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Company Formation in France

Overview :

France is the fifth economic power in the world. Its per capita income from goods and services is among the highest in Europe, and its labour productivity is one of the best in the world.

The internationalisation of the French economy is an established fact. It can be measured by the dynamic nature of its trade with Europe and the rest of the world. It can also be seen in capital movements: France is both a major investor in other countries and a favoured destination for international investment.

A policy has been launched in France to raise its growth rate and improve its trade balance. It is based on raising household purchasing power. It will necessarily involve winning new positions in the most dynamic regions of the world economy, developing its offering of innovative, high-value-added products and services, and a greater contribution from medium-sized firms.

Tax Regime in France :

Corporate tax is payable upon the net profits of the corporation and the rate is currently fixed at 33.33%, plus a surtax of 3%, which brings the effective tax rates to 34.33%.

Social security contributions are levied on gross salaries at 35 to 45% for the employer, and 14 to 20% for the employee. Separate general social security contributions are levied on all income at a rate of generally 10% in most cases. There are several different rates for VAT, which are currently applicable, but the standard rate is 19.6%.

Stamp or registration duties are payable on transactions on shares, real estate, intangible assets of all business entities. They also apply to leases, donations, successions, and some specific types of contracts. Rates vary from 1% to 15%. They are payable by the purchaser or the tenant, but payment may also be claimed from the vendor in certain cases.

Advantages of incorporating a company in France :
  • France has the second largest population in Western Europe behind Germany and a good purchasing power. These two elements make France an attractive market for a large variety of products and services. Like in many other western countries, the French market is open to competition and presents many opportunities to international businesses looking for a new venture.
  • The French workforce qualified and productive. Statistics show that France is the third country in terms of hourly productivity while annual and hourly productivity rates per worker is approximately 20% higher than other European countries.
  • France has one of the most well designed and efficient transport networks in the world providing a fast and reliable way to transport and deliver goods around France.
  • France has also introduced special taxation and financial incentives to encourage multinational companies to establish their regional headquarters in France.
  • France is located at the heart of Europe and shares borders with Belgium, Germany, Luxembourg, Switzerland, Italy and Spain. France also has direct links to the UK, Algeria and Tunisia. This unique location is a great asset for international organisations wanting to sell their products on the European and International market.

Types of Entities :

The sole trader :

A sole trader is considered to be an individual who carries on a business on a regular basis. The sole trader is wholly responsible for his/her business and even his/her personal possessions may be used as a guarantee in case of financial difficulty. There are four possible ways for an individual to go into business :

As a sole;
As a sole trader of an EIRL;
As the sole partner of an EURL;
As the sole partner of an SAS.

Partnerships :

Like a franchise, a partnership entitles you to use an established brand, but it allows you greater autonomy. For example, you may sell products other than branded goods, provided these remain a side line. You aren’t obliged to follow strict procedures, but can benefit from the knowledge and experience of other partners in order to adapt guidelines to personal and local needs. As with a franchise, there’s an ‘entry fee’, but it’s usually lower. Business decisions are generally made on a democratic basis rather than simply being imposed upon you, as with a franchise operation. A partnership contract is similar to a franchise contract, except that it isn’t standardised, but can vary from case to case.

Public limited company :

he incorporation of a Public Ltd Company requires a minimum of seven shareholders and a minimum capital of 37,000 Euros (225,000 Euros if the shares are to be quoted on the stock exchange). At least 100% of the share capital must be subscribed at incorporation; only 50% must be paid at the set up. The liability of shareholders is limited to the amount of their investment. The shareholders meet at least once a year to approve the annual financial statements and to decide whether profits will be distributed or retained.

Private limited company :

SARL may have no more than 100 shareholders. Shareholders are liable for their capital contribution. As a common practice, standard share capital is 7,500 euros, 20% must be paid up at the set up. It could be reduced at only 1 euro. SARL is run by one or more managers, who may be appointed by the articles of incorporation or by a majority decision of shareholders. They may be chosen among the shareholders themselves or among third parties. If the manager is a non EU citizen, he or she must obtain a residence permit or receipt of statement at the “prefecture” (administrative authority). The manager makes all management decisions on behalf of the company and he/she may be held personally liable under civil and criminal law.

General Partnership:

A general partnership is a commercial company form in which all of the associates are considered as merchants and jointly and severally liable for the partnership’s liabilities.   Despite this significant drawback, SNC’s are often used because of their flexibility (no minimum share capital, no Board of Directors, minimum of two partners, possibility of dividend rights existing independently of voting rights and capital contributions). The SNC is not directly subject to income tax. Profits are taxable as part of each member income in proportion to his/her interest in the partnership.

Limited Partnership:

The SCS structure, seldom used in France, includes :

  • One or more general partners who manage the company and are responsible for debts incurred by the company;
  • One or more limited partners whose liability is limited to their capital contribution. Limited liability partners are not allowed to participate in the management of the company. Their legal status is similar to the one of a partner of an SARL. There is no legal minimum capital.

Limited Partnership by shares :

Similar to the previous category except that the shares are negotiable and that the status of the limited liability partners is similar to a shareholder’s in a SA. A minimum capital of 37,000 euros or 225,000 euros if the SCA is quoted is also required.

Time Period:

Usually, Incorporating a Company takes about 8-10 days.