France is a business-friendly country, that offers a vibrant economic ecosystem that is suitable for businesses to scale and rise.
Being the 6th largest economy in the world, France boasts a huge domestic market and it is a major route to the rest of the European single market.
Launching a business in France entails various steps but the primary one is deciding what structure is ideal for your company’s operations in order to benefit from legal insurance. The legal structure selected by a company will impact its status and taxation.
Outlined below are some tips on the best legal structure you can assign for your business in France.
Choosing your business structure in France
If you are contemplating setting up your business in Paris Region, it’s crucial that you acquaint yourself with France’s legal and tax system.
French law gives a wide assortment of legal business structures, hence catering to foreign investors’ desires and goals.
The three main types of business structures your can choose for your business in France depends on your strategy and degree of liberation from the parent company. Outlines next are the main types of Business in France:
- Liaison office
A liaison office is the easiest type of business structure you can form in France. It acts as the extension of the foreign company. It is a steady place of work that is not regarded as a permanent establishment as long as you do not carry out any retail activity. Under this structure, one or more employees are positioned under the responsibility of a representative. The activity of the office is limited entirely to providing the parent company with data, and advertising or performing market research analysis on their behalf.
- Branch
The second alternative is the branch. A branch gives the benefit of being able to ignore specific administrative formalities since no real company creation takes place. This is a reasonable way for a foreign company to expand to France because contrary to the previous case, it enables your business to conduct commercial activities and to make judgments independently.
- Subsidiary
The subsidiary is suitable for a long-term project and is by far the most essential solution for your business and growth project in France. What makes a subsidiary more desirable is that the foreign parent company does not face entirely, the debts incurred by the permanent establishment in France.
The subsidiary type enables you to operate as a French company and as an independent legal entity.
Common types of French subsidiaries
France has three major types of subsidiaries that differ according to their size and the number of shareholders they involve:
- Société anonyme (SA)
The SA is a legal form primarily used by big corporations in France, as it allows public offering of shares. Modified for large companies requiring external capital by turning to the market, it is a very complicated form of company, not generally suitable for a first incorporation in France.
An SA requires a minimum starting capital of 37,000 euros. This subsidiary structure is managed by a board of directors who must be shareholders and must also elect a chairman and a general manager.
- Société à responsabilité limitée (SARL)
It’s easy to set up and operate. It’s also suitable for small businesses. A SARL allows there to be more than one manager operating the company. The SARL is a widely utilized form of corporation in France, primarily due to the number of benefits it gives to small businesses, such as low capital requirements and reasonable rules and regulations.
- Société par actions simplifiée (SAS)
The SAS is an increasingly utilized type of company, primarily because of its flexibility and low capital requirements. The SAS is a more adaptable corporate form than the SARL.
There are two probable systems in this case: there can be a chairman and one or more Managing Directors. Or, if there is a sole shareholder who represents the company to others, the subsidiary will be called a “Société par Actions Simplifiée Unipersonnelle” (SASU). The SAS is basically a simplified form of the SA.
After selecting the legal structure that fits your company’s operations, the next step is to open a corporate bank account in order to keep personal assets and business assets separate.
Part of the company formation process is registering at the Centre des Formalités des Entreprises, after which you will receive the company registration number (SIRET). You will also be allocated an Extrait Kbis – a document that approves your company’s independent activities in France.
Taxation
The SA, SAS/SASU, and SARL structures are subject to French taxes, including corporate income tax, forgoing tax on profits and business tax as well as VAT.
Unless the preference for income tax has been taken, the executive income of these structures is deductible from the company’s revenues.
Social regime
The chairman of a SA or a SAS is categorized as an employee and thus common social security charges are applied to his income. But, it isn’t the same for the members of the board of directors in a SA.
And in the case of a SARL, there are two ways: the Majority Manager will be categorized as a liberal professional whereas the minimal or equal shareholder is considered as an incorporated employee and will gain from the social security regime.
You should take the time to familiarize yourself with the rules and regulations of France before agreeing on a structure that meets your needs in terms of development and level of control for the foreign company.
Whether you’d like to know more about types of companies in France or you are ready to incorporate your business, contact your Damalion expert now.
