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We often define the entrepreneur as the one who takes the risks. The financial risk is probably the main risk that assumes the entrepreneur, because his personal fortune can be engaged and there are many costs during the phase of installation and cessation of the activity. It is many more difficult to understand when the created company is a small structure. The life of the entrepreneur would largely be facilitated if there was a status which allowed to test the market with a limited financial risk, a simple system of imposition and VAT which would not penalize the silly periods of the year in terms of sales, a regime opened to all and which allows to launch its activity after a long period of unemployment, a regime of fast and simple creation and cessation of the company. This system exists, and to my knowledge, it is a French specificity, it is called the "auto-entrepreneur".
It seemed interesting for me to treat it as a supplement to the course, because it is very popular in my country, and because it is often a one or two year's preliminary phase before the creation of a limited company for example. Launched the January 1st, 2009, the status of auto-entrepreneur, planed by the law of the modernization of the economy n°2008-776 (presented in Council of Ministers on April 28th, 2008 and adopted on August 4th, 2008) appears to have been a strong success since its launch on January 1st, 2009.
Indeed, during the first 15 days of January, 2008 20 000 auto-entrepreneurs had already dashed into the adventure, more than 40 000 for the whole January month and 120 000 creations at the end of first quarter, forcing the Hervé Novelli's ministry to increase its forecasts of new entrepreneurs from 200 000 to 300 000 for the end of 2009.
Thus, We will wonder if this status will be successful in terms of longevity and to improve the life of the entrepreneur, as well as the French economic situation, or if in one year or two the assessment of these massive creations will show the status as a fad.
The Economic and social French context
The auto-entrepreneur's status arose from a promise of campaign of Nicolas Sarkozy (French president since 2007), to end the French aberrance to subject the entrepreneurs to expenses at the very moment they had still made no incomes.
But the implementation of this status was widely accelerated in March, 2008, by the combined effect of the crisis of "subprimes" raging since August, 2007 but becoming more and more disturbing, and of the dissatisfaction of the French people about their purchasing power.
The financial crisis
It is exactly on September 15th, 2008, the day of the bankruptcy of the fourth American investment bank Lehman Brothers, that the financial world collapse and that a real threat on the world economy begins to appear.
The national stock exchanges fell, the capital of companies collapsed, these one restructured, dismissed; the financial crisis makes the first victims.
After that, appears a decline of the morale and of the confidence of the households, the consumption has stopped, the investments are frozen, the dismissals continue and so the crisis settles down. Companies are severely touched because the perspectives of growth on the French and international territory are very bad. The projects of new business start-up are postponed in a more favorable period.
It is in January, 2008 that the employment shows its first signs of weakness, -0,7 %, with 13 200 additional applicants in France.
Then, the unemployment will stagnate with light variations from February till August, to rise highly from September, 2008, which is also the date of the bankruptcy of the Lehman Brothers bank. This correlation is important because from this date, the French unemployment will not stop climbing until today.
Number of job-seekers (cat A, B and C)
It is thus in a context on unprecedented growth of the unemployment, with approximately 60 000 jobs destroyed per month, that the government decided to set-up the auto-entrepreneur's status.
In this context, how the auto-entrepreneur's status will act as a support to the action of the government in the resolution of the crisis? What are the stakes in this status?
The auto-entrepreneur's status stakes
The main stake in the auto-entrepreneur's status was to make it attractive, understandable and simple to implement for an activity, to make that all those who had been discouraged by the creation of a commercial structure turning into the entrepreneurship adventure simply and without too many loads so that the company would not die one year after its creation. Thus it was a question of revitalizing the French new business start-up in times of crisis to limit as much as possible its effects.
Thus, there are many economic stakes:
To limit the effects of the unemployment and of the financial crisis,
To supply an income supplement to the employees and the retired people to favor the purchasing power,
To encourage the actors of the black economy to regularize their situation,
To largely simplify the process of setting a new business start-up, considered as very heavy and very long, using internet to simplify all the administrative formalities (creation of the structure, the statement of generated income, and payment of the diverse taxes).
According to Alexander Von Schirmeister and Pierre Kosciusko-Morizet it is also an effective way to revitalize the French e-commerce and the sale of product or service by internet. Ebay and PriceMinister support the auto-entrepreneurship. Indeed, regularizing the particular salesmen allows Ebay and PriceMinister to offer them a better commercial follow-up and thus to dope their sales.
