A Guide to the Main Business Structures in France
Setting up a business in a different country is a big step and one of the first hurdles you need to jump is choosing the correct business structure. In France there are various different structures available from SARLs to SAs to EURLs and for the sole traders you can choose to set up a Micro-Entreprise as an Auto-Entrepreneur. But picking which one is right for you and your business is crucial. So here’s an easy-to-read guide that won’t have you scratching your head and reaching for your accountant on speed-dial.
SARL - Société à Responsibilité Limitée
A SARL is the equivalent of a Limited Liability Company. It’s a good choice for small and medium sized businesses because it is relatively easy to incorporate, manage and operate. There is also the option of transforming a SARL into an SA further along the line if the investor’s business has developed to such an extent that a change is necessary.
A manager needs to be appointed – called a gérant – who has a legal responsibility for the running of the company. Or a panel of directors can also be created called a “collège de gérants” and the minimum number of directors is one.
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If the company only has one director or shareholder or if the director holds more than 50% of the shares of the company, the burden of social security payments is incurred from the first day the company is formed. If you are the majority shareholder then you are treated as a self-employed person but if you are a minority or equal shareholder, then you are treated as a salaried employee. The salary is a deductible expense from company profits. You can also choose to have some of it paid as dividends instead. Any profits gained by the SARL will be assessed for corporation tax through company taxation.
When opening a business bank account for a SARL you need to deposit around €4,000. The minimum share capital was reduced from €7,500 to €1 but no bank would take you seriously if you were trying to open a business with that amount. (And it certainly wouldn’t cover the fees!) Whatever amount of capital you choose to start with, this figure must be included on all your official documentation, for instance letterheads, invoices and order forms. The deposited amount is "working capital" and can be taken out of the account for use at any time once the account has been opened. Bank accounts can rarely be opened remotely and most of the time banks require a meeting in person.
SAS - Societé Par Actions Simplifieé
An SAS is a Simplified Stock Company which is perfect for creating a joint venture between a French company and a foreign partner. Previously, French companies had found it difficult to enter into joint-venture relationships with foreign companies because of the rigidity of French corporate law but SAS companies are increasingly finding favour with foreign investors who wish to set up subsidiaries in France.
In an SAS, a president and one shareholder is required. They can be the same person in which case the company will be incorporated as a SASU - Société par Actions Simplifiées Unipersonnelle.
The only person authorized to act on behalf of an SAS company is its President. An SAS may not have two Presidents, however, a Director General (“directeur général”) may be appointed and granted powers similar to those of the President. The President is considered an employee of the company and so pays normal employee social security contributions except for unemployment insurance.
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Opening a business bank account for an SAS requires an initial share capital deposit of around 4,000 euros as there is no minimum required anymore. An auditor is required if the business controls one or more companies and it is also required if it exceeds two of the three following thresholds: €1,000,000 of total assets, €2,000,000 of turnover or 20 employees.
SA - Societé Anonyme
An SA is normally used by businesses that want to go public on the stock exchange or have lots of shareholders as there is no maximum amount of shareholders with this type of business structure. An SA is designed to help fundraising by encouraging new investors to contribute to the share capital. So any businesses with strong potential for expansion, investment and profit are likely to go for this structure.
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There must be a minimum of seven shareholders and the company is run by a board of directors called a conseil d’administration and have a président directeur-général (PDG) which is equivalent to a chief executive. (But be warned, the PDG can be fired at any time by the board!)
The minimum share capital with an SA is much larger at €37,000 and is probably the most difficult sort of company to start because the registration requirements are elaborate due to the fact that an SA can sell shares on the public stock exchange. An auditor called a commissaire aux comptes has to audit your accounts every year. And with regards to tax and social security, the senior management are considered as regular salaried employees of the company.
EURL - Entreprise Unipersonelle à Responsibilité Limitée
An EURL is a limited company but is owned by just one person, a sole trader.
The owner's liability for debts is limited to the value of their investment (it can be opened with as little as €1 but again there’s not many banks that would approve of such a small investment). Capital can be entered by way of cash or assets and for a small business there is no need for an independent valuation of assets entered as capital.
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Regarding taxes, an EURL can choose whether to be taxed through the personal income tax system (so no distinction between profits of business and income of the owner), or to pay company tax on the profits in which case your pay is a deductible expense from the company’s profits, or else you can be paid in dividends. But however you choose to take a salary, social security contributions as a self-employed person will need to be met.
ME - Micro-Entreprises or AE Auto-Entrepreneur
There’s a simple business status available to those who just want to establish a small business in France which is called a Micro-Entreprise. It is also known as auto-entrepreneur status and is popular because the registration can be done online and the tax and accounting rules are simplified. (Although you have to be able to either read or speak French in order to do this, so make sure you understand everything before you fill in the forms as mistakes will delay the process and things can get a little complicated if your business is very unusual or crosses over into multiple business categories.)
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There are also turnover limits for MEs and auto-entrepreneurs, depending on what type of service or product you offer. The best way to check your status is to click here on the Auto-Entrepreneur website https://www.portail-autoentrepreneur.fr/academie/statut-auto-entrepreneur/plafond-chiffre-daffaires. MEs and auto-entrepreneurs don’t need to have a corporate business bank account as such, but they do need to have a separate account which is used only for their business dealings.
For MEs and auto-entrepreneurs, there is no corporation tax to pay and if you don't earn enough to pay tax then tax is zero, but social charges still need to be paid no matter how much you earn. The tax rate applied assumes a fixed rate of expenses depending on your activity type and an ME cannot charge or recoup VAT and cannot deduct expenses.
One of the big advantages is that an ME or auto-entrepreneur doesn’t need to pay for an accountant. However, an unalterable log of incomings and outgoings (for example not an Excel file but a handwritten log that can't be changed) needs to be kept. Although a chartered accountant is not necessary for an ME, it may be worth spending a bit of money on one if you’re nervous or confused about tax, and also to save you from the headache of dealing with French paperwork.
So now we’ve covered the main French business structures for you, if you need any further help, just download our free detailed guide below on how to start your French company, or go to our page“opening your business in France” where you can also find details on opening a bank account, or finding an accountant. Alternatively you can email your questions to us through our contact page or call us on 0033 (0)1 53 57 49 10.
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