An overview of the main business structures in France
When it comes to doing business in France, one of the critical decisions entrepreneurs face is choosing the right business structure. France offers a range of options, each with its own set of advantages and disadvantages. In this article, we’ll explore three popular business structures in France: Sole Trader (Entreprise Individuelle), SAS (Société par Actions Simplifiée), and SARL (Société à Responsabilité Limitée). Understanding these structures is crucial for anyone looking to start or expand a business in this beautiful country.
Sole Trader
(Entreprise Individuelle)
Limited Companies
(SARL, SAS, SA etc.)
Partnerships
(SNC, SCS, SCA)
Sole Trader, the simplest company structure in France
An overview of the Sole trader (Entreprise Individuelle) legal business structure
If you are looking to start a business in France, then choosing the Entreprise Individuelle status may be the easiest and quickest way to get you started.
Entreprise Individuelle or Entrepreneur Individuel are the French equivalents of the sole trader, self-employed or sole proprietorship business structures that exist in some English-speaking countries.
The sole trader is a simple legal structure because it involves only you as the business owner (no other partners), no share capital is required and there is no need for articles of association.
The sole trader status is an unlimited liability business structure i.e. you and your business are treated as one entity not only for tax purposes but also in relation to debts. This means that if God forbid, your business fails then the company’s creditors could sue you personally for any overdue debts and even seize your personal belongings. However, sole traders who registered their business as of 15 May 2022 now benefit from a more advantageous regime under which their liability is limited to the business assets.
Sole traders have reduced obligations in terms of both tax and accounting. They report their business profits or loss at the time of filing their personal tax return and they don’t need to prepare annual accounts to publish to the Commercial Court.
Registering an Entreprise Individuelle is straightforward. Create an account on INPI Connect, and get started!
It is worth mentioning that in France, many consulting activities and intellectual professions fall within the scope of what we call Professions libérales, which is simply a subcategory of the sole trader legal structure.
The pros and cons of the Sole Trader status
Pros of the Sole Trader in France
✅ Simplified registration process
✅ No share capital required
✅ Reduced accounting obligations (no annual accounts)
✅ As of 15 May 2022, liability limited to the business assets
✅ Advantageous tax regime, especially the micro-entreprise regime
✅ Under certain conditions, the business losses can be offset against the others household income for income tax purposes
Cons of the Sole Trader in France
❌ Unlimited liability (before 15 May 2022)
❌ No shareholders, so can’t take in investments
❌ Cannot benefit from the advantageous tax regime of dividends
The different Limited Liability Companies in France
You’ve made up your mind about setting up a business in France and have decided to go the Limited Liability Company route, this is awesome! Your project is starting to shape up.
There are many limited liability company structures in France so, how do you know which one is right for you among the SARL or EURL, the SAS or SASU and the SA? Hopefully, after having read this article, you will be able to make an informed decision about the legal structure you want for your business.
When deciding which company structure to choose, you need to consider the followings.
1. The social regime of the director’s remuneration
Some directors will be treated as employees (Assimilés-salarié) for social security purposes while others will be treated as non-employed workers (Travailleurs Non-Salariés or TNS). There are differences between the two in terms of both cost and social benefits.
2. The share capital you are willing to invest
Some company structures require a minimum share capital.
3. The ease of transferring shares to an existing shareholder or to an outsider
Not all company legal structures are equal when it comes to simplifying the process of transferring shares to a family member or selling shares to an outside investor.
4. The number of shareholders
Some legal structures require a minimum number of shareholders.
5. The funding needs
Some legal structures are allowed to trade their shares publicly while others are not.
The Private Limited Companies in France (LTD): SARL, EURL, SAS and SASU
The SARL and the SAS are the main private limited company structures in France.
When the SARL is founded by only one shareholder it is called Entreprise Unipersonnelle à Responsabilité Limitée (EURL) and similarly when the SAS is founded by unique shareholder it is called Société par Actions Simplifiées Unipersonnelle (SASU).
The features of the SARL/EURL:
SARL stands for Société À Responsabilité Limitée, Private Limited Liability Company.
