To build your Shopify store, one of the most important things you need to do is set the business status of your business. Is it important to declare yourself to get started on Shopify? Yes it is! In reality, to create your e-commerce business, you need to create a business. Hence the importance of determining a legal status to be able to carry out your activity legally. Which business status is best for building a Shopify store? There are many statuses suitable for the creation of your store. To help you choose your company status, we will present each of the company statutes and their implications. Thus, you will be able to make your choice better.
Shopify Store: What is a business status and why have one?
When we talk about the status of a company, in general, we are referring to its legal form. In other words, it is the legal context that is imposed on an economic activity. This legal framework that allows your company to exist within a certain system, is not only legal. It is also fiscal and economic.
Whether it’s an ecommerce or dropshipping business, it’s important to make legal arrangements before you start selling products on your Shopify store. The choice of the legal status of your company determines the legal framework in which you carry out your activity. Even if you opt for dropshipping because you don’t want to manage inventory or bear logistical costs, as soon as you make a sale, you are supposed to have a legal status authorizing you to make these sales. However, if you do not do so, it is considered a hidden sale; which implies hidden work.
In addition, it is also important to know which company status to choose. In fact, it will have a lot of tax and social consequences on your business. Your choice also determines the steps you will have to take when creating your business. As well as the management of VAT, social charges, administrative, etc. As an entrepreneur, with legal status, you protect your business and yourself.
Shopify Store: Some Criteria to Consider When Choosing Your Business Status
To find the business status that best suits you in your Shopify store, there are many criteria to consider. In reality, choosing a legal structure really depends on the nature of your business as well as your growth goals. That is why it is essential to take these points into account.
Shopify Store: Be alone or partner
It’s important to determine whether you want to create your Shopify store on your own or link you. Working individually or in a team has its advantages and disadvantages. You can choose to work solo. However, if you decide later, know that you will not have difficulty integrating other people as partners. For now, you need to determine how many people there will be in the company.
If you prefer to be alone and keep complete independence, know that there are company statutes that could suit you. Similarly, if you plan to partner, there are societal structures that will suit you.
The size of your project
You need to consider the financial needs of your Shopify store. If you plan to set up an activity that requires a lot of funding, there are company statutes that you can choose and that will allow you to receive external investors. Do the financial needs of your business require bank loans, investors? Depending on this, you will be able to make your choice. You must also choose your status according to the cost of the necessary financial resources and according to your personal contribution. In fact, some statutes have ceilings, while others do not.
Protecting your heritage
If you have a private estate that you want to preserve, there is a specific business status that allows you to differentiate your personal property from professional ones. Similarly, the choice of certain statuses implies the mixing of personal and professional assets.
You need to determine the social plan you want to opt for. Depending on the type of social protection you want, you can be considered an employee or a self-employed person.
The tax system
This is also an important point to consider. Do you want your Shopify store profits to be subject to income tax? Or rather, they will be subject to corporate tax? Depending on the status you choose, your company will not be subject to the same type of taxes. By the way, neither do you.
In reality, choosing your plan will determine whether your company’s profits will be subject to income tax or corporation tax. In the first case, the profits are taxed directly on your behalf or that of each of your partners. In the second case, this implies a taxation of profits directly on the company. You or your partners are taxed on the remuneration and dividends received.
Shopify Store: Which Business Status to Choose?
The choice of legal status must be made after careful consideration. After all, this will have social, patrimonial, commercial and tax consequences on you as a business creator. While there’s no perfect legal status for building a Shopify store, here are some statuses that might be right for you.
If you want to create your activity alone, here are the statuses that may suit you:
The sole proprietorship (EI)
The sole proprietorship is the most flexible legal form to undertake alone.
The sole proprietorship
- Allows you to quickly launch your business at a lower cost;
- Does not present complications in the steps to be taken;
- Is quick to set up, no need to consult anyone;
- Has fewer formalities to complete;
- Simply register at the Business Formalities Centre (CFE) to declare your business;
- Has no turnover cap;
- Allows you to be the only person to make and manage all decisions that concern the company;
- You are not accountable;
- Falls under income tax;
- Confuses personal and professional wealth;
- Imposes an obligation to keep actual accounts;
- You are the only one to manage the debts;
- Does not offer the possibility of integrating partners;
- Does not offer VAT refunds.
It should be noted that this status does not protect your family’s assets from the risks associated with your activity, if you are married under a community regime. For this, it would be wise to think about changing the matrimonial regime and choose a regime of separation of property, before creating your company under this status. You also have the possibility to protect your main residence and your land not used for professional activity, by making a declaration of non-seizability before a notary.
Micro-enterprise (formerly self-enterprise)
The status of auto-entrepreneur simplifies the creation of a company. If you want to be alone in creating and managing your Shopify store or if you want to develop a complementary business in addition to a profession, the micro-enterprise will suit you. It is a legal status suitable for dropshipping.
