Establishment costs represent a crucial element for entrepreneurs and companies in the creation or development phase. These expenses, essential to the very existence of the company, deserve particular attention because of their impact on accounting and taxation. Let’s explore in detail the nature of these expenses, their accounting treatment and the tax implications for business managers.
Definition and composition of establishment fees
THE establishment fees include all expenses incurred during the creation or development of a business. These costs are essential to the existence of the structure, but cannot be directly linked to specific productions. Their nature varies depending on the stage of development of the company and is divided into several categories:
Incorporation costs constitute the first part of the establishment costs. They include:
- Registration rights
- Professional fees (lawyers, notaries)
- Registration fees
- Costs linked to legal publications
Initial establishment costs form the second part. They include:
- Prospecting expenses
- Initial advertising costs
- Costs related to the installation of premises
Finally, capital increase, merger or division costs complete this list. These operations, although less frequent, generate significant costs which fall into the category of establishment costs.
It is important to note that some significant advertising costs can be considered as establishment costs, in particular when they are incurred for the launch of a new activity or the establishment in a new market.
Accounting and tax treatment of establishment costs
The treatment of establishment costs in accounting raises strategic questions for entrepreneurs. Two main methods are available to them, each having different implications on the company’s accounts:
1. The preferential method consists of recognize these costs as expenses. This approach allows for an immediate tax deduction, provided that the general deductibility criteria are met. It has the advantage of not weighing down the company’s balance sheet.
2. The alternative method allow the immobilization of costs on the assets side of the balance sheet. In this case, the costs are amortized over a maximum period of 5 years. This option offers the possibility of spreading the load over several financial years, which can be advantageous for young companies wishing to preserve their results in the short term.
| Method | Benefits | Disadvantages |
|---|---|---|
| Recognition as expenses | Immediate tax deduction | Impact on the result of the financial year |
| Fixed assets | Load spreading | Restriction on dividend distribution |
It should be noted that a accounting feature allows you to go through account 72 “Capitalized production” if the costs were initially recognized as expenses. This technique offers additional flexibility in the accounting management of these expenses.
Tax and policy implications for entrepreneurs
THE establishment fees have significant tax and strategic implications for entrepreneurs. There tax deduction of these costs can be done in two ways:
- Immediate deduction : if the costs are recognized as expenses, they can be deducted in full in the current financial year, subject to meeting the general conditions of deductibility.
- Staggered deduction : in the event of immobilization, the deduction is spread over a maximum period of 5 years, at the rate of accounting depreciation.
The choice between these two options depends on the financial situation of the company and its medium-term strategy. A start-up in a phase of rapid growth might prefer immobilization to preserve its results, while a more mature company would opt for immediate deduction.
A crucial point to consider is the impact on dividend distribution. Indeed, as long as establishment costs appear on the assets side of the balance sheet, the company cannot distribute dividends. This restriction can influence the decision of the partners, particularly in companies where remuneration by dividends is an important element of the remuneration policy.
Furthermore, entrepreneurs must be attentive to the reimbursement of establishment fees personally advanced. The company can reimburse them, but it is imperative to keep all supporting documents to avoid any subsequent tax disputes.
Developments and special cases of establishment costs
The treatment of establishment costs is evolving to adapt to contemporary economic and accounting realities. Several points deserve particular attention:
1. Accounting novelty : From 2025, a new account 2901 “Depreciation of establishment costs” will be introduced. This development will allow a better assessment of the real value of these assets on the balance sheet, thus reflecting more faithfully the financial situation of the company.
2. Special cases : Certain expenses, although similar in their nature, are treated differently from traditional establishment costs:
- Fees for issuing bonds or bonds follow a separate accounting and tax regime.
- The purchase of social rights by the company may generate specific costs which require special treatment.
- Amounts paid by a national interest market concessionaire may be assimilated to establishment costs under certain conditions.
These particular cases underline the importance of an in-depth analysis of each situation by an accountant. The complexity of processing establishment costs and their long-term implications on the financial health of the company fully justify the use of a professional.
In short, the establishment fees represent a strategic issue for entrepreneurs. Their judicious management, both from an accounting and tax perspective, can have a significant impact on the financial performance of the company in the short and medium term. A perfect understanding of these mechanisms allows managers to make informed decisions, thus optimizing the financial structure of their company from its first steps.