At first glance, the process of incorporating in France may seem to be a lengthy and daunting task. Our team is here to make the experience of starting a business in France as simple as possible.
Starting a business in France can be done in a multitude of ways. Your business could take the form of a corporation with the limited liability traditionally tied to legal personality (ex: SARL or SAS), or take shape under a single ownership (ex: SASU, EURL). The legal status of the sole proprietorship is inherently simpler than that of the incorporated model with the LLC characterized by the separate legal personality of the firm and its shareholders.
The key features of corporate existence in France are defined in Article 1832 of the French Civil Code:
“A company is created by two or several persons who agree by contract to devote to a common enterprise property, or their own services, with a view to sharing the profit, or benefit from the savings, which may result therefrom. In cases set out by the law, it may be created by the will of one person. The members undertake to contribute to any losses”.
EU citizens and nationals from the European Economic Area and Switzerland are authorized to start a business in France. Foreign nationals, on the other hand, must be granted a temporary residency permit (APS), renewable annually, in order to be able to establish a business in France. Another option for members of the “qualified work-force” requires applying for a four year “talent passport”, another type of residence permit established with the goal of increasing the economic attractiveness of France’s entrepreneurial landscape.
See NovLaw’s practical guide on applying for France’s “Talent Passport” for investors (link next article on Passport Talent)
France has recently made it easier for foreign investors to set up their own businesses in the territory. France has become the top country in the EU for entrepreneurship, with the process becoming increasingly more cost and time efficient.
There are many different statutes offered to you when first looking to set up your business in France. In order to pick the right one for you, it is crucial to understand their distinctive characteristics, notably in reference to liability and taxation.
As a foreign investor in France, there are three essential types you will need to know. The LLCs (SARL) and Simplified Joint Stock Companies (SAS) are the two most commonly applied statutes to business ventures in France. Both forms can be incorporated with minimal capital and a single shareholder. They form private companies that can be publicly traded (SA) once they have outgrown the original intent of their initial statutes.
● The Limited Liability Company (SARL ‘société à responsabilité limitée’)
● The Simplified Joint Stock Company (SAS ‘société par actions simplifiée’)
● The Public Limited Company (SA ‘société anonyme’)
The French interpretation of the American or British LLC seen in the SARL is characterized by a relatively simple and clear-cut administrative structure but can quickly become inadequate once the company grows. Following the Macron Act of 2015 for economic growth and activity, the SARL has become increasingly adaptable and is a potential area of interest for foreign investment. A SARL requires the involvement of at least two shareholders and is capped at a total of 100 participants. The company’s shares are non-transferable other than to close relatives and otherwise demand that the majority of shareholders sign off on the proposed transfer. The SARL is a traditional form of incorporation for French companies, with small and medium sized firms (PME) making up more than a third of the country’s GDP.
For foreign investors, the simplified joint stock company in the French SAS is the most attractive option when looking to set up a business in France. Its comparative flexibility, in both structural and substantive clauses, makes the SAS a valuable alternative to the widely popular SARL (limited liability company). The SAS resembles the limited companies found in the UK and US and is often employed in the case of a foreign parent company establishing a wholly owned French subsidiary.
The French joint stock company (SA) is similar to a public limited company and has certain strict conditions of formalities such as: (1) a minimum of seven shareholders involved; (2) an initial share capital of at least 37 000 EUR. This form allows the firm’s shareholders to limit their liability to the extent of the value of their given shares.
The single person limited liability company (EURL) is run as a limited liability shareholder company and resembles partially the trust function existing in common law practices in the US and UK.
In France, like in the United States, liability for pre-incorporation transactions are highly regulated and relatively strict in application. Acting on behalf of a corporation with proven knowledge of its unincorporated status makes the person jointly and severally liable for the liabilities signed while doing so. It is important to remember to file your articles of incorporation before entering into a contract on behalf the business (i.e.: signing a lease or hiring employees).
The French civil law system has codified its company law legislation within its Code of Commerce.
Seeking the help of specialized lawyers increases your chances of setting up a successful and sustainable business from the ground up.
France’s legal environment is complex and the list of incorporation statutes is extensive. The complexities inherent to opening a business abroad may lead you to require the help of experts either for your company’s incorporation process or in the application of a residency permit.
NovLaw is a forward-thinking Paris law firm with a noted expertise in French corporate law. Our team of corporate lawyers is expertly trained to navigate the intricacies and specificities inherent to the French incorporation process.
Step 1: Choose the Relevant Statute for your Business Venture
As a foreign investor, the most relevant statute for your business venture is most likely going to be that of the Simplified Joint Stock Company due to its inherent flexibility and high potential for contractual freedom.
For more detailed information on the other statutes available to you and your team, see the section above on how to choose between France’s different statutes of incorporation.
Step 4: Choose your Bank Wisely, Invest your Capital and Obtain a Certificate of Deposit
In order to properly start your business in France you will need to set up a minimum share capital within your chosen bank. In the case of EURL, SARL and SAS the minimum share capital has been symbolically set at 1 EUR with banks typically asking for higher investment. This sum entrusted to your bank can be unlocked once the bank collects your newly incorporated company’s K-bis, understood as the certificate of your company or its ID card. This process typically takes two weeks and is necessary to be legitimately recognized as a functioning and incorporate business on the French market..
Step 5: Register with the French Registry of Commerce and Companies (RCS)
The next step in your incorporation process is to make sure you properly register with the commercial courts. Your registration file should include :
– the required government registration form (M0 or P0)
– The signed statutes of the undertaking
– a copy of the required publication of the legal announcements in the journal
– a copy of the director’s identity card
– a certificate of domiciliation of the company
– The identification form of the ultimate beneficial owners of the company
Once the file has been compiled, the company is registered at the clerk’s office of the commercial court corresponding to the domicile of the registered office, either by mail or online at Infogreffe.
If the file is complete, the K-Bis extract will be sent within 24 hours, with the official number of the company: the SIREN or the SIRET.
Step 6: Obtain your company’s “K-bis”
The French version of a certificate of incorporation is called an “extrait Kbis“ and is understood as the company’s ID card. It is an official document issued by the Registrar Office of the Commercial Court and it confirms the corporate existence of your company and its registration in the Trade and Companies Register (RCS).
Step 7: Publish a Legal Notice with an Authorized Journal (JAL)
The following step is to announce the opening of your recently registered and incorporated company in an authorized legal journal of your choice. This is a step specific to the French corporate scene for the informal introduction of your company to the business world.
Step 8: Declare your Head Office
Determining where to incorporate your new business means determining your firm’s chosen nationality, competent courts in case of litigation and applicable tax regulations. With certain municipalities offering special rates on company real estate contributions (CFE) based on local business tax law.
Hiring a corporate lawyer to assist you in determining where to incorporate your firm increases your chance at creating a successful business in France.
French corporate law offers various possibilities for where to set up your firm’s head offices:
● Choose the residence of the legal representative or that of the individual entrepreneur
● Rent or buy the office, if the activity requires it. This important expense should be included in the business plan
● Use the domiciliary services of a business center that will provide a legitimate address, even if the entrepreneur does not live in the same city.