Benefits of Establishing a Liberal Practice Company (SEL)

This note is for young professionals starting their own practice, explaining why it’s beneficial to transition to a Liberal Practice Company (SEL) right from the beginning. It’s often much simpler to establish your business as a company when you first set up, rather than waiting years to realize that a significant portion of your earnings is consumed by social security contributions and income tax.

• THE INTEREST OF STRUCTURING YOUR PRIVATE INTO A COMPANY

The primary benefit of transitioning to a Liberal Practice Company (SEL) is the ability to control your social contributions and reduce your tax burden. It’s crucial to understand from the outset that your social security contributions and income tax will be calculated on your entire profit – even the portion you don’t need for immediate living expenses and intend to save.

For example, if your profit is $100 but you only need $75 for living and want to save $25, your social security contributions and income tax will still be calculated on the full $100. This dramatically impacts your ability to invest and save for the future.

By switching to a SEL, you gain the power to manage your social contributions and taxation effectively. Recognizing this advantage early is vital, as delaying the transition can make it far more complex once you reach a high level of social and tax pressure.

• How mandatory levies work in a Liberal Practice Company Environment

Social security contributions and income tax are determined by the compensation of the SEL manager – that’s you. When establishing your company, and annually after approving the previous financial year’s accounts, you determine your own level of compensation. This chosen compensation then serves as the basis for calculating your social security contributions and income tax.

For instance, if your company’s profit is $300 but your chosen salary is $75, your social security contributions will be calculated on the $75, not the company’s total profit. This gives you direct control over your social security contributions and allows you to better anticipate your tax liability.

The savings you gain on contributions and taxes enable effective wealth management and make planning and financing your investments significantly easier. You’ll benefit from positive cash flow that can be strategically leveraged.

• Practical arrangements for switching to a Liberal Practice Company

The most commonly established entity is the SELARL. This company type is specifically designed for liberal professions, operating similarly to an SARL, and is formally recognized by the regulations governing regulated professions. Your SELARL’s bylaws will be filed with your Professional Association, granting your company legal existence validated by the regulatory bodies.

The procedures are outlined below, and we will handle the drafting of all necessary documents. You will only need to sign the prepared documents at each stage.

• Assessing the Value of the Liberal Practice: This foundational step is crucial for transitioning to a SEL. You don’t need to do anything at this stage. We will coordinate with your accountant to perform the necessary analysis and configure the legal and tax aspects of your file.
• Drafting the Contribution Agreement for the SEL: This legal document formalizes the transfer of your existing practice from you (as a self-employed professional) to your future SEL. The agreement will also include crucial tax provisions to prevent the taxation of unrealized capital gains.
• Drafting the SEL Bylaws (statuts): We will ensure these bylaws incorporate all specific provisions relevant to your regulated profession.
• Registration of the Future SEL with the Commercial Court Registry: This registration is contingent upon the approval of the bylaws by your specific professional body. We will maintain close communication with the Registry’s legal department throughout this process.
• Registration of the SEL with Regulatory Bodies: We will prepare all the required documents for submission to their legal department.
• Obtaining the Certificate of Registration and Tax Service Registration.
  
  
  

• Your company will then be incorporated

Given the time required for your SEL’s approval by the professional body, please allow approximately three months to finalize the registration of your SEL with all relevant institutions.

NEED any ASSISTANCE?