A limited liability company , also known under the Initials limited liability company (sometimes SÀRL or Sàrl ), is the shape of company with limited Responsabilité existing in France, Suisse and with the Luxembourg, and whose vocation is commercial.

The limited liability company is a company for which the responsibility is limited to the contributions, and the shares held in the capital are not freely transferable. One needs the agreement of all associate them.

In France

Since the law of the July 11th 1985, the limited liability company knows two alternatives: the pluripersonnelle limited liability company (at least two Associated S) and EURL (only one Associated). The Company of liberal exercise to limited responsibility, as opposed to what indicates its name, is not a limited liability company but a Société of liberal exercise (SALT).

One counts today nearly 1.500.000 limited liability companies, which corresponds to two thirds of all the business firms. The limited liability company is particularly adapted for the small and medium-size companies.

The limited liability company can decline itself in various complementary forms, according to the carried on activity and the associates concerned, which can bring various advantages to the point of view of the taxation (amongst other things): the limited liability company with variable capital, the limited liability company of press, or the limited liability company of family.

A limited liability company is a company or there are two people minimum who creates it. Moreover, the limited liability company is chosen by the people who need to make investments but which do not want to be imposed.

History

The limited liability company, whose legal character is somewhat ambivalent, because one can describe it neither as partnership nor of joint stock company, was developed in Germany (GMBH) by a law going back to 1893. Since 1925, the legal shape of the limited liability company is also legalized in France.

Legal characteristics

  • Capital

    • the amount of the Capital of the company is freely fixed by the statutes (L223-2 Article of the commercial law); formerly the minimum Capital was of 50.000 F, then with the passage to the Euro with 7.500 €.
  • Removal of a minimum capital : The law for the economic initiative of August 1st, 2003 removed the obligation of the minimum capital which was of 7.500 €; it is thus legal to open a company with a capital of one euro. However the authorized capital is a pledge of confidence with respect to the banks and organizations lenders or of the creditors. It is also an index for the partners, because one will tend more to make deal with a company which has an important capital, because in the event of problems, the associates are held with the losses with height of their contribution in the capital. However, the health of the company only is imperfectly returned by the authorized capital and it is to better take note of its accounts and assessments.
The capital is divided into partnership shares and its distribution is mentioned in the statutes. That in particular makes it possible to organize the distribution of the capacities within the companies (associate majority and minority, important in the vote of the decisions). The partnership shares must be subscribed entirely by the associates. They must be completely released when they represent contributions in kind.
    • the cash subscriptions must be released from at least a fifth of their amount. The release of the surplus intervenes in one or more time on decision of the Gérant, within a time which cannot exceed five years as from the registration of the company to the company and trade register. However, the authorized capital must be completely released before any subscription of new partnership shares to release in cash, under penalty of nullity of the operation.
    • contributions in kind (goods, stocks, credits…) must be carried out immediately.
    • the Apports in industry from now on are authorized (particular competence, “dexterity”, expertise), but they do not enter the amount of the social Capital. They make it possible however to acquire the quality of associated and to take part in the division of the Bénéfice. If necessary, the statutes determine the methods according to which can be subscribed of the partnership shares in industry.

  • Associated (natural persons or morals)

    • Minimum: 2
    • Maximum: 100
    • Their responsibility is limited to their contributions.

Constitution of a limited liability company

Basic conditions

  • general elements of the Contract
    • the assent: legal provisions commun run
    • the capacity:
      • Associated not Trading S : the civil capacity is enough to be associated. A minor émancipé, major protected, 2 husbands, a foreigner can be associated. moral persons can also be associated.
      • No incompatibility or prohibition limits the access at a limited liability company.
    • the Object:
      • the limited liability company is obligatorily commercial whatever its object
      • Certaines activities are prohibited: insurance companies, companies of capitalization, banks.
      • Certaines activities is reserved for the other shapes of companies: management of wallet of transferable securities, investment companies
      • Certaines activities are reserved for the limited liability companies: real estate company of management
      • Certaines activities are exerted in limited liability company under certain conditions: Limited liability company of certified public accountant, legal council

