Business formation and entity choice in France

What are the most common types of businesses that can be established in France? 

In France, an entrepreneur can choose between two kinds of legal structure: sole trader (entreprise individuelle) and partnership/company (société).
There are two kinds of entities in France, civil (mainly restricted to either professional services or real estate activities) and commercial ones (engaged in trade or business).
A sole partner may also choose to run a business without creating a company.

Regarding the partner/shareholder liability, several kinds of commercial companies can be used as corporate veils in order to protect the partners’/shareholders’ personal assets in case of bankruptcy.

Depending on the form of the company, the rules applicable may be different and cover the following subjects:

  • Structure of the management and managers’ level of power
  • Shareholder meeting quorum and majority rules
  • Minimum capital required
  • Sale of shares to third parties
  • Audit requirements

The rules, rights, and obligations are the same for all companies whether French or foreign.
There are numerous types of company structure which are provided by French commercial and civil law, however today the great majority of trading entities in France have taken one of the following forms:

  • Entreprise individuelle – “One-man business” – EIRL (There is no notion of capital)
  • Société anonyme (S.A.) – “Corporation”, (The minimum capital requirement is €37,000)
  • Société à responsabilité limitée (S.A.R.L. / E.U.R.L.) – “Limited liability company”, (The minimum capital is €1)
  • Société par actions simplifiée (S.A.S. / S.A.S.U.) – “Simplified joint stock company”, (The minimum capital is €1)
  • Société en nom collectif (S.N.C.) – “General partnership”, (The minimum capital is €1)
  • Société civile (S.C.) – “Civil company”. (The minimum capital is €1)

The corporate veil of SA, SAS and SARL companies limits the liability of their shareholders to the amount of their share capital except for instance in case of fraud. These entities have legal personality and can have a maximum duration of 99 years (renewable).

Before setting-up your legal structure, you need to know if you will be a sole partner, have several partners or just need representation in France.

It should be noted that for EURL, SASU, SAS, SARL, SA, SNC companies, the appointment of a statutory auditor is mandatory whenever the company exceeds 2 of the following thresholds (threshold applicable as from the 1st accounting year ending on May 26th 2019 or after – previous threshold are given between parenthesis):

  • Balance sheet > € 4 million
  • Yearly pre-tax turnover > € 8 million
  • Average number of employees > 50

Specific threshold applies for groups
Depending on the type of business and level of investment, foreign-owned businesses may decide to initially set up a Branch business in France rather than a separate legal entity. When creating a Branch, consideration should be given to both risk and tax issues. A Branch business could be more cost-efficient to establish and maintain, as the French filing and administrative obligations are significantly less than a company structure. 

How long does it take to establish a legal entity in France?

The incorporation procedure in France is a straightforward process. Typically, it takes approximately 3 weeks to complete the incorporation of a subsidiary or register a Branch once all relevant documentation has been gathered. 
Tax registration in France

What are the tax filing requirements in France? 

Overview

The incorporation of a new company with the French Trade Registry, triggers automatically registration with French Tax Authorities.

As an overview, main tax filings include:

  • Corporation tax (CIT)
  • Value-added tax (VAT) and VAT related returns (Intrastat returns – DEB, EC Sales List – DES)
  • CET tax, which is sub-composed of CFE and CVAE Tax
  • Social Solidarity Contribution (C3S)
  • Tax on Company cars (TVS)
  • Tax based on gross salaries (such as training tax, apprenticeship tax, tax on disabled, building tax)
  • Annual fees return (DAS2)
  • Loans and interests return (IFU)
  • Rental return (DECLoyer)
  • Simplified transfer pricing return
  • CBCR notification

Depending on the size of the company, its business activity and relevant thresholds other tax and/or specific tax filings can be required. 

Are new companies required to apply for employer identification numbers? 

Yes, all new companies with employees in France must register for employment taxes. 

What is the tax authority in France? 

French Tax Authorities (“Impôts”)
https://www.impots.gouv.fr/portail/

What is the process of applying for a tax identification number in France and what is it called?

The process of applying for a tax identification number in France is called Tax Registration. New companies are automatically registered for tax when French entity is set up in front of Trade Registry.

Other registrations

Are there any other registrations required in France?

Depending on Business operated, some specific registration or agreements could be necessary (e.g. bank, insurance, regulated activities, health or training)

 
 

Key contacts 

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Idriss Belloucif

Partner
E: [email protected]

 

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Beatrice Belouet

Partner
E: [email protected]