations to meetings, payment of social security contributions, etc.).
Please note
Unlike SARL, the management of SNC may be entrusted to a legal person (e.g. a business). In that case, it shall carry out the day-to-day management activities through its managers.
In dealing with third parties (outside management), the manager engages the business by acts forming part of the objects of the company. In other words, acts may be annulled if they go beyond the social purpose of the company.
Example :
An executive of SNC whose corporate purpose is Furnished rental for professional use will not commit the business if it carries out securities management activities.
Statutes may limit the powers of the manager and provide that the conclusion of any such act shall require the prior authorization of the members.
In the case of a plurality of managers, the statutes may also determine the powers of each, and therefore, for example, share among themselves the burden of administering the business by specializing their powers. However, the social accounts and possibly the management report must be drawn up by all the managers.
Decision-making
Decisions which exceed the powers conferred on the managers shall be taken at unanimity associates.
However, the statutes may validly provide that certain decisions shall be taken at a majority which they shall determine. This majority may vary according to the seriousness of the decisions to be taken. It may also be calculated either as a number of members, or as capital, or as a number and as capital.
Warning
Unanimity shall be always required for decisions concerning the disposal of shares and the SAS transformation.
Taxation of profits
The tax regime for a general partnership (SNC) is almost identical to that for individual companies. Except where business tax (SI) is optional, profits made by the business are taxed on behalf of each partner (and not on behalf of the business), including when not distributed.
Thus, the CNS is subject toincome tax (IR) :
- In the category of Industrial and Commercial Benefits (BIC) when engaged in a commercial, industrial or craft activity
- In the category of non-commercial profits (NBC) when engaged in a liberal activity
- In the category of property income when it carries out a property management activity.
Please note
Taxable profit of the business means before deduction of the remuneration paid to members operating in the business.
Taxation of the director
Associate Manager
The remuneration paid to the manager shall be linked to the share of the social benefits accruing to him in his capacity as partner. They are therefore imposed on theincome tax (IR), according to the rules specific to the category of profits to which the business' activity falls (BIC, NLC, property income).
However, when the business opted forbusiness tax (IS), the remuneration of the manager shall be taxed at theincome tax (IR) in the category of wages and salaries. In this case, a reduction of 10% or a deduction of the amount of the actual expenses (accommodation, meals, travel,...) of the director is made before the application of the tax.
Unassociated Manager
The remuneration which the non-member manager receives under his corporate mandate shall be imposed on theincome tax (IR) in the category of wages and salaries.
A reduction of 10% or a deduction of the amount of the actual expenses (accommodation, meals, travel,...) of the director is made before the application of the tax.
Taxation of members
Each partner is subject to theincome tax (IR) in the category of industrial and commercial profits (BIC), on the basis of the share of profits corresponding to its entitlements.
The social security regime of SNC's managers varies according to their associated or unassociated.
Associate Manager
Because they are traders, all members of a SNC, whether or not they are managersshall be covered by the social security system of Self-employed persons (SFTs). They are therefore attached to the social security scheme for the self-employed (SSI), which is integrated into the general social security scheme.
Unassociated Manager
The non-member manager is subject to the social security scheme of assimilated employees. He is attached to the general social security scheme and has social security cover similar to that of an employee.
However, he does not contribute to unemployment insurance.
Divestments of shares, even between members, always requireunanimous agreement associates. It is therefore possible to leave the partnership only if all the other members consent or if the business is dissolved.
Please note
Disposals of shares in a general partnership must be recorded in writingby a notarial act or by a private signature.
The transfer of shares shall give rise to the payment of a registration fee to the tax administration.
This duty shall be fixed at 3% of the transfer price less one abatement equal to €23,000 and returned to percentage of the number of shares transferred in social capital.
Example :
You own 50 shares in an SNC, the capital of which is divided into 400 shares. You sell your shares for a value of €50,000.
The amount of registration fees payable by the purchaser is calculated as follows: Transfer price - (23,000 x Number of shares sold ÷ Total shares in the business) x 3%.
Applied to our example, this would result in: 50,000 - (23,000 × 50 ÷ 400) = 47,125 × 3% = €1,414 registration fees.
CNS | LOCK | SARL | |
|---|---|---|---|
Number of partners | 2 to unlimited | 1 to unlimited | 1 to 100 |
Leader | Manager (one or more) | President (and one or more Directors-General) | Manager (one or more) |
Share capital | Free | Free | Free |
Release of cash contributions | No obligation | At least 1/2 from creation | At least 1/5 from creation |
Financial Responsibility | Unlimited and solidarity | Limited to inputs | Limited to inputs |
Taxation of profits | Income tax (IR). Possible option for SI | Business tax (IS). Possible option for IR | Taxes on businesses (IS). Possible option for IR |
Tax treatment of the director |
| Income tax (IR) in the Salaries and Wages category | Income tax (IR) in the Salaries and Wages category |
Social security of the director |
| Assimilated employee | TNS if majority management, treated as employee in other cases |
Corporate securities | Shares | Actions | Shares |
Transmission of securities | Unanimity of the partners | Free (possible approval clause) | Authorization of members |
Registration fees | 3% of the sale price after a reduction of €23,000 | 0.1% of the transfer price | 3% of the sale price after a reduction of €23,000 |
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SNC regime (legislative part)
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