- Number of shareholders: From 2 to 100, individuals or companies. Only 1 shareholder for the EURL
- Shareholders’ liability: Limited to their investment in the share capital
- Directors: One on more directors. Individuals only. Can be among shareholders or not.
- Share capital: No minimum.
- Directors’ social regime: Directors who own more than 50% of voting rights are non-employed workers or TNS. Directors who own less than 50% of voting rights are treated as employees for social security purposes (assimilés-salarié) except for the statutory unemployment benefits to which they are not entitled and so they do not contribute to either.
This means that a TNS director don’t get payslips for their salary. Their income is declared annually to the social bodies through their individual income tax return which allows the social bodies to calculate the social contributions due.
On the other hand, the assimilés-salariés directors get monthly payslips for their salary and there social contributions are paid monthly through the French Full Payroll Submission system called the DSN. - Tax regime: Corporate tax or Individual income tax as an option and with conditions.
Pros of SARL Business Structure in France
✅ Limited liability
✅ Ease of transfer of shares (depending on the company’s articles of association)
✅ Tax benefit (choice between corporate tax and individual income tax)
✅ The TNS status of the controlling director which remuneration costs less to the company in terms of social contributions (between 30% and 40%) compared to the assimilé-salarié status of the SAS(U)’ directors.
Cons of SARL Business Structure in France
❌ Complex setup
❌ Limited access to capital as shares cannot be publicly traded
❌ No payslips for the TNS director’s salary which can make it difficult to prove income to rent an apartment or to apply for mortgage for example.
❌ Dividends paid to TNS directors are subjet to hefty social contributions (between 35% and 45%)
❌ Stronger accounting, tax and regulatory requirements compared to the Sole Trader status
❌ The content of the articles of association (statuts) is mostly governed by the French Corporate Law which restricts the flexibility compared to the SAS/SASU
The features of the SAS/SASU:
- Number of shareholders: 2 minimum. Only 1 shareholder for the SASU. No maximum.
- Shareholders’ liability: Limited to their investment in the share capital
- Directors: One director (Président). Zero or more general managers (directeurs généraux). Can be among shareholders or not.
- Share capital: No minimum.
- Directors’ social regime: The Président and the general managers are all treated as employees for social security purposes (assimilés-salarié) except for the statutory unemployment benefits to which they are not entitled and so they do not contribute to either.
- Tax regime: Corporate tax. Personal taxation on option and with conditions.
Pros of SAS/SASU Business Structure in France
✅ Limited liability
✅ Ease of transfer of shares and ease of raising capital since SAS can issue various types of shares, including preferred shares, which can be attractive to investors
✅ Flexbility: The content of the articles of association can be tailored to the specific needs of the shareholders on many aspects
✅ Tax benefit for the SAS/SASU under the corporate tax scheme since the dividends paid to shareholders can be subjet to the 30% flat tax and are not subjet to further social contributions as it is the case in SARL for TNS directors and shareholders
✅ SAS/SASU shareholder(s) can opt for the individual income tax scheme as opposed to the coporate tax scheme. This can be advantgeous for sharholders who want to maximise disposable income and don’t worry much about social security and pension contributions in the short term
✅ The SAS/SASU directors receive payslips for their salary which can be useful for renting an apartment or applying for a mortgage
Cons of SAS/SASU Business Structure in France
❌ Complex setup
❌ Since SAS/SASU directors are assimilés-salariés (treated as employees for social security purposes), their remuneration is subject to both employee’s social contributions (c. 25%) and employer’s social contributions (c. 40%) which make their remuneration more expensive to the company compared to the TNS‘s remuneration in the SARL
❌ Stronger accounting, tax and regulatory requirements compared to the Sole Trader status
Looking to Register Your Company in France?
Are you considering expanding your business to France but feeling overwhelmed by the intricacies of company registration and selecting the ideal business structure? Our expert team is here to guide you every step of the way. Whether you need assistance with the intricacies of French company registration or need help in choosing the right business structure tailored to your unique goals, we’re here to simplify the process.
Don’t hesitate to reach out to our experienced professionals today. Your path to success in the French market starts with a single click – get in touch with us now and let’s embark on this journey together!