Le French right allows the partners of a SARL to suspend their activity in such a way provisoire. This state of inactivity is called temporal reduction. It does not remove the company from the legal registers, but places it in a transitional situation, for a period not exceeding two years. To benefit from it, it is necessary to satisfy certain legal obligations. Foundation-company-ricard explains everything there is to know about the mothballing of an LLC and answers the following questions:
- What is the reason for mothballing an LLC?
- How long can an LLC be placed dormant?
- What are the procedures to follow to put an LLC on hold?
- What are the consequences of putting an LLC on hold?
According to French legislation, the partners of a SARL may suspend their activity in such a way provisoire. This state is known as temporal reduction. It does not have the effect of removing the company from the legal registers, but of placing it in a transitional situation, for a period not exceeding two years. To benefit from it, legal formalities are to be respected. Foundation-company-ricard details everything there is to know about the mothballing of an LLC and answers the following questions:
- What is the reason for mothballing an LLC?
- What is the maximum idle time for an LLC?
- What are the formalities to be completed to put an LLC on hold?
- What are the consequences of putting an LLC on hold?
Le French right allows the partners of a SARL to put their activity in suspension or on a provisoire. This state is known as put to sleep. It does not have the effect of removing the company from the legal registers, but of placing it in a transitional situation, for a period not exceeding two years. You have to respect some legal formalities. Foundation-company-ricard reveals everything you need to know about the mothballing of an LLC and answers the following questions:
- What is the reason for mothballing an LLC?
- What is the maximum idle time for an LLC?
- What are the steps to take to put an LLC on hold?
- What are the consequences of putting an LLC on hold?
What are the advantages of putting an LLC on hold?
Le leader of a limited liability company has the right to make the decision to put the company on hold that he manages. For this, however, it is necessary to prove a temporary cessation of activity. This procedure is different from dissolution and liquidation which ultimately results in the disappearance (delisting of the LLC of the trade and companies register). The objective here is to modify the information entered in the RCS.
The reasons that lead the manager to put your LLC on hold do not have to not be suspicious. For example, it is not to hide a cessation of payment. In other words, the financial situation of the company must be sound.
Putting an LLC on hold can bring advantages in certain circumstances, but it is an option whose duration is limited.
Dormant duration of a SARL
The time during which is in state of rest an LLC cannot exceed 2 années. This period begins from the moment when the modification of the information entered in the Trade and Companies Register is made.
When the period ends, the partners and the manager will have to resume their activity, sell the shares of the company or dissolve the company voluntarily.
If no action is taken, they incur Consequences. The SARL is exposed to hazard to be automatically struck off. The clerk of the commercial court may, in the event that he has informed the company beforehand, remove it from the registers if no response is received within 6 months from the day on which the letter is received.
What are the steps to take to put a SARL to sleep?
The legal representative has the power to decide put to sleep a company. In the case of a SARL, it's the manager who is empowered to make that decision. This must be validated by the partners at a general meeting which is recorded in the minutes. Once the agreement has been obtained, it is necessary to fulfill various legal formalities.
The purpose of these steps is to ask the clerk of the commercial court to update the information relating to the SARL in the trade and companies register. To do this, you must complete a “M2” form and pay frais. The registry will then add a specific mention to the company's Kbis extract.
The legal notice is optional and can be published in the Official bulletin of civil and commercial announcements (BODACC) to inform anyone who may be interested in putting the SARL on hold.
If business activity is started again, the sleep state must be terminated. The same formalities must then be completed with the registry of the commercial court in order to modify the data contained in the RCS and to delete the comment appearing on the Kbis extract.
Results of the mothballing of an LLC
When the mothballing of an LLC comes into effect, this has consequences for the way the company operates, particularly in terms of taxation and accounting. Here are the main results.
Tax impacts of the mothballing of a SARL
A dormant SARL is not more submissive value added tax (VAT). Consequently, it no longer has to pay VAT declarations.
With regard to the corporate land contribution (CFE), it is only due if the SARL exercise a activity au beginning of the tax year.
Finally, for statements of results annual, the company does not benefit fromno exemptions. It must always send them to the tax authorities, even if it suspends its activities for an entire accounting year. In this case, she can tick the corresponding option on each form (“none”).
Accounting impacts of the mothballing of a SARL
As far as accounting is concerned, putting it to sleep doesn't really have an impact. Keeping accounts remains mandatory, in accordance with legal provisions.
In addition, the establishment of annual accounts is always mandatory. No exemption is provided, except for micro-SARLs, ie those which meet the conditions of a “micro-enterprise” in the economic (and non-fiscal) sense. In this case, they can produce an abbreviated balance sheet as well as an abbreviated income statement.
Finally, the manager must always summon the partners and bring them together in a general meeting so that they can decide on:
- Approval of the annual accounts,
- The distribution of the result (if it is not zero),
- The discharge of the management,
- Etc
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When a SARL temporarily suspends its activity, it can choose to go dormant. The manager makes this decision. However, this must be validated by the partners during a consultation. The mothballing allows the SARL to continue to exist. It retains its legal personality and may restart its activities at any time (and at the latest after a period of two years).