It is also beneficial for the buyers who benefit from better guarantees in terms of refund) and of deadlines delivery.
Furthermore, the potential of creation of the auto-entrepreneur status for the online sale would be enormous, according to Pierre Kosciusko-Morizet: " on the 9 million members of PriceMinister, 3 millions are salesmen among whom 15 000 are active professional salesmen. The potential of particular salesmen concerned by this new regime of the auto-entrepreneur amounts to several tens of thousands. "
There is also a less visible, but not insignificant, social stake in times of crisis: it is to offer a social status to those who wish to launch an activity. To pass from the unemployed or from student to entrepreneur is a sign of social success, which in times of crisis will favor the increase of the morale of the French people and thus the consumption. Of course this stake has to be put in perspective because everybody does not create an auto-company; however in the view of the success of this system, the chances are high that on the middle term perspective, these new auto-entrepreneurs will have a not insignificant weight in the calculation of the morale of the French people.
III. Definition of the auto-entrepreneur's status
We will now try to understand the answer of the French government to the problems and to the stakes which were briefly expressed in the previous chapter by detailing this new status.
The auto-entrepreneur is a natural person who wants to exercise in main or complementary title, a commercial, small-scale or liberal activity (the agricultural activities and the sales agent have no access to this status). It is exempted from registration in the Register of companies (RCS in french) or from the Trade directory (RM in french).
The auto-entrepreneur benefits in particular from a simplified tax system in which he pays a monthly or quarterly paid plan that include the social security contributions and the taxes on the income, in percentage of its turnover by a unique payment from the day when he realizes this turnover.
This status also exempts from the subjection in the VAT, the auto-entrepreneur will thus pay nothing more that his social and fiscal fixed price to the State and cannot consequently deduct the VAT of its suppliers.
Can become an auto-entrepreneur every person being: student, employee of private, state employee, liberal profession, retired man, job-seeker, or the same entrepreneur wishing to exercise a secondary activity.
Finally, the accounting of the auto-entrepreneur is extremely simplified: an exercise book with two columns "receipts" and "expenses" will be enough. The important part will be just to keep all the invoices and to classify them chronologically by date.
Creation and discontinuance of business
The launch of an auto-entrepreneur's activity is extremely simple and fast, it is enough to fill a simple statement declaration (form P0-Auto-entrepreneur) in the CFE (center of formality of companies) or on Internet: http://www.cfenet.cci.fr/.
The creation is immediate and thus allows the auto-entrepreneur to begin directly its activity.
The cessation or the modification of the activity is also easy, it is enough to fill the form P2 / P4 - Auto-entrepreneur and to send it to the CFE.
The micro-social and micro-fiscal regime
The auto-entrepreneur can pay off his social security contributions and his taxes only on his gains basis, monthly or quarterly.
However, he is limited in terms of turnover, what clearly underlines that the auto-entrepreneur remains a status for launching an activity and\or to test of the targeted market. The activities of sale of goods are limited to 80 000â‚¬ of turnover a year, and the activities of sale of services and liberal activities are limited to 32 000â‚¬.
The auto-entrepreneur has to opt for the micro-social regime with the Social security of the Independents (RSI in French) at the latest the last day of the month which follows the launch of its activity.
This will allow the auto-entrepreneur to pay his social security contributions according to his activity as follows:
12 % for the commercial activities of sale of goods, objects, stationery and foodstuffs to eat in, or of stationery of housing which recover from the tax regime of the micro-BIC (Industrial and commercial profits) as far as the annual turnover does not exceed 80 000 â‚¬,
21,3 %: for other commercial activities of services, as well as home-made activities. The limit of application of the annual turnover of the regime of micro-companies is 32 000 â‚¬;
18,3 %: for the liberal activities which recover from the regime simplified of taxation of the not commercial profits, in the annual limit of 32 000 â‚¬ of receipts and which exercise a profession recovering from the CIPAV (Interprofessional cashdesk of Foresight and Old-age insurance).
The micro-fiscal regime is available only for the auto-entrepreneurs who have opted for the micro-social regime.
