Being a developed and industrialized country with a sophisticated market and a highly educated workforce, France is a desirable place to set up a business.
France’s strategic geographical location and high-quality transport infrastructure enable businesses easy access to many geographical regions, including Europe, the Middle East, and Africa.
France has all the ethical assets in place to attract, develop and expand business no matter the size. In respect of this, companies looking to flourish in the international market have vast opportunities in France.
Starting a business in France involves various steps but the fundamental one is deciding what structure is ideal for the company’s operations in order to benefit from legal insurance. The legal structure selected will also influence the social status of its employees and the way the company will be taxed so it’s important to choose carefully.
We outlined below is a summary of the most popular different business entities in France.
French sole proprietorship (entreprise individually – EI)
This is the simplest legal form of company constitution in France. The founder of this company is fully responsible for all debts and obligations. There is initial capital required for this type of company in France. This is because the entrepreneur and the company are considered as one in the eyes of justice. There is no cost related to registration or fees associated with companies of this type. But, the entrepreneur has to pay income tax in the sector corresponding to their commercial activity.
French limited liability company (société a responsabilité limitée – SARL)
The SARL is a widely used form of company in France, primarily due to the number of benefits it offers to small businesses, such as low capital requirements and reasonable rules and regulations.
This type of business in France required at least two shareholders. And the liability of the shareholders is limited to the amount of their contributions. No more than 100 shareholders or legal entities can form a French SARL. The capital contributions of a French SARL can be made in cash or anything that has monetary value. The French SARL does not have access to the capital markets and its shares cannot be listed on a stock exchange.
French single-person limited liability company (EURL)
The EURL is considered a public limited company formed by a single shareholder and is subject to the same rules applied to a formal limited liability company with a few exceptions.
The value of the minimum capital needed is determined by the shareholder and will depend on the activity, the size of the activity, and the company’s capital requirements. The EURL profits are taxed on income tax in the shareholder’s name, although an alternative to corporation tax is possible.
The private limited liability company (Société d’Exercice Libéral à Responsabilité Limitée – SELARL)
The SELARL was created when the law adopted the rules of operation of LLCs to adapt them to the needs of the liberal professions. The rules governing the SELARL are very similar to those of the SARL, but they take into account the specificities and ethics of the professions for which they were created.
The public limited company (Société anonyme – SA)
The SA is a legal form primarily used by large companies in France, as it enables public offering of shares. A minimum of seven shareholders is needed in order to set up a SA. The shareholders can either be individuals or legal entities. The initial share capital is 37,000 EUR and the capital is divided into shares. The shareholders have limited liability to the extent of their share contribution.
Modified for large companies requiring external capital by resorting to the market, the SA is a very complex form of company and is not generally appropriate for a first incorporation in France.
A French SA is formed by a Board of Directors, a President, and a CEO. But, they can also be managed by a Supervisory Board and a Board of Directors.
The simplified joint stock company (Société par actions simplifiée – SAS)
SAS is a popular type of company in France, primarily because of its great flexibility and low capital requirements.
The SAS is practically a simplified form of the SA. As a result, many SAs have been modified into SAS.
For the opening of a SAS in France, a minimum of one or more partners is required, whether natural or legal, and the minimum capital is set freely by the partners and depends on the size, the activity, and the company’s capital requirements. Additionally, the appointment of an auditor is reserved for SAS of a specific size or with capital ties to other companies.
Lastly, the profits of such a company are subject to corporation tax.
Simplified single-person joint-stock company (SASU)
The SASU is a derivation of a SAS with the specificity of it being comprised only of one partner, singular or collective.
The rules pertained to a SAS also applied to a SASU with some particularities. Only a few operating rules vary from those applicable to SAS.
General partnership (société en nom collectif – SNC)
This business type is less common than the other types in France. At least two partners are required for its formation as far as a partnership is regarded.
The Partners are responsible for the obligations and debts of the partnership to the extent of their assets. No minimum capital is required and SNC shares cannot be sold unless the partners decide unanimously, without prejudice to a contrary clause in the articles of association.
Also, each partner is personally taxed on its share of income tax in the category of industrial and commercial profits.
Professional civil society (SCP)
This form of company enables several individuals exercising the same liberal profession to exercise it in common. They are then liable for their social debts. To establish this type of company, a minimum of two people is required. No minimum share capital is required.
Are you Interested in expanding your businesses to France, and require help with the formalities involved? Let’s go ahead and contact your Damalion expert now.
