The EURL: A Single-Shareholder SARL

The EURL - entreprise unipersonnelle à responsabilité limitée - is a French SARL with a single shareholder. It is not a separate company form: it is a SARL that happens to have one member instead of two or more, which lets a founder build a genuine company, with its own legal personality and limited liability, without needing a partner. That single fact shapes everything about it - how it is run, taxed, and how it converts into a classic multi-member SARL the moment a second shareholder appears. This guide explains what the EURL is, why founders choose it, how its single shareholder exercises the powers a meeting would normally hold, how it is taxed, and the traps to watch - from the limits of limited liability to the paperwork that keeps it valid.

What the EURL is

The EURL is a variety of the SARL with a single shareholder, and the whole point of it is to let a founder run a business as sole master of the affair - exactly as a sole trader would - while limiting financial risk to their contributions. The single shareholder can be an individual or a legal person (a company, or even an association), and they do not acquire the status of a trader by holding the shares; they are treated like any SARL member.

A few formal points follow from its nature as a SARL. There is no legal obligation to use the label "EURL" - the name must, in principle, carry the words "société à responsabilité limitée" or the initials "SARL". The company must have a registered office, which can be at the manager's home (subject to any contrary lease or law, with a five-year temporary domiciliation otherwise available), and it acquires legal personality on registration at the trade and companies register. Contributions can be in cash - at least a fifth paid up on subscription, the balance within five years - or in kind, with the single shareholder able to dispense with a contributions auditor where no in-kind contribution exceeds €30,000 and they do not together exceed half the capital.

Because the EURL is a SARL, moving from an EURL to a SARL with two or more members is not a transformation and needs no special procedure - it happens automatically the moment a second shareholder arrives. This is one of the EURL's quiet advantages: it is a company that can grow into a partnership without changing its form, provided its articles were drafted with that future in mind.

Why founders choose the EURL

The core attraction is being sole master of the business while capping the financial risk at the contributions - the autonomy of a sole trader combined with a company's limited liability. Around that sit a set of practical advantages. Setting up an EURL is, in principle, inexpensive. Selling the business is usually easier as a share sale than as a sale of the goodwill, and gifting the shares - or passing them on death - is smoother, so that the founder's death does not automatically end the business as it would for a sole trader. The company can be run by a third party without resorting to a lease-management arrangement, and funds the shareholder advances through a current account can be remunerated and repaid.

The tax regime is, in most cases, neutral compared with a sole trader, and the EURL offers a genuine choice: taxed by default as a partnership (income tax in the shareholder's hands) or, by option, subject to company tax. There are targeted reliefs too - capital-gains exemptions on a retirement sale or for smaller businesses under turnover thresholds - and the cost of acquiring the shares is deductible for a shareholder who works in the company.

There are real disadvantages to weigh. Limited liability can prove illusory in practice (discussed below). Unlike a sole trader, the single shareholder cannot make their main home or other property unseizable. The EURL cannot lend to, or guarantee the commitments of, an individual single shareholder. There is formality around drawing a remuneration - the shareholder cannot draw money from the till at will. The managing single shareholder cannot claim the employee social-security regime, and there is a real risk of criminal penalties for failing to draw up the annual accounts. Choosing the EURL is a balance of these, not an automatic win.

The limits of limited liability

The headline promise of the EURL - risk limited to the contributions - is accurate, but it comes with important qualifications. The first is the personal guarantee. Banks routinely ask the managing shareholder (or their spouse) to stand as guarantor, which pierces the limited-liability shield for the guaranteed debt. This does not rob the EURL of its point - tax and social liabilities are not, in principle, guaranteed, and a guarantor benefits from protective rules, notably that the guaranteed debt must not be disproportionate to their income and assets, failing which the guarantee is capped at what they could properly have committed.

The second qualification is confusion of assets. The single shareholder must keep their own patrimony strictly separate from the company's. If they blur the two - using the company for personal ends - a creditor may seek to reach them personally, and a court can find a confusion of patrimonies that defeats the limited liability. Where the shareholder keeps the line clean, the protection holds: a bank that lent to an EURL without taking a guarantee could not turn to the managing shareholder in the absence of any proven confusion.

The third is insolvency. If the EURL cannot pay its debts, none of the shareholder's own assets is drawn into the safeguard, reorganisation or liquidation - a genuine advantage over the sole trader, whose business assets are exposed. But that protection depends on the shareholder having behaved as the head of a real, separate company: proper accounts, decisions taken in the company's interest, and no diversion of assets. The practical lesson is that limited liability in an EURL is earned by discipline, not granted unconditionally.

