Starting your business in France – The choice of your company form
We helped many of our customers to set up their business and start their activity in France over the past few years. To help you find the best option, we have summarized the different company forms you could use in France. There are often some confusions about which solution should be chosen.
The choice of legal form will depend upon the entrepreneur’s marital situation and assets, and also, obviously, upon the project (is the entrepreneur setting up a business alone? does the business need substantial investment?) and the business activity envisaged.
These aspects must be considered with great care, as the various options have different legal, tax and social consequences. It is better to be assisted by a legal professional. Here are the main characteristics of the most common forms:
- The public limited company (SAS):
- Made up of at least 7 shareholders with minimum €37,000 of capital
- Led by a President and a Chief Executive Officer (who may be the same person) and by a Board of Directors composed of at least 3 people
- Reserved for projects of a certain size, usually when shareholders are not directly involved in the activity of the company and want to exercise a power of control within the board of directors
- Shareholders’ liability limited to the amount of their contributions
- The simplified joint stock company (SAS):
- In general SAS is not suitable for a business creation by a natural person[1]
- The SAS must have at least two partners, responsible within the limit of their contributions
- There is no minimum share capital amount required
- Quite flexible for shareholders through possibility of freely organizing its operation in the articles of association
- The simplified single-person joint-stock company (SASU):
- Special category of SAS with only one partner
- Like SAS, it is rarely adapted to a start-up company
- Only a few operating rules differ from those applicable to SAS, simplifying legal formalism in particular
- The limited liability company in France (SARL):
- Most commonly used type of business in France
- At least 2 partners
- Simple structure
- Partners’ liability limited to the amount of their contributions.
- No minimum capital required
- The single-person limited liability company (EURL):
- Can be considered as a special category of limited liability company as the EURL has only one shareholder
- Operating rule very similar to SARL
- Main difference with SARL concerns its tax system: its profits are automatically taxed on income tax in the shareholder’s name, although an option to corporation tax is possible
- The real estate company (SCI):
- Special purpose company dedicated to owning only unfurnished real-estate properties
- Allows purchase of the property by multiple persons
- Provides stability and continuity in the ownership and management of family property
- Facilitates the transfer and ownership of property
- Avoids the constraints of French inheritance laws
- Creates tax advantages
- Protects the family home from business creditors
- Professional civil society (SCP):
- Allows several persons exercising the same liberal profession to exercise it in common. They are then indefinitely liable for social debts
- No minimum capital required
- Profits are taxed on income tax at the level of each partner
As shown above, there are various types of legal forms for businesses in France. Seeking professional advice is a must in order to find the best custom solution. If you have further questions regarding the process of company set up in France, please contact us.
[1] A human being, as opposed to a “legal” person, which is an entity or group considered collectively as a single individual for legal purposes. Source: https://legaldictionary.net/natural-person/
