Since 14 February 2022, Law 2022-172 has created a new status for sole traders. The aim of this new status is to strengthen protection of personal assets of the sole trader.
From now on, we'll be talking about single status for sole traders.
Former status
Until now, all the assets held by a sole trader formed part of the same heritage. There was no distinction between goods used for’professional activity and goods used in the personal life.
Consequences of the old status
The old status was dangerous. If the sole trader had problems paying his suppliers in the course of his business, the suppliers could obtain payment by deducting the amounts due from the sole trader's account. the entrepreneur's personal assets. However, this option was limited to certain unseizable goods as the main residence.
To protect sole traders, a hybrid status was created with the’EIRL, limited liability sole proprietorship. Given the formalism attached to this status, the scheme has not been successful. It disappears with the single status of the individual entrepreneur.
New status
Under the new status, business and private assets will be automatically separated. Creditors of the professional activity will only be able to take advantage of assets resulting from the professional activity. in the event of non-payment.
No prior declaration or inventory is required. Assets will be allocated automatically according to their usefulness and the activity carried out by the sole trader.
Who is affected?
This new status concerns individual entrepreneurs. In other words private persons who exercises in their own name their professional activities. These include shopkeepers, craftsmen, farmers and the self-employed (including regulated professions). In other words, businesses that are not in the form of a company.
Distinction between business and personal assets
For some properties, the distinction is simple. Take, for example, a builder. The cement mixer will automatically be included in his business assets. Conversely, the television will be included in his private assets.
Things are getting complicated for mixed goods and common goods.
Mixed property
These include private car. The entrepreneur uses his «passenger vehicle» in private life, but also for business needs. He uses it to go to a customer meeting, for example. The same applies to the bank account, This is because the entrepreneur is not required to have a separate account. A priori, these goods swill be allocated to business assets. A decree is to be issued fixing the terms and conditions of the scheme.
Common property
A joint property of spouses will automatically be assigned to the business assets without the prior agreement of the spouse. Each spouse is free to use the joint assets. The forthcoming decree will specify the terms and conditions of application.
Transfer of business assets
This is a major innovation. If a sole trader ceases trading, his business assets can be transferred without the company having to be wound up.
Sole traders will be able to sell your business for valuable consideration or free of charge inter vivos, or transfer it to a company without going into liquidation. It must comply with the following conditions:
- the transfer must concern all the business assets,
- in the case of a contribution to a company, the assets transferred must be sufficient to meet the debts due,
- the sole trader and the transferee must not have been declared bankrupt or disqualified from managing the business.
Handling collective proceedings in the event of financial difficulties
Following the separation of the assets of the sole trader, the law provides for separate procedures for dealing with financial difficulties.
Until now, sole traders had only one asset. This was covered by company procedures. They were subject to protection, receivership, liquidation or professional recovery.
From now on, procedures can be split between professional and private assets.
