How to open an LLC: everything you need to know about capital, partners and company

How to open an SRL? The establishment and registration of an LLC (an acronym for limited liability company) is done by completing several formalities in a specific order. These include drafting the articles of incorporation of the limited liability company, paying contributions to the company, publishing a notice of incorporation, and drafting the statement of registration of the limited liability company. The procedure ends with the filing of the statement of creation of the limited liability company with the business formalities center, accompanied by all the required documents.

Find out in our article all the basic steps to open an LLC.

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What is an LLC?

A limited liability company consists of a minimum of two partners, who can be legal entities or individuals, and whose liability is limited to the amount of their respective contributions. To take advantage of the benefits of an LLC by being a single member, you will have to create a single-member limited liability company, also called a single-member LLC. The latter is taxable on income.

The share capital contributed to the company is distributed in shares among the various partners according to their contributions. The advantages of a limited liability company are numerous, and it is one of the most popular legal forms for entrepreneurs who want to launch themselves into the business world.

An LLC protects personal assets while providing a secure legal framework for partners. Finally, the SRL taxation system corresponds to traditional corporate tax, but partners can choose to be taxed provisionally in their own name.

The drafting of the articles of incorporation of the limited liability company

The drafting of the articles of incorporation is the main step in the formalities of setting up an LLC. This memorandum of association contains all the rules for the operation of the company, and in particular those governing the relationship between the members and the relationship with third parties.

When drafting the articles of incorporation of an LLC, it is important to make sure that all mandatory information required by law is included. Given the presence of several partners, drafting the articles of association of an LLC is not an easy exercise.

The Commercial Code states that the articles of association of an LLC must contain the following information:

• the legal form of the company,
• the duration of the company,
• the name of the company,
• the registered office of the company,
• the corporate purpose of the company,
• the amount of the company's share capital,
• the distribution of shares among the shareholders,
• the payment of shares,
• in the case of a cash contribution, the details of the payment of shares and the deposit of funds,
• in the case of an in-kind contribution, the valuation of each contribution, with the contribution auditor's report attached to the articles of incorporation or the conditional decision not to use the valuation of in-kind contributions,
• in the case of an in-kind contribution, the conditions under which in-kind shares may be subscribed.

Then, all information relevant to the operation of the limited liability company must be included in the articles of incorporation. In particular, the following information must be included:

• a summary of the contributions of each partner
• the choice of manager(s) of the LLC, or the terms under which they are chosen if the designation is not made in the articles of incorporation,
• a determination of the powers of the manager(s),
• the opening and closing dates of the fiscal year,
• the terms and procedures for the appointment of an auditor and his deputy,
• the distribution of liquidation profits and surpluses,
• the procedures for liquidation of the company.

How to open an LLC: the basic steps

Deposit the cash contributions made into a blocked account

At least one-fifth (20%) of cash contributions made in connection with the establishment of a limited liability company must be paid as soon as the company is incorporated. In case of partial payment, the excess must be paid in one or more installments, upon the request of the manager, within five years of the registration of the LLC.

Within 8 days of their receipt, and before the signing of the articles of incorporation, the funds paid by the members must be deposited into the account of the company in formation:

• in a bank;
• with a notary public.

Mention of the deposit of funds must appear in the articles of incorporation of the limited liability company. It is therefore necessary to carry out this formality before the final signing of the articles of incorporation.

Finalize and sign the articles of incorporation of the limited liability company

Once the members have completed the steps related to cash and in-kind contributions, the articles of incorporation of the LLC can be finalized.

Each member of the LLC should receive an original signed copy of the SRL Articles of Incorporation.

If the manager is named directly in the articles of incorporation, he or she must sign them, indicating that he or she is capable of performing the duties of a manager. If there is more than one manager, each manager must sign and follow the same procedure.

As of July 1, 2015, deeds registering the formation of business corporations are no longer subject to registration formalities. Therefore, it is no longer necessary to register SRL articles of incorporation within one month of their signing.

If the founding partners have encountered expenses on behalf of the future LLC, a paragraph must be included in the articles of incorporation regarding the recovery of acts done on behalf of the company being formed and to attach the list of these acts to the articles of incorporation. You will need to record these expenses under the heading of acts done on behalf of the company being formed.