  • elements specific to the deeds of partnership

    • the number of associated: 2 to 100. If the number becomes equal to 1 associated, there is transformation into EURL. If the number of associates becomes higher than 100, there is regularization in the year if not the company dissolved or is regularized in SA.
    • the capital: it is freely fixed in the statutes (before, the minimum capital was of 7.500 €); it can be released entirely or partially, over one duration maximum 5 years. Later on with creation, the capital can be increased (capital growth).
the capital is made of Apport S :
  • the shares representing of the cash subscriptions must be released from at least 1/5e of their amount. The later release intervenes in one or more time on decision of the manager within a time which cannot exceed 5 years as from the registration. Deposit in the 8 days at a notary, a bank or with the Case of deposits and consignment. Possibility of taking again the funds so not constitution in the 6 months of the payment.
  • Concerning the contributions in kind, the Statut S must contain the evaluation of it. A police chief with the contributions is unanimously named future associates or by ordinance of the president of the Bankruptcy court; this police chief writes a report/ratio annexed to the statutes. This obligation does not exist when the value of any contribution does not exceed 7.500 € and that the full value of the contributions in kind does not exceed half of the Capital. The evaluation engages the responsibility interdependent of associated with regard to the thirds if there is no police chief with the contributions or if the associates retained a value higher than the value recommended by the police chief with the contributions.
  • the Apports in industry are authorized since 2001 (law NRE) without restriction. But the contribution does not open right to partnership shares, but to shares in industry. In fact the statutes then will fix the conditions of remuneration. If the statutes do not fix them, the amount of the benefit and losses will be then equal to associated which has less partnership shares.

the capital is represented by partnership shares : The subscription and the total release of the shares must be made with the constitution i.e. with the signature statuts.
The distribution of the partnership shares must be mentioned in the statutes. The distribution of the benefit and the losses is not inevitably proportional to the shares but the participation in the losses cannot be higher than the shares.

Conditions of form and publicity

  • the Statute S:
They must be written (under private signature or by notarial act) and be signed by all the associés.
In addition to the mentions common to any company, one must include there for the limited liability company the evaluation of the contributions in kind, the choice of the managers and the distribution of the capacities, the transmission of the shares, the modes of consultation of associated and the modes of distribution of the bénéfices.
In appendix, one adds the report/ratio of the police chief to the contributions and the state of the acts achieved on behalf of the company in formation.

  • acts passed on behalf of the not yet registered company

The people acting on behalf of the company are responsible jointly and indefinitely consequences for their acts unless the company, after being made up and being registered, does not take again their engagements on his account. These engagements are then famous to be subscribed right from the start by the société.
There exist 2 processes of automatic recovery: acts annexed to the statutes and acts envisaged by the statutes.

  • measurements of publicity

The statutes must be recorded with the receipt of the Taxes in the 30 days following the signature.
Insertion in a Newspaper of Legal Advertisements.
Insertion in the Official Bulletin Of the Civil and Commercial Advertisements.
Registration with the Trade register and the Companies.

Tax mode

The limited liability company is subjected to the Corporation tax.

Option: if all the associates are natural persons and members of the same family (husband and/or children), the limited liability company can choose the income tax (IR). In this case, the benefit systematically is distributed between associated and is added in the declaration of the incomes of each one.

For the manager of the limited liability company, there exist two modes distinct from social protection: statute of the minority or levelling manager and the majority statute of manager who is determined according to the number of partnership shares held by the manager, his spouse and his minors not émancipés. The manager is minority if it holds less 50% of the shares; egalitarian if it holds 50% of the partnership shares (even statute that the minority manager); majority if it holds more than 50% of the shares. Caution: in the event of joint management, one cumulates the shares held by all them managers to determine their respective social status.

Statute of the minority or levelling manager

He is compared to that of an employee in comparison with social protection and thus profits from the general scheme of Social security. To the levelling statute of manager is compared to that of the minority one.

It is possible to cumulate the minority function of manager with the quality of paid. The manager must for that meet the following conditions:

- to occupy an effective work station; - to carry on an activity distinct from management; - to be remunerated by wages; - to work under a subordination connection.

Note: the existence of a subordination connection can be possible only in the event of management minority or levelling.

The majority statute of manager

He is compared to that of a tradesman. He profits, indeed, of same mode of social protection that of the self-employed persons (TNS).

It cannot cumulate a work contract with its function of managing in the same company.

Nomination of the leaders

The leaders of limited liability company are called “Gérant S”. Any limited liability company has at least a manager. The managers are named by the statutes (managers statutory) or by decision of associated representing more half of the Capital except stronger majority envisaged by the statutes.

Associates of a limited liability company

The Associé S with a limited liability company (between 2 and 100) do not have the quality of Trading and can be gainfully employed within the company. As for any legal form, the associate has rights and obligations.

Increase, reduction, transformation, dissolution

Capital growth

In the law of July 24th, 1966, there exists little of specific measures concerning the capital growth of the limited liability companies. Consequently, it is advisable to take as a starting point the applicable provisions for SA.
  • increase by way of contributions
    • Cash subscriptions
The capital growth will be decided by the extraordinary general assembly since modification of the statutes with a majority of 3/4 of the partnership shares. If the statutes envisaged it, the decision can be taken by consultation écrite.

