What legal forms can be adopted to do business in France?

Start a business in France

WHAT LEGAL FORMS CAN BE ADOPTED TO DO BUSINESS IN FRANCE ? 

--> French accountant's advice


Updated on 15/03/2021

Any natural or legal person wishing to set up a business in France should be aware of the legal possibilities available to them as well as the main advantages and disadvantages of each of them. Here is a summary of the most frequently adopted legal structures.


I - INDIVIDUAL BUSINESS

  1. Registration procedure

This is the simplest method for operating a very small business. The operator must apply for registration to:

  • CFE “Centre de Formalités des entreprises” of the Chamber of Commerce and Industry for traders,
  • CFE of the Chamber of Trades for craftsmen,
  • CFE of the Urssaf for the liberal professions.


The file to be submitted to request the creation of a sole proprietorship must contain the following elements:

  • A form P.0.,
  • A proof of occupancy of the premises (lease contract),
  • Proof of the information of the spouse on the consequences on the common property of debts contracted in a professional capacity,
  • A copy of the identity document and a certificate of parentage if it does not appear on the proof of identity,
  • A declaration on the honor of non-conviction,
  • In the event of regulated activity, proof of authorization,
  • Possibly, a copy of the declaration of exemption from seizure made by the notary,
  • If applicable, proof of marriage or PACS in the event of an option for the status of collaborating spouse,
  • A check for the creation formalities.
  1. Protection of the operator's personal property

It is important to protect your real estate other than the main residence against any possible action by future professional creditors. For this, it is necessary to have a declaration of exemption from seizure drawn up by a notary (the main residence is protected by an exemption from seizure applicable as of right since August 7th 2015).

As soon as the declaration of exemption from seizure is made, the individual operator cannot be sued for debts resulting from his professional activity arising after the declaration has been filed.


II - CREATION OF AN E.I.R.L.

This legal form has several advantages. It sits between the sole proprietorship and the E.U.R.L. It allows you to benefit from the simplicity of the sole proprietorship and the advantages of E.U.R.L. (option for the imposition of corporation tax, limitation of liability).

The file must be submitted to the competent business formality center “C.F.E.” (see above "INDIVIDUAL BUSINESS").

List of documents to provide:

  • The declaration of assignment of assets to professional patrimony.
    Where applicable, several documents must be annexed to the declaration of assignment:
    • For entrepreneurs living as a couple and when a common good is allocated to the E.I.R.L., it is necessary to obtain the agreement of the spouse,
    • For entrepreneurs who wish to allocate an undivided asset, it is necessary to obtain the agreement of the co-owner,
  • A print P.0. (or a P2 form if the company already exists),
  • A P. E.I.R.L. print,
  • A copy of the identity document and a certificate of parentage if it does not appear on the proof of identity,
  • A declaration on the honor of non-conviction,
  • Proof of the address of the activity (lease contract).


III - S.A.R.L.  SOCIETE A RESPONSABILITE LIMITEE - E.U.R.L. ENTREPRISE UNIPERSONNELLE A RESPONSABILITE LIMITEE

This type of company is similar to the British “LIMITED COMPANY”. It may be constituted by two or more partners for an S.A.R.L., or only one partner for an E.U.R.L.

  1. The main characteristics of a S.A.R.L. or E.U.R.L.
  • Share capital: no minimum amount is requested when it is incorporated,
  • Registered office: the company must have a registered office which can be fixed at the domicile of the manager,
  • Contributions admitted: in cash, contributions in kind and contributions in industry (know-how), but contributions in industry do not constitute capital,
  • Number of partners: 1 minimum for a E.U.R.L., 100 maximum,
  • Decision-making: in ordinary or extraordinary general assembly,
  • Lifespan: maximum 99 years, but it can be extended,
  • Financial year: 12 months, except for the first year,
  • Articles of Association: mandatory written document in which must be mentioned the form of the company, the company name, the registered office, the corporate object, the duration of the company, the amount of the share capital, the identity of the founding partners, contributions in cash, valuation of contributions in kind, terms of release of capital, subscription terms for contributions in industry, distribution of shares among the partners.


The company may also be a subsidiary of a British company. In this case, the French S.A.R.L. will be able to pay dividends to the parent company. If the manager of the French company works mainly in England for the activity carried out in France, the French company will pay justified management fees to the parent company and deduct from its profit.

  1. The main advantages of this type of company

These main advantages are as follows:

  • Liability limited to the amount of the partners' contributions (except in the event of serious misconduct),
  • Funding flexibility: we can easily bring in or out the partners or transform a E.U.R.L. into an S.A.R.L.,
  • A flexible tax regime: the S.A.R.L. is subject to corporation tax but you can also opt for direct taxation of the partners in income tax if it is formed between members of the same family. Such an option is possible in all cases during the first 5 years of the constitution,
  • The choice of the social system for the leaders: the manager or managers are subject to the self-employed workers regime if they hold more than 50% of the shares.
     