How to appoint the manager(s) of the LLC

The first managers of the limited liability company may be appointed directly in the articles of incorporation or in a subsequent act, by collective decision of the members representing more than half of the shares.

If the appointment is made directly in the articles of association, we indicated the steps to be taken in the previous step.

If directors are subsequently appointed by decision of the shareholders, minutes must be taken recording their appointment. A copy of these minutes must be provided to the company's formality center when the SARL registration statement is filed.

Note: When directors are not named in the bylaws, the minutes appointing them must be dated very close to the date of the bylaws.

Mandatory information in the articles of incorporation

The law requires members to specify the following mandatory mentions in the limited liability company's articles of incorporation:

• The corporate form: this is to specify that the partners create a limited liability company or LLC.
• The duration of the limited liability company: must be a maximum of 99 years, but can be extended.
• The company name: be careful not to choose a company name already in use, nor a name protected by copyright or trademark.
• The registered office: the partner may domicile the LLC at his or her home, office or store, or at a third party's home, with prior permission.
• The corporate purpose: must be sufficiently broad to allow the limited liability company to develop its business without limitation in time.
• The amount of share capital and the distribution of shares: the whole of the cash contributions of the share capital must not be immediately paid by the shareholders. The minimum capital in SRL is €1. Higher capital makes it possible to meet initial expenses and gain credibility with banks and other investors.

In addition to these mandatory mentions, the articles of incorporation can specify the identity of the SRL manager. However, it is recommended that the manager be appointed by a separate deed of appointment, so that the manager can be changed without amending the articles of incorporation.

All mandatory information in the company's articles of incorporation should be carefully considered when creating the LLC. In fact, any change in the articles of incorporation involves a heavy, time-consuming and expensive procedure.

The operating rules of the SRL

The law determines the SRL's operating procedures. The members may make certain arrangements when creating the limited liability company, but they are obliged to abide by certain mandatory rules:

• Decisions in the operation of the LLC are made at a general meeting, either ordinary or extraordinary depending on the nature of the resolution. Some decisions may be recorded in writing, without a general meeting, if the articles of association so provide and within the limits of the importance of the decisions. Procedures for calling general meetings and the conditions of quorum and voting are prescribed by law. SARL members meet at least once a year to approve the accounts and annual report.
• Shares are not freely transferable to third parties: an approval clause requires the prior consent of the members before selling shares to third parties. Transfer to a family member or other partner, on the other hand, does not require approval, although the bylaws may provide otherwise.
• The manager's powers cannot be limited by the bylaws with respect to third parties: the manager is vested with the broadest powers to act in all circumstances on behalf of the company. However, the bylaws may limit the manager's powers vis-à-vis the shareholders.
• Within the limits of the public policy causes for dissolution, the shareholders may provide for other cases of dissolution when the LLC is created.

SRL or SAS: what are the differences?

It is usual to create an SRL for an activity considered traditional or as part of a family business. The SAS model, on the other hand, is used for innovative projects such as start-ups.

What are the differences in practice?

In the SRL, the spouse can benefit from the advantageous status of a collaborating spouse (his or her social protection is provided in the absence of remuneration).

The president of an SAS is regarded as an employee, while the majority director of a SARL is self-employed: the amount of his social contributions is lower, but so is his coverage.

The social status of the company manager, therefore, is an important consideration when choosing whether to create a SARL or an SAS.

The law provides a stricter framework for the operation of the LLC, and limits the freedom of the partners in the articles of incorporation. This specificity can be an advantage: the drafting of articles of incorporation is easier, and there is less risk-taking for the minority partner, who actually benefits from legal protection of his or her interests.

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What about online LLCs?

Today, all the digital tools are available to the future entrepreneur to enable him to create his SRL online. First, drafting the articles of incorporation can be done by a team of lawyers working in the Tech sector. You can then file the articles of association yourself through websites provided by the state, where you will have a complete set-up for creating your SRL online. The creation of your company can also be outsourced to an online accounting firm. This allows you to entrust your creation administrative formalities to a team of professionals.

You can, however, open your company independently online and for free, but be careful not to make mistakes in drafting articles of association, for example, as this could slow down the entire formation process.