How the EURL is taxed

Tax is where the EURL's flexibility shows most. By default, an EURL whose single shareholder is an individual falls automatically under the partnership regime: the company's profits are taxed in the shareholder's hands under income tax, in the category matching the company's activity, and the manager's remuneration is not deductible - it is folded back into the taxable profit. Where the single shareholder is a legal person, the EURL is compulsorily subject to company tax.

An individual shareholder can opt for company tax instead, and the choice needs weighing on both sides. Under company tax, profits are taxed at the company level - with the reduced 15% rate up to €42,500 of profit and the standard rate above - and the manager's remuneration becomes deductible, but distributions are then taxed again in the shareholder's hands. The EURL offers something a sole trader now technically can obtain by assimilation, but with the legal certainty of an established company form, which is one reason founders still choose it for the tax option.

The social regime is a further consideration. The managing single shareholder is, by definition, a majority manager, and so falls under the self-employed (non-salaried) regime rather than the employee regime - which can be cheaper than the assimilated-employee regime of some company directors, though the cover is noticeably less generous unless topped up with voluntary insurance. A non-managing single shareholder who works in the company is also treated as self-employed. Getting the tax option and the social regime right together is one of the most valuable pieces of planning at the outset of an EURL.

How the single shareholder decides

Because there is no one to hold a meeting with, the law adapts the SARL's collective-decision machinery. The single shareholder exercises the powers that a meeting would hold, and the code expressly disapplies the SARL rules on convening and holding meetings and the special majority rules - they are, by definition, inapplicable to one person. The single shareholder can carry out any decision, statutory or not, alone: amend the articles, increase the capital, approve the accounts, all by their own decision.

The essential discipline is the register of decisions. Each decision the single shareholder takes in place of a meeting must be recorded in a register, and regulated agreements are entered there in the same way. This is not a formality to be skipped: decisions taken in breach of the rules - including an unlawful general delegation of the manager's powers, or a decision not entered in the register - can be annulled at the request of any interested party. The register is what proves the company was run as a company.

Two safeguards protect against self-dealing. Non-current agreements not on normal terms between the single shareholder (or a non-shareholder manager) and the company go through a regulated-agreements control, recorded in the register - though ordinary agreements on normal terms need no formality. And there is an absolute prohibition: the individual single shareholder, their spouse, ascendants and descendants cannot borrow from the company, obtain an overdraft or current-account facility from it, or have it guarantee their commitments to third parties - any such contract is void, and the prohibition also binds the manager.

The manager and the irrevocability point

Most often the individual single shareholder will manage their own company, appointing themselves manager in the articles or a later act; management can also be shared, or entrusted to a third party who need not be a shareholder. A striking feature follows from the single-member structure: the managing single shareholder is in practice irrevocable. They cannot be removed by the shareholder (themselves) nor by the courts, because a judicial removal can only be sought by a shareholder - and there is no other shareholder to seek it.

Where management is instead entrusted to a third party, the single shareholder can remove them - but a removal without just cause can give rise to damages, so the shareholder should tell the manager what is proposed and let them present a defence. Poor management is a just cause; ending the mandate as the legal consequence of a dissolution decided for genuine economic reasons is not an abuse. The courts examine whether the reason relied on truly relates to the mandate: ceasing to perform separate employment duties, for instance, is not by itself a valid ground to revoke the company mandate.

The manager binds the company toward third parties on the ordinary SARL terms, and cannot delegate the entirety of their powers to a third party. The manager's remuneration is set by the appointing act, the articles, or a later decision of the single shareholder - and it can validly be approved after the event, so long as the articles are respected. A managing shareholder's remuneration gives them regular income without waiting for the annual dividend decision, since any other drawing on the company's funds is prohibited.

Running the EURL: accounts and formalities

The EURL's yearly rhythm centres on the accounts. The single shareholder must examine and approve the accounts, and allocate the result, within six months of the year-end, applying commercial-accounting rules as any SARL does. The manager must draw up a management report - unless the company is a small enterprise below two of three thresholds, in which case it is exempt. Until the legal reserve reaches a tenth of the capital, the shareholder must, on pain of annulment, allocate to it.

There is a valuable simplification for the most common case. Where the single shareholder is also the sole manager, filing the signed inventory and annual accounts at the registry within the six months counts as approval of the accounts - with no need to record a separate approval in the register of decisions. This spares the one-person company a layer of paperwork. Where the shareholder is not the sole manager, the manager must send them the report, accounts and any auditor's report by the end of the fifth month after year-end, and the inventory is held for them at the office.

