As in any other European country, any person who is a national of another EEC country may become a craftsman, merchant or company manager in France under the same conditions as a French national. It should be noted, however, that in order to practice a regulated profession, a French diploma or its equivalent will be required. But, besides starting a business, there are several other possibilities to invest in business in France.

I – Buying a commercial property

It is the purchase of the main elements of a business, that is to say the customers, the equipment, all the investment, the right to renew the lease of the premises in which the activity is carried out and the stocks. The natural or legal person making the purchase must, of course, register with the commercial court or the trade-register for the artisans. It is very important to check the valuation that was made by the seller. There are many methods to evaluate a goodwill: The main ones are:

• The amount of turnover,
• The value of investments,
• The so-called « goodwill » method.

A chartered accountant will be able to work with you to verify this assessment by choosing the method that best suits the business and to give you an opinion on its possibilities of evolution.

The rate of transfer duties depends on the value of the goodwill, they are:

• 0% to € 23 000
• 3% from 23,000 to € 200 000,
• 5% beyond € 200 000.

II – Purchase of shares of companies

Buying the shares of a company leads to the purchase not only of the business but also of all the receivables, bank accounts, debts and profits placed in reserves or losses carried forward. It is extremely important to have the shares evaluated by an accounting professional and even to carry out an audit of the company because after the purchase one becomes the holder of the litigations in progress and any latent debts. The audit will also allow the professional to give an opinion on the financial health of this company and to judge its future prospects.

It is also very important to draft clear and effective guarantee clauses that will enable the buyer to obtain prompt repayment by the seller of any debt not recorded on the balance sheet at the time of sale where the origin of such debt is before the date of the transfer of shares.

The purchase of shares entails the following advantages :

• It is not necessary to form a company,
• The initial purchase price is in principle lower (the amount of the company’s debts is deducted) and the basis for calculating transfer taxes is reduced accordingly.

The rate of registration fees is 0.1% on transfers of shares of “sociétés par actions” and 3% on the sale price of the shares of the SARL with a reduction on the value of the shares of € 23,000 reduced to the proportion of the number of shares sold in relation to the total number of shares composing the company’s capital.

III – Subscription to a capital increase

In this case it is also necessary to ask an accountant to carry out an audit which will also check the financial health of the company, the future prospects and the real value of the shares. This will make it possible to evaluate the « issue premium » that will be attached to the capital increase.

Contributions of sums of money to carry out a capital increase are exempt from transfer duties.

IV – Advances to a company’s current account

This is a real loan and it is therefore necessary to carry out the same controls as indicated above to ensure that the company will be able to repay its debt.

It is of course important to observe what rate of interest the company will give to this current account and how long the refund will take place.

V – The means of financing

The most traditional way is to finance by a natural person with a financial contribution. The movement of capital within the European Union is open, so the transfer of capital to a French company does not pose any difficulty.

Funding can also be provided through a company or foundation. If it is carried out by a commercial company, the legal consequences will be different depending on the purchase:

• In case of goodwill purchase, the French business becomes the French establishment of a foreign company. The registration in the commercial register and societies of a French establishment of an English company is a very simple and inexpensive operation. It is necessary to appoint an individual who will represent the company in France and provide the registry of the commercial court a copy of the articles of the society and the lease of the premises where the activity will be carried. It will be necessary to provide a new copy of the articles after any statutory modification. The main advantages of this legal arrangement are the speed and the lack of legal operations during the period of activity, (No general meetings, no publication of accounts). In this situation, the activity carried out in France will pay corporation tax in France as if it were an independent company, but the British company will integrate into its accounts the revenues and expenses of its French establishment. The tax paid in France will of course be deducted from the total payable to the tax authorities in England. Headquarter may charge justified management fees that will be deductible in France.
• In the event of the purchase of shares or participation in a capital increase, the securities will be recorded as participation titles in the assets of the balance sheet. Dividends paid by the French company will be recorded as revenue in the company owning the securities. A withholding tax will normally be levied in France at the time of distribution but may be deducted from the amount of tax payable by the company receiving the dividends.

There is a large selection of solutions for investing in France. It may to consist in buying shares on the stock exchange, to conclude various assistance agreements between companies such as « joint venture », etc. The most important thing is to do nothing blindly and open a debate with a chartered accountant to find the most secure and cost-effective solution.