#AFrenchStart: Under what legal form should I set up my business in France ?

Apr 19, 2022 | Invest in France

Choosing a legal status adapted to your project is fundamental to starting your activity in the best conditions. Indeed, a too rigid legal structure can slow down the development of your company. Then, a type of company that does not allow for heavy investments can also be an obstacle. In this respect, the choice of the legal entities is important. Discover the three main types of legal forms in France!

Step 2: Choose your corporate legal form in France

In the #AFrenchStart sequence, we will give you the keys to a successful launch in France! The first step is to choose the business structure of your establishment. This second step will see which legal form to choose depending on your investment projects in France as foreign investors.

Thanks to essential reforms, you probably know that creating and managing a business has become more accessible in recent years! Indeed, many services are now available online! For example, tax services are at your fingertips thanks to the Tax4Business portal, while a one-stop-shop has been created for the administrative procedures involved in setting up a business.

Read more: Danish CEO: France is less bureaucratic than you think and better than its reputation!

Want moderate flexibility for your legal form?

First of all, the status of a limited liability company (SARL) offers you moderate flexibility in your organization.

About the status of the director, from a social security perspective, the director of a SARL is considered an employee only if they are not a majority partner and they receive a salary. If they are a majority partner, they are considered self-employed individuals in social security terms.

Regarding registration duty, the sale of a partner’s shares in a SARL is subject to registration duty equal to 3% of the sale price (after an allowance of €23,000, depending on the number of shares sold to the total number of shares issued by the company). Generally speaking, registration duty is paid by the buyer. However, the seller and buyer are jointly liable for registration duty.

Learn more: 10 tips for setting up a business structure in France

A lot of common points between limited companies

The simplified limited company (société anonyme par actions simplifiée, SAS) and public limited company (société anonyme, SA) offer respectively a very high organizational flexibility and a shallow one. The SAS being particularly flexible, it is recommended when a public offering is unnecessary, and no stock market listing is desired. On the other hand, for larger projects requiring heavy investments and calling for external funds, the SA is more adapted.

Regarding the company’s governance, in a SAS, only the President can make decisions and manage the company. On the other hand, in a SA, collegial bodies are necessary for addition to the CEO: the Board of Directors or the Supervisory Board. It is required to gather at least seven partners to constitute a SA.

However, the director is considered an employee from a social security perspective. If they do not hold an employment contract alongside their role as a director, the Director is not eligible for unemployment coverage, which is available solely to employees.

Regarding the registration duty, both sales of shares are subject to a registration duty of 0.1% of the sale price. However, in the same way as the limited liability companies, generally speaking, registration duty is paid by the buyer. And officially, however, the seller and buyer are jointly liable for registration duty.

Learn more: Business environment in France: regulations, available government aid, social security, and tax environment

Statutory auditors: when do I need it?

Statutory auditors are mandatory in some situations

First, it is compulsory if the company exceeds two of the following three thresholds at the end of an accounting year: a balance sheet total of €4,000,000 or more; or a turnover of €8,000,000 or more; or 50 or more employees on average. The term of office is six years.

Also, it is mandatory if, taken as part of a company group, the company is a controlling company that forms, together with the companies it controls, a group that exceeds two of the following three thresholds at the end of an accounting year. These conditions are a balance sheet total of €4,000,000 or more, a turnover of €8,000,000 or more, or 50 or more employees on average.

To be clear, the company is a controlled company that exceeds two of the following three thresholds at the end of an accounting year: a balance sheet total of €2,000,000 or more; turnover of €4,000,000 or more; or 25 or more employees on average. In this case, the term of office is six years or three years in case of option for statutory audit of small companies.

 

So, contact us for free guidance on your investments projects in France!

Article written by Samy Trabelsi

Maxime Krummenacker - Communications Manager - Business France
Maxime KRUMMENACKER
Communications Manager
Maxime Krummenacker - Communications Manager - Business France
Maxime KRUMMENACKER
Communication Manager

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