With the first consultation, the assembly must decide the most important methods (amount, many shares, assembling premium,…). The manager deals of the subscriptions and the releases of funds since the integral release is required of suite.
The second consultation ratifies the capital growth and modifies the statuts.

If the increase is not carried out in the 6 months of the 1st deposit of the funds, the contributors can ask for the refunding of their dépôts.
In the event of subscription by a third, an approval is nécessaire.
For the common husbands in goods, it is necessary to inform the spouse under penalty of nullity of the apport.

With regard to the publicity :
- recording of the official report of the assemblée
- insertion in a newspaper of advertisements légales
- deposit at the clerk's office (statement of the assembly, statutes, declaration of conformity)
- modifying request with RCS
- insertion with BODACC

    • Contributions in kind

The contribution of good in kind must result from a contract écrit.
The procedure is close to that which exists on the level of the constitution: one evaluates the contributions in an additional report/ratio with the statutes under the responsibility of a Commissaire to the contributions. The contract of contribution must be approved by the associés.

Concerning the publicity , idem that for the increase by deposit but cash subscriptions in addition to the report/ratio of the police chief of the contributions at the clerk's office of the court of commerce.

  • Compensation of credits in partnership shares

Either by contribution in kind, or by way of compensation.
The compensated credits must be certain and exigible. Moreover this possibility must be envisaged by the extraordinary assembly which decides increase.

  • Increase by way of incorporation of reserves, issue premiums and benefit

The decision to carry out such a capital growth is validly made by the associates representing half at least the partnership shares and not 3/4. The formalities are identical to those of an increase by cash subscriptions.

The reduction and the loss of capital

The transformation

If the company transforms into Partnership or Civil society, that requires the unanimous agreement of the associés.

If the company is transformed into SA, there are conditions. A deliberation of associated accounting for at least the 3/4 with the partnership shares is necessary. The assessments of the last 2 exercises must be approved by the associés.
A report/ratio of a police chief is required on the situation of the company. Moreover, the manager will ask the president of the Bankruptcy court to appoint a police chief with the transformation (which can be the Auditor). This police chief appreciates the value of the goods composing the credit and the advantages particular to the profit of the associates or the thirds. He presents a report/ratio in which he attests that the amount of the Stockholders' equity is at least equal to the authorized capital. In practice, it can be in charge of the establishment of the report/ratio on the situation of the société.
The limited liability company which transforms itself into SA must at least follow the rules particular to SA i.e. 7 associated, the capital, the nomination of an auditor, the modification of the statutes, the transformation of the partnership shares into actions and the respect of the formalities of publicity.

Dissolution

  • Causes common to all the companies
Arrival of the term, extinction of the object, compulsory liquidation, cancellation of the deed of partnership, decision of the associates.
  • Other causes
The company is automatically dissolved at the end of 1 year if the number of the associates exceeds 100; if the stockholders' equity is lower at least legal; in the event of loss of half of the capital.

On the other hand, the limited liability company is not dissolved by the death of a associate (or by its incapacity, its personal bankruptcy…).

The limited liability company is dissolved when it understands more than 100 associated and that the situation could not be regularized within 1 year or if the associates could not validly deliberate on the decision to take following the loss of half of the capital or could not regularize the situation within 1 year.

In Switzerland

Legal characteristics

limited liability company is defined in the Code of the obligations, article 772 and following. Apart from these articles, it is those of the Public limit company which precede ( Article 620 and following ).

  • Capital

    • the authorized capital cannot be lower than 20  000 frank and higher than 2  000  000 of francs and must be a multiple of 1000. ( Article 773 and 774 )
    • Contributions carried out in cash (money) or in kind (tangible properties)
    • Immediate liberation: 50% ( Article 774 al. 2 )

  • Associated

    • minimum 2 ( Article 775 )
    • maximum with 100 associated

  • Obligations

    • Contained statutes: company name, seat of the company, object of the company, assembling authorized capital and start from each associate, forms to observe for the publications. ( Article 776 )
    • Inscription with the Trade register

Tax mode

SàRL and its associates are imposed as well as a Public limit company, i.e. with the income tax and the wealth tax.

Organization

The assembly of the associates is the supreme power of the limited liability company. The associates are the managers and the representatives of the company, but can delegate management and the representation to thirds if the statutes allow it.

The responsibility for the founders, the managers, the controllers and the liquidators is subject to the rules for SA. ( Article 827 )

See too

Other articles

  • Responsibility limited
  • Undertaken unipersonal to responsibility limited
  • Company for liberal exercise to limited responsibility
  • Public limit company

External bonds

  • Synthesis on the site of the Agency for the creation of company (APCE)
  • List of the documents necessary to a limited liability company

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