Where an auditor is in place, the single shareholder must give them fifteen days' notice of an intended decision, and the accounts documents must reach the auditor a month before they go to the shareholder - pushing the practical timetable back further than in a classic SARL. And even in a one-person company, the permanent right to the company's documents survives where the manager is a third party, and a non-managing shareholder keeps the twice-yearly right to question the manager on anything threatening the business's continuity. Decisions taken in breach of the accounts rules can be annulled at any interested party's request.

When a second shareholder arrives

Because the EURL is a SARL, the arrival of a second shareholder turns it into a classic multi-member SARL automatically, with no transformation. This can happen several ways: a capital increase subscribed by a newcomer, a partial sale of the shares to more than one person, a divorce that splits community shares between spouses, or a death that brings heirs in. A total sale of all the shares to a single buyer keeps the EURL as an EURL - though the buyer's community-regime spouse may claim to become a shareholder and make it multi-member.

The practical step on conversion is light: update the articles to identify the new shareholders and file them at the registry. But there is a drafting lesson that has to be learned in advance. Because the standard statutory model articles do not cater for the shift to a classic SARL, and because a founder who did not foresee a partner may have no approval clause, they can find a stranger - a subscriber's spouse or descendant - entering the company with no way to block it. Inserting an approval clause and the classic-SARL rules at the outset means no scramble to amend the articles later, when new shareholders may hold the votes to resist.

This is why the best EURL articles are drafted from day one as if a second shareholder might appear: covering both the one-person present and the multi-member future. Anticipating a sale, a divorce or a death in the articles is what makes the EURL's great flexibility - the smooth growth into a SARL - work in the founder's favour rather than against it.

EURL versus the alternatives

The EURL is usually chosen against two comparators: the sole trader (entreprise individuelle) and the single-shareholder share company, the SASU. Against the sole trader, the EURL's advantages are a company's legal personality and limited liability, easier transmission (a share sale or gift rather than a sale of goodwill, and no automatic end of the business on the founder's death), and the ability to remunerate and repay a shareholder's current account. Its disadvantages are that it cannot make the founder's home unseizable - something the sole trader's regime allows - and that it brings more formality, from the register of decisions to the rules on drawing a remuneration.

Against the SASU, the trade-off is mainly social and fiscal. The EURL's managing shareholder is self-employed, which is often cheaper than the assimilated-employee regime of a SASU's president, though the social cover is less generous unless topped up. On registration duties, a share sale in an EURL attracts 3% after an allowance, while a SASU's shares attract a flat lower rate - a factor if a future sale is likely. There is no universally right answer: the choice turns on the founder's income needs, appetite for social cover, and plans for the business.

One structural point favours the EURL for the cautious founder: because it is a SARL, it can later convert to a classic multi-member SARL without a transformation, and it offers the legal certainty of a long-established, heavily litigated form. For a founder who values that certainty and the self-employed social regime, the EURL remains a strong and dependable default - but the decision is worth making deliberately, with the numbers in front of you, rather than by habit.

Setting up an EURL

Incorporating an EURL follows the SARL pattern, adapted for one member. The founder deposits any cash contributions in a bank and can pay up as little as a fifth on subscription, with the balance over five years. For contributions in kind, a contributions auditor can be dispensed with where no single in-kind contribution exceeds €30,000 and they do not together exceed half the capital - but a founder using that dispensation should keep evidence (invoices, inventories, valuation references) supporting the values, because the shareholder is personally liable for the value attributed to in-kind contributions where no auditor acted.

Where the founder contributes a going business - a fonds de commerce or an existing trade - this is not a mere accounting formality but a genuine transfer of the asset out of their personal patrimony into a separate legal person, carrying the same warranties as any contributor (against hidden defects and eviction). The contribution must also respect the founder's matrimonial regime: a community-regime spouse may have rights over community assets contributed, and can, in some cases, claim to become a shareholder - which is exactly why the articles should anticipate a second member from the outset.

The company acquires legal personality on registration, and acts done for it during formation can be taken over so that they are treated as the company's from the start - the single shareholder should record that takeover in the register of decisions after registration. Capital, even if minimal, must exist: contributions in industry (skill or work) are possible but do not count toward the capital, so there must also be cash or in-kind contributions. A realistic capital, rather than a token one, also gives the company a cushion against the loss-of-half-capital procedure in an early loss-making year.

Frequently asked questions about the EURL

This article states general principles of French law as at its date of publication and is provided for information only. It does not constitute legal or tax advice and creates no lawyer-client relationship. Rates, thresholds and reliefs evolve; verify the current figures before acting, and take advice on your specific situation.