How to open a limited liability company: everything you need to know about capital, shareholders and company

How to open an LLC? The creation 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 declaration of registration of the limited liability company. The procedure ends with the filing of the declaration of creation of the limited liability company at the commercial formalities centre, accompanied by all the required documents.

Find out in our article all the basic steps to open a limited liability company.

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What is an LLC?

A limited liability company consists of a minimum of two partners, who may be legal entities or individuals, and whose liability is limited to the amount of their respective contributions. In order to benefit from the advantages of a limited liability company being a sole shareholder, you will have to create a single-member limited liability company, also called a one-man limited liability company. 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 wishing to enter the business world.

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

Drafting the articles of association of the limited liability company

The drafting of the memorandum of association is the main step in the formalities for setting up an LLC. This memorandum of association contains all the rules for the functioning of the company, and in particular those regulating the relationship between the partners and the relationship with third parties.

When drafting the articles of association of an LLC, it is important to ensure 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 a simple exercise.

The Commercial Code states that the articles of association of a limited liability company 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 the 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 auditor's report on the contributions attached to the articles of association or the decision, subject to conditions, not to use the valuation of contributions in kind
• in the case of an in-kind contribution, the conditions under which the in-kind shares can be subscribed.

Next, all information relevant to the functioning of the limited liability company must be included in the statutes. 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 association
• the determination of the powers of the manager(s)
• the opening and closing dates of the financial year,
• the conditions and procedures for the appointment of an auditor and his deputy,
• the distribution of profits and liquidation surpluses,
• the procedures for winding up the company.

How to open an LLC: the basic steps

Deposit the paid cash contributions in a blocked account

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

Within eight days of their receipt, and prior to the signing of the articles of incorporation, the funds paid by the partners must be deposited in 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 association of the limited liability company. It is therefore necessary to carry out this formality before the final signing of the articles of association.

Finalising and signing the articles of association of the limited liability company

Once the members have completed the steps relating to contributions in cash and in kind, the articles of association of the limited liability company can be finalised.

Each member of the limited liability company must receive a signed original copy of the articles of association of the limited liability company.

If the manager is directly named in the articles of association, he or she must sign them, indicating that he or she is able to perform the functions of a manager. If there is more than one manager, each manager must sign and follow the same procedure.

As of 1 July 2015, deeds registering the formation of commercial companies are no longer subject to registration formalities. It is therefore no longer necessary to register articles of association within one month of their signature.

If the founding partners have incurred expenses on behalf of the future LLC, a paragraph must be included in the articles of incorporation concerning the recovery of the acts performed on behalf of the company being formed and a list of these acts must be attached to the articles of incorporation. You will have 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 limited liability company

The first manager(s) of the limited liability company may be appointed directly in the articles of association or in a subsequent deed, by collective decision of the shareholders representing more than half of the shares.

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

If the directors are subsequently appointed by decision of the shareholders, minutes must be kept recording their appointment. A copy of these minutes must be provided to the company's formality centre when filing the SARL registration declaration.

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

Mandatory information in the articles of association

The law requires members to specify the following mandatory information in the articles of association of the limited liability company:

• The company form: this is to specify that the partners create a limited liability company or limited liability company.
• The duration of the limited liability company: it must be a maximum of 99 years, but can be extended.
• The company name: be careful not to choose a company name that is already in use, nor a name protected by copyright or trademark.
• The registered office: the partner may domicile the limited liability company at his home, office or shop, or at the home of a third party, subject to authorisation.
• The object of the company: it must be sufficiently broad to allow the limited liability company to develop its activity without time limits.
• The amount of the share capital and the distribution of the shares: the entirety of the cash contributions of the share capital must not be immediately paid in by the shareholders. The minimum capital in a limited liability company is €1. A higher capital makes it possible to meet initial expenses and to gain credibility with banks and other investors.

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

All mandatory information in the articles of association of the company must be carefully considered when setting up the LLC. Indeed, any amendment of the articles of association involves a cumbersome, lengthy and costly procedure.

The SRL's operating rules

The law determines the SRL's operating procedures. The partners may make certain arrangements when setting up the limited liability company, but they are obliged to comply with certain mandatory rules:

• Decisions within the scope of the SRL's management are made in a general meeting, either ordinary or extraordinary depending on the nature of the resolution. Certain 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. The procedures for convening general meetings and the quorum and voting conditions are laid down by law. The members of the SARL meet at least once a year to approve the accounts and the annual report.
• Shares are not freely transferable to third parties: an approval clause requires the prior consent of the shareholders before selling shares to third parties. Transfer to a family member or another partner, on the other hand, does not require approval, although the articles of association may provide otherwise.
• The manager's powers may not be limited by the articles of association vis-à-vis third parties: the manager is vested with the broadest powers to act in all circumstances on behalf of the company. The statutes may, however, 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 dissolution hypotheses at the time of the creation of the limited liability company.

LLC or SAS: what are the differences?

It is usual to create a limited liability company 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 limited liability company, the spouse can benefit from the advantageous status of collaborating spouse (his social protection is ensured in the absence of remuneration).

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

The social status of the company manager is therefore an important element when choosing whether to set up an LLC 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 association. This specificity can be an advantage: the drafting of articles of association is simpler, and there is less risk-taking for the minority partner, who actually benefits from legal protection of his interests.

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What about online limited liability companies?

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

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