Accounting for sole proprietorships: the complete file to make sense of it all
Are you the head of a sole proprietorship and wondering what the accounting rules are?
Because the accounting obligations to be applied depend on your tax regime and your activity... it's easy to get lost!
Don't panic: whether you're a micro-business, a company governed by the "régime réel normal" or a BIC tax regime, we'll tell you everything!
What are the accounting obligations of a sole proprietorship?
The accounting obligations of Sole Proprietorships, or EI, differ according to :
- the tax regime applied:
- régime réel normal,
- simplified tax system,
- micro-business regime.
- Company activity:
- business generating industrial or commercial profits, or BIC,
- business generating non-commercial profits, or BNC.
Accounting obligations of EI companies under the normal actual regime
Companies concerned
- Companies generating sales in excess of :
- 818,000 excl. tax for sales of merchandise, takeaway food, food for on-site consumption and accommodation,
- 247,000 excl. tax for services.
- who are subject to another tax regime, but have nevertheless opted for the normal actual tax regime.
Their accounting obligations
- Commitment accounting 👉 This involves declaring all movements affecting the company's assets:
- record receivables and payables chronologically;
- record all supporting documents on the day they are drawn up.
- Produce accounting books, i.e. :
- the journal: chronologically recording accounting movements;
- the general ledger: lists all transactions, classifying them by account.
- Centralize the auxiliary journals in the journal book on a monthly basis.
- Draw up annual financial statements and file them with the Commercial Court:
- balance sheet: showing the company's assets and liabilities at a given date;
- the income statement: revealing expenses and income for the financial year;
- appendices: to help you understand the balance sheet and income statement.
- Carry out an inventory at least once every twelve months.
Accounting obligations for companies operating under the simplified real-estate regime
Companies concerned
- For sales of goods, take-away and on-site foodstuffs and accommodation services 👉 companies with sales of between €176,200 and €818,000 excluding VAT.
- For service provision activities 👉 companies with sales between €72,600 and €247,000 excluding VAT.
💡 In the above cases, companies are automatically covered by the simplified real-estate regime and benefit from accounting relief. They may, however, opt for the normal actual regime.
Their accounting obligations
- Cash accounting 👉 This type of accounting only takes into account revenues received and expenses paid. Receivables and payables are only recorded at the end of the accounting period.
- Centralize accounting entries (in a journal book, for example) on a quarterly basis.
- Perform lump-sum valuations of inventories and work-in-progress.
- Deduct fuel costs on a flat-rate basis, based on the tax authorities' rates.
- Draw up annual financial statements and file them with the Commercial Court:
- a simplified balance sheet: showing essential assets and liabilities;
- a simplified income statement: listing the main income and expenses.
Accounting obligations for IEs covered by the micro-enterprise scheme
Companies concerned
- For the sale of goods, takeaway food or food to be consumed on the premises, and the provision of accommodation 👉 companies with sales of less than €176,200 excluding VAT.
- For service provision activities 👉 companies with sales of less than €72,600 excluding VAT.
Companies covered by this scheme benefit from highly simplified accounting, the main purpose of which is to determine the profits taxable by the tax authorities.
Their accounting obligations
- Keep a book of receipts, in which all receipts for the year are recorded in chronological order.
- Produce a register of purchases in the following cases:
- sale of merchandise,
- sale of foodstuffs for on-site consumption or takeaway,
- accommodation services.
- Draw up invoices.
Micro-businesses are not required to keep annual accounts.
Accounting obligations of BNC-regulated IEs
Businesses concerned
The BNC regime applies to income from :
- liberal professions,
- charges and offices (e.g. notaries),
- copyright,
- agents acting on behalf of their clients, etc.
However, the accounting obligations of BNC-regulated IEs differ according to the tax regime to which they are subject:
- the micro-BNC regime 👉 for businesses with sales of less than €72,600;
- the controlled declaration regime 👉 for companies with sales in excess of €72,600.
💡 The 2022 Finance Act now allows you to opt out of the controlled declaration regime within the same timeframe as for opting in.
Accounting obligations for IEs under the micro-BNC regime
These are the same obligations as for BIC micro-enterprises (see above).
Accounting obligations for EI under the controlled declaration regime
- Keeping cash accounts 👉 As seen above, this involves keeping a daybook of income and expenditure.
- Establish a fixed assets register 👉 this is a specific feature of BNC under the controlled declaration regime, involving the indication of:
- the date of acquisition and disposal of the fixed asset,
- its nature,
- its cost and sale price.
- Produce an income statement for tax purposes (declaration no. 2035). However, annual financial statements are not mandatory.
How do you keep accounts for a sole proprietorship?
Use the services of a chartered accountant
Many sole-proprietorships, particularly when they are subject to the normal actual accounting system, choose to call on the services of a chartered accountant:
- by outsourcing their accounting, even partially,
- hiring their own professional.
While outsourcing can represent a significant expense, it offers three main advantages:
- time savings for the company,
- reduced risk of errors, and compliance with current accounting regulations,
- expert advice, particularly in tax matters.
Ultimately, it's the skills available in-house, the budget and above all the type of accounting to be applied that determines whether or not to use a chartered accountant.
💡 Note that you can also opt for the services of an online chartered accountant!
Keeping your own accounts
Doing your own accounting allows you to:
- save money,
- gain a clearer picture of expenses, revenues and your business in general.
Sole proprietorship accounting in Excel
It's possible to keep your own accounts in the traditional way, using an Excel spreadsheet in particular, especially if you have simplified accounts (such as the revenue book and purchase register for micro-businesses).
However, as soon as a sole trader 's accounting obligations become more complex, and require the production of annual accounts, the use of accounting software is recommended.
Accounting software for sole traders
Accounting software has one major advantage: the range of products on the market is so broad that it's easy to find a solution that matches :
- the nature of your accounting obligations,
- the company's structure and skills,
- the budget available. You can even find free accounting software for sole proprietorships, a solution tailored to the needs of small organizations.
And there are even more advantages:
- it's a management tool that gives you an overview of your company's financial situation;
- it centralizes information, making it accessible anytime, anywhere;
- it saves time;
- reduces errors, such as data entry;
- it's a good tool for communication between employees, as well as with the chartered accountant.
What is your solution for meeting the accounting obligations of your sole proprietorship? Tell us about your experience in the comments section.