  1. Some disadvantages

All types of companies have drawbacks compared to the status of self-employed:

  • The costs relating to the creation formality and the operating cost are higher,
  • The operation is more rigid (need to bring the partners together by general meetings to make decisions, etc.).


Another disadvantage also exists compared to other types of companies (S.A.S. or S.A.):

  • The majority manager(s) are subject to the self-employed scheme, an option for the salary scheme is impossible for them.
     
  1. The particularities of the E.U.R.L.

The E.U.R.L. is quite simply an S.A.R.L. having only one partner. It is a solution which makes it possible to limit the liability of a single operator to the amount of its contributions. The main differences with an S.A.R.L. are the following:

  • The tax regime: income tax regime, the entrepreneur is personally taxed on the profit made by the E.I.R.L. It is possible to opt for the micro-enterprise tax regime when the sole managing partner is a natural person.
    It is also possible to opt for the corporate tax regime.
  • Social status of the manager: when he is also the sole shareholder, he falls under the self-employed workers' regime (TNS); when he is not the sole shareholder, he is a salaried manager with an affiliation to the employees' scheme.

 

IV - S.A.S. SOCIETE PAR ACTIONS SIMPLIFIEE

This form of joint stock company has certain advantages such as the possibility of having a very flexible operating mode which can be freely organized in the articles of association.

The company can be formed by a single partner (S.A.S.U.).

  1. The main characteristics of a S.A.S. or S.A.S.U.

The characteristics are, for the most part, similar to those of an S.A.R.L. (or E.U.R.L.):

  • Share capital: no minimum amount is requested when it is incorporated,
  • Registered office: the company must have a registered office which can be fixed at the domicile of the manager,
  • Contributions admitted: in cash, contributions in kind and contribution in industry,
  • Number of partners: 1 minimum no maximum,
  • Decision-making: in ordinary or extraordinary general assembly,
  • Lifespan: maximum 99 years, but it can be extended,
  • Financial year: 12 months, except for the first year.
     
  1. The main differences between S.A.S. and S.A.R.L.
  • The freedom to define the operating rules: the partners have great freedom to organize the management and decision-making methods in the articles of association. However, they must comply with certain rules provided for by law. For example, a president must in particular be appointed in any S.A.S.
  • The tax system: S.A.S. are normally taxed on corporation tax, an option for the taxation of profits to income tax can only be formulated at the time of the incorporation of the company and for a period of 5 years maximum.
  • The social security scheme for managers: they are considered as employees and are compulsorily covered by the general social security scheme. Thus, no social contribution will be due if no remuneration is paid (unlike majority managers of S.A.R.L. assimilated to self-employed workers who are liable for minimum social contributions even in the absence of remuneration).


V - S.A. SOCIETE ANONYME

Here are the specific rules that differentiate S.A. from other types of companies:

  • The share capital: it must be a minimum amount of € 37,000,
  • The shareholders: 2 shareholders for a company not listed on the stock exchange. No maximum is prescribed by law. If the S.A. is listed, a minimum of 7 shareholders is required.
  • Management bodies in SA: two organizational systems can be provided for in an SA:
    • With a board of directors and a managing director (possibly assisted by deputy managing directors),
    • Or with a supervisory board and a management board.


VI - CREATION OF A FRENCH ESTABLISHMENT OF A COMPANY GOVERNED BY FOREIGN LAW

The entry in the trade and companies register of a French establishment of a foreign company is a very simple and inexpensive operation. It is necessary to designate a natural person who will represent the company in France and will provide the clerk of the commercial court with a copy of the articles of association of the company and of the lease of the premises where the activity will be carried out. It will be necessary to provide a new copy of the statutes after any modification of the statutes.

The main advantages of this legal provision are the speed and absence of legal transactions during the period of activity (no general meetings, no publication of accounts).

As the permanent structure of the foreign company, the branch is however subject to the French tax regime. Its profits will not be subject to double taxation in the country of origin if the latter has concluded a bilateral agreement with France in order to avoid this double taxation.

The head office may invoice justified management fees which will be deductible in France.


CONCLUSION

The choice of the legal structure will depend both on the investor (natural person or company), his preferences for a social regime and the activity carried out. Faced with the complexity and the number of different solutions, it is of course necessary to seek advice from a competent person before setting up a business.

Our accounting and auditing firm can provide you with this help, so contact us!