It is about a new mode of calculation of income tax; the payments of this tax are liquidated by application, applied on the amount of the turnover or on the receipts before tax of the considered period, with one of the following rates:
1 %: for the commercial activities of sale of goods, objects, stationery and foodstuffs to eat in, or of stationery of housing, or of stationery of housing;
1,7 %: for other commercial activities in particular of services, as well as the home-made activities;
2,2 %: for the liberal activities.
It is necessary to know that the micro-fiscal option is totally independent from the micro-social option. In other words, the tax-exempt persons should not at all opt for the micro-fiscal.
If the condition of maximum income of the household income is not performed, the auto-entrepreneur will be subjected to the basic scheme of the micro-company that is to say with a progressive table after a standard deduction.
Furthermore, the auto-entrepreneur is not subjected to the VAT and is also tax-exempt of business rate during three years as from the creation of his company.
This status is thus very particular, and changes completely the standards dictated by the previous statuses. However, if this status is different, it is advisable to wonder if people who are going to use it really have a different profile or if it is the entrepreneurs of yesterday who will opt for this new status.
IV. The pioneers of the auto-entrepreneurship
In a context of crisis of the unemployment and of the purchasing power carried by the world financial crisis, who were the pioneers of auto-entrepreneur's status?
Who does this status benefit? To the classic entrepreneurs avid for a bigger flexibility and for an underestimated taxation? Or did this status was successful to target a new type of entrepreneur not having dared to create of company previously?
THE ACOSS (the Central Agency of the Organization of Social Security) published a study on the profile of these 120 000 new auto-entrepreneurs.
It would seem that for the moment, the bet of the government is winning, indeed, 8 % of the auto-entrepreneurs are retired people, 31,20 % are job-seekers, and 36,70 % are employees.
Twice more retired people dash into the auto-entrepreneurship instead of a classic status, and 44 040 employees used it to improve their purchasing power by an income supplement.
There are also less 37 440 unemployed persons, among whom 21 % of them are young graduates.
The main activities of these first auto-entrepreneurs are:
The advice for the business affairs and the other advice for management;
Other personal services;
Other retail trades;
The IT programming;
The sale at bay on specialized catalog.
The study reveals in particular that the activities of advice and IT programming are more represented in the auto-entrepreneur's population than within the framework of a classic new business start-up. Â«It is in particular, for one part, about executives or about technicians who can, next to an employment, complete their income. It is also, for another part, about retired people, who continue to exercise their previous activity (...) ", indicates the study of the site LesEchos.fr.
V. Advantages and critics
For more clarity, this chapter will present a list of all the advantages of this status among which those enumerated previously in their respective parts, to present then the limits and the critics that has been far been formulated against the auto-entrepreneur status.
1) Simplicity of creation and cessation - Simple declaration of one page to fill.
2) Possibility of accumulation of the auto-entrepreneur and another employment.
3) Imposition of the social security contributions and the income taxes, simplified by the micro-social and the micro-fiscal regime.
4) No charges as long as the activity is not launched and as long as that the turnover was not realized.
5) Possibility to stop his activity during 12 months without paying any charges - turning the auto-entrepreneur status interesting for the seasonal workers.
6) Accounting simplified by the simple holding of an exercise book.
7) No VAT - simplicity of management.
8) Possibility to exercise the activity at home while protecting its own goods by notarial act.
9) Contribution for the pension taken into account by quarter, according to the annual realized turnover.
In spite of the fact that many people qualify this status as a revolutionary's status, it is also the object of critics by certain professions.
The storekeepers assert that it is about unfair competition, because of the fixed taxation (micro-social + micro-fiscal) considered to be too light, and the thresholds of turnover too much important to compensate for this damage. Furthermore, auto-entrepreneur's status by its simplicity can be created by whoever, regardless of skills nor even of elementary notions of the job. Because even if the competition of an auto-entrepreneur is unimportant for a storekeeper who has create a real structure for its company, the increase of the creations of auto-entrepreneur can be a real threat.
The risk taken by the retired auto-entrepreneurs or the unemployed persons is too low financially and the activity is too easy to practice in comparison with craftsmen who pay taxes, train apprentices or trainees, are certified, and by this fact participate more in the economic progression of the country.
The complaints of the most qualified entrepreneurs concern the fact that the non-subjection in the VAT makes more difficult the doorstep selling of the companies which look unfavorably not to be able to deduct the VAT of their invoices.