- Allows to limit as much as possible the constraints with regard to the formalities;
- Lower accounting obligations;
- No expenses to pay if you do not receive income;
- No annual management report at your expense;
- Lower social security contributions;
- No deposit of accounts;
- Exemption from the declaration and payment of VAT on the services or sales you make (applies when your turnover for the previous year does not exceed a certain threshold);
- Limitation of turnover (as an auto-entrepreneur in e-commerce, you are limited to an amount of annual revenue. When you exceed this threshold, you automatically switch to the status of sole proprietorship);
- No integration of partners;
- No deduction of expenses;
- Required to have a bank account dedicated to your activity;
The Sole Proprietorship with Limited Liability (EIRL)
This legal status allows you to protect your personal property. Thanks to the EIRL, you can allocate to your professional activity a patrimony distinct from that of your personal one. Your personal property is protected from the risks inherent in your professional activity. In reality, professional creditors only have the possibility to sue if the assets are allocated to the exercise of your professional activity. Through a declaration of assignment, you can now separate your personal assets from your professional assets.
The sole proprietorship with Limited Liability (EURL)
This legal status allows you to limit your liability in the event of bankruptcy of your business. If you have the means, the EURL is the legal form most used by entrepreneurs. Profits are subject to income tax if the sole shareholder is a natural person. If the sole shareholder is a legal person, the EURL is subject to corporation tax. With only 1 euro, a EURL can be opened. This status also makes it possible to distinguish between personal and professional assets. It also allows you to choose your tax regime and to have light formalities to complete. On the other hand, it has an excessive cost and does not allow you to benefit from the employee regime as a business manager.
If you want to create your business with partners, here are the statuses that may be right for you:
The Limited Liability Company (SARL)
A SARL is a company status that gives the possibility of having several partners within the limit of 100. The limitation of liability is one of the greatest advantages of the SARL. This corporate status minimizes the responsibilities that your company’s associates must have. In other words, it limits the responsibilities of the partners according to their contribution to the company. In addition, with this status, your spouse can take part in the activities of your company.
Normally, a SARL is subject to corporation tax. However, some SARLs may choose income tax. With this legal status, the partners do not commit their family and personal patrimony under any circumstances. In case of financial difficulties, this proves to be a considerable advantage.
The Simplified Joint Stock Company (SAS)
The SAS is a modern legal status. It takes at least 2 partners to create a SAS. This also makes it possible to have several partners from different professions and fields. The director of the SAS is assimilated as an employee and contributes to the general social security scheme. In addition, this status offers the possibility of choosing between income tax and corporation tax. On the other hand, sas is a rather complex form of society. The implementation of rules and statutes, administrative and accounting formalities are quite delicate.
Anyway, if you want to create a Shopify store with several people and protect your personal wealth, opt for an LLC or a SAS.
Shopify Store: How do I create one?
Now that you know which business status to choose for your Shopify store, let’s take a look at how to set up a Shopify store.
Sign up for Shopify
Head over to shopify’s website and fill out the signup form to create an account. Enter the necessary information. Next, set the name of your Shopify store. You will be asked for further additional information as a result of this.
Create your Shopify store
After you sign up, you will be directed directly to your store’s admin interface. It is the command center of your company. Once you’re at this stage, you can start customizing your store, importing products, and setting up payment options and shipping. This step is very easy to set up.
Choose a theme for your Shopify store
Shopify offers customizable themes and templates. You want to create a store like Tiny Ruffles Shopify store, it’s time to customize your store. Shopify has its own official store for themes. Premium themes to pay, offer more customization possibilities. However, you can also get a pro store with the free themes.
Add your products
The next step is to add your products. On the admin panel, in the left bar, click on “Products”. You will then see the “Add Product” option. Please enter detailed information, make an accurate description of each product. Pay attention to how to insert the keywords, descriptions, and URLs that will promote your SEO.
Set up payment options
It’s time to set up the payment methods on your store. A payment gateway allows your customers to make purchases on your Shopify store. Each payment method has its own fees and rules. Please consider this to determine which one is best for your Shopify store. You can use Shopify Payments to not pay transaction fees. Other payment gateways will charge 2%, 1%, or 0.5% depending on the Shopify plan you choose.
Don’t forget to set up taxes, shipping costs, and buy a domain name. Shopify has many features that you need to master. They are accessible in the FAQ section of their website.
There are a multitude of business statuses for creating a Shopify store. Consider your growth goals, your specific needs, as well as your realities to make your choice. For example, you can start with micro-enterprise status in order to save as much as possible and minimize financial risks. Very simplified and less expensive than others, this status is ideal if your turnover does not exceed the ceiling of 170,000 € HT. On the other hand, the status of sole proprietorship will be suitable if you want to create your Shopify store without associating yourself and if you are in the perspective of generating a turnover of more than 176 200 €. However, if you want to have partners, think instead of the SARL or the SAS.