The partnership in 5 essential points

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Summary of the article

1. The partnership: definition

A partnership is a structure in whichIntuitu Personae is very strong. The partners are linked by a personal bond and the pursuit of a common interest that led to the creation of a business together. The choice of partners is therefore decisive.

A partnership is different from a capital company in which the relationship between the partners is based on their contribution to capital. Moreover, their liability is limited to their contribution, whereas it is generally unlimited and joint in a partnership of persons.

The partnership is characterized by 3 main criteria:

A distribution of share capital Of the company in social shares and not in shares;
The need for a approval for each incoming partner, which involves obtaining the agreement of all partners;
One indefinite and joint responsibility of the partners, which means that the financial responsibility of the partners is not limited to their contributions and that a creditor can request the full repayment of a debt to any of them.

✅ To take stock of the Difference between shareholder and partner.

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2. The different types of partnerships

Non-mixed partnerships

The choice of business structure depends on the activities that are carried out. SNC is widespread among retailers, while liberal activities will go to civil societies.

La SNC general partnership requires at least 2 partners but does not have a minimum taxed share capital. The partners undertake to bear the risks in a joint and unlimited manner on their personal assets.
La SCI real estate company offers a non-restrictive legal framework, generally used to create an arrangement to manage private or professional real estate assets.
La professional civil society SCP is widely used by natural persons, liberal professions, to jointly exercise their regulated liberal activity (lawyer, doctor, architect, physiotherapist, etc.).

La Joint stock company SEP is based on a partnership contract, but it has no legal personality, because the partners decided not to register it.

✅ Learn more about civil society.

Mixed partnerships

SARL and SELARL are exceptions to the rule. These capital companies are in fact classified as partnerships. It is the importance attributed to the identity of their associates that gives these entities a mixed character. They are limited liability partnerships.

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3. The choice of a stable legal form

The partnership of persons involves a strong commitment of the partners in the life of the company. The partners know each other personally and are not likely to change frequently. This status therefore offers a certain stability.

The entry and exit of partners in the company's capital require the approval of all partners. The transfer of shares and the transfer of a business are therefore more complex in a partnership of partnerships than of capital. They require an approval procedure:

Information of other partners in writing;
Filing of the transfer document at the head office;
Unanimous validation of the new partner to validate the transfer;
Modification of the statutes.

⚠️ You can anticipate your succession by integrating your heirs, minor children, as partners in your SARL. This facilitates the transfer of shares, without the need for an approval procedure.

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4. The disadvantages of partnership status

The endangerment of personal assets
Because it is based on a joint and indefinite responsibility of the partners, partnerships offer little protection for the personal assets of the partners. Everyone can thus bear the social debt on their private assets, before turning to the other members for reimbursement.

The blocking of the company's development potential
The difficulty of bringing in new capital partners makes the prospects for development more complex and can generate deadlock situations. In addition, it should be noted that shares cannot be issued on the stock exchange. It is better to renounce the legal status of a partnership if you want to do list on the stock exchange your company in the long run.

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5. Taxation of partnerships

Transparent taxation with IR taxation

In principle, the company is not taxed directly on its profits. These are taxed in the hands of each of the partners, at the progressive rate of income tax for the share of profits due to him.

THEIR taxation may present a tax advantage for partners depending on their personal situation. With its progressive scale, income tax can be more advantageous than corporate tax, which has a standard rate of 25%. Be careful, however, in the event of significant profits, the partners can abruptly change the tax bracket, up to entering the 45% tax bracket. If your IR tax bracket is too heavy, it is possible to opt for the corporate tax regime.

⚠️ In partnerships, Profits are deemed to be distributed. The partners are therefore taxed on the share they should have received. They are included in their taxable profit even if they are not received.

In the event of a company deficit, the tax regime allows partners to deduct the share of the company's deficit to reduce the basis for calculating their tax of the year of activity. Partners can thus reduce their personal taxation.

The IS option

Partners in the partnership may choose to To submit To corporate tax, but be careful:

The option requires a unanimous decision by the partners;
The IS option is irrevocable! A return to the past would lead to the fiscal consequences of a cessation of activity and in particular the taxation of capital gains.

In partnerships subject to corporate income tax, It is the company that bears the taxation of profits. Corporate income companies can benefit from a reduced rate of 15% up to €42,500 in profits. For their part, the partners are then taxed at the IR in the event of payment of dividends.

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