Another formulated criticism is the precariousness that this status can bring by the use of certain employers. Indeed, in certain sectors, a pressure can be exercised on the employees so that they become auto-entrepreneurs paid as subcontractors to reduce the social security contributions which are heavier within a classic company. The government would thus be creating a fiscal niche which would allow a reduction of welfare costs from 45 % to 23 % by outsourcing jobs and thus by reducing the salaried work.
VI. Uses et evolutions of the status
For the State
The State uses above all this status to tempt the French people to create and thus to revitalize the entrepreneurial spirit. The idea is to stimulate the new business start-up to make of France the country having the best faced the financial crisis, while perpetuating a state of mind which will be favorable to the new classics business start-ups.
The auto-entrepreneur status also has to be used as a springboard for the creation of a micro-company, individual Company, and that is why the thresholds of 32 000â‚¬ turnover and 80 000â‚¬ were fixed.
If we try to estimate the politics consequences, I think that the auto-entrepreneur is an opportunity for the party of the right: giving the status of entrepreneur access to the most deprived persons and thus to federate the poor men and the rich around an economic dynamism which afterward would tend to be greeted by all those having used it. Would it be an attempt to widen the capitalist horizon for populations which had rejected it by disappointment or bad experiments by giving them all the profits onto the short term? That is to say an employment, an income, a future.
The chances are high that if some of these auto-entrepreneurs would formulate criticisms towards the government and toward the solutions proposed by the right, their political beliefs would be influenced by a measure which will have probably changed their lives.
This it will be very interesting to study the impacts which have had this measure on the French vote during the next presidential elections, because if the rhythm of adoption of the status continues, in 2012, there would be potentially 1 million persons who will have used this status. Will the auto-entrepreneur be a political instrument?
B. For the Auto-Entrepreneurs
For the auto-entrepreneurs, the uses remain limited and relatively confined, in the objectives of market test and viability of the company, as well as in the income supplement.
However, by looking closer at this status, there is a use which could show itself interesting to allow the auto-entrepreneurs to maximize their working time and their income. Indeed, federate auto-entrepreneurs exercising the same functions allow them an easy getting in touch with customers and thus limit the investments in communication and the doorstep selling.
For example, an e-commerce service: if a web site is held by an auto-entrepreneur, the turnover will be limited to 32 000â‚¬.
However, the web site held by this auto-entrepreneur does not belong to him professionally, because it is not planned in the declaration of the beginning of activity P0-Auto-entrepreneur.
To satisfy better his customers, but also to offer to his activity a better visibility, he can get closer to the other auto-entrepreneurs supplying the same service as him to share his web site and make a platform of getting in touch between the demand and the offer.
The income generated by this web site can then be multiplied by the number of auto-entrepreneurs whom it federates, making afterward easier for the auto-entrepreneurs to find customers and thus to reach the maximum income allowed by the status. Furthermore, if this platform wins in fame, its members can choose to join to create a company without any turnover limit and thus participate in a more lucrative activity.
In a context of financial and purchasing power crisis, of an unprecedented increasing of the unemployment, the French government launched a new status that allows a simplified launch of an economic activity.
With a creation in 30 minutes, social and fiscal charges lesser and with an easy calculation, the possibility of accumulation with another employment while validating quarters of contribution for the pension, the auto-entrepreneur's status is a big success.
While it arouses a strong craze and participates completely to fight the effects of the crisis, certain criticisms suggest a disintegration of the market and an unfair competition that could put in the medium term in danger certain professions and push employments to the precariousness. However its major objective to revitalize the new business start-up is reached. For having myself worked in a bank, I can say that I have seen numerous cases of successful auto-entrepreneurs which were going to transform their status to be able to hire, and exceed ceilings. But this status is not a panacea, because banks are very reluctant to grant a bank loan (and thus oblige the self-financing), the costs for the entrepreneur are more elevated because the VAT is not deductible, and because it slows down the expansion of the company in its first stages, but it is a good example of understanding of the problems that meet the entrepreneurs in their initiatives.
The time will be certainly the best judge to evaluate if this status will have had the capacity to offer long-lasting economic positive consequences, and to change the attitudes of the entrepreneurs, or if it will just have undergone a fad carried by the fear of crisis.