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 9th February 2010
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Introduction: is your French business viable? Being self-employed in France is possible – you just have to look around you at the many thriving cafés, shops and artisans. However, it is without a doubt a process that needs a lot of time and preparation if you are to succeed, and enjoy what you are doing. The French system is complicated, unwieldy and at times downright illogical. To make it work for you you need to be clear on every aspect – from what you are going to do to how you are going to do it and the level of payments you have to make to the state. These are likely to be more than expected, and if not planned for can put a new small business under severe strain. The French Chamber of Commerce estimates that 70% of businesses close after their first year. Roger Moss who, with his wife Julia, has run a business designing websites and producing illustrated travel features in France since 2003 has this to say: ‘In the UK the system is much more liberal. There a person can be self-employed and do whatever he wishes to make a living, and the tax regime and other contributions are simplified and generally logical. Here in France the system can be opaque, inflexible, excessively bureaucratic and therefore costly, severely limiting your ability to earn a decent living. I was self-employed in Britain for 20 years – here I can’t be self-employed in the same way. It is very frustrating.’ One of the biggest problems for any self-employed business, whether an artisan or small company, is the amount of money you have to pay out as soon as you start up. In France there are not only tax charges to take into account, there are also cotisations (social charges that cover health, pensions and benefits such as unemployment and child - think of it as the equivalent of national insurance in the UK.) These start off at a high rate and rise yearly for the first three years regardless of your income. For example, a single, self-employed person can expect to pay 40% of their total net income (after running expenses but before income tax) in social charges. So, say you have earnings of 45,000€ HT (not including TVA/VAT), with 7,000€ running costs leaving you an income of 38,000€; in your first year you will pay about 3,500€ in social charges; the second about 7,500€; in the third about 11,500€; and in the fourth about 9,000€ (the third year is always the steepest). You will also have a tax bill in the second to fourth years in the region of €3-4,000 pa. The contributions for the 1 st and 2 nd year are based on a fictitious income. If you earn more than that amount, you will have to pay the extra contributions in the third year, as well as year 3’s normal contributions. However, even if you do not earn enough to pay tax (20,000€ profit per year), you will still have to pay hefty cotisations. Take for example, John Hughes, who by the end of his second year of being in business as a gardener had a profit of €10,000 on a turnover of 20,000€. That year he paid €5,000 in social charges. The next year, his third, he had a similar turnover but paid even more cotisations - about €7,000. ‘There are times when I wonder why I bother,’ says John. ‘It can be very dispiriting.’ If you’re not prepared for this, the bills dropping through the letterbox can be soul-destroying. Paying by direct debit is an option that can make these payments more manageable. The best way to cope with cotisations, however, is to have money put aside for three years worth of payments. This gives you a chance to get your business under way and have some understanding of how things work. Andrew Bournemouth who, with partner Anne Poole opened Chez Christies in 2004, specialising in English goods, including homemade Christmas cakes and new and used English books, comments: ‘The French system does not favour the self-employed as charges and taxes are high. You need to be able to fully finance yourself for a minimum of three years to be able to get a good start.’ Roger and Julie created a SARL but that has not been the end of the problems. ‘In our SARL company statutes we were required to declare that we were going to take a set wage per annum from the business, but this has rarely been taken in full. Even though the accountant can see the reality of our trading situation, the specified amount is still entered on our tax return. In fact, the cotisations and accountants' charges add up to just about what the business made last year.’ Roger and Julie decided to take a set income per annum out of their SARL – but you don’t have to. You can opt to take a director’s remuneration, ie you take a variable amount of money depending on how well the company is doing. For those who want to run a shop or a bar and want to hire someone to help out, be careful. The cost of hiring personnel in France is high – which goes some way to explaining the country’s unemployment rate. Not only do employers have to cover an employee’s cotisations, it is also extremely difficult and costly to get rid of someone without paying them substantial amounts of money, whether you’re firing them because they are incompetent, because you can no longer afford to employ them, or are closing down your business. This is why many French small businesses ‘employ’ only family, to the extent that they will close down for the time they go on holiday, rather than employing outside staff. Take heart, though; the big French picture for the self-employed is not all doom and gloom. Faced with rising unemployment, job insecurity and a stagnating marketplace, the French government has introduced a range of incentives, which include simplified legislations, tax breaks, subsidies and grants, designed to encourage French and foreigners alike. For example, now there are business cheque d'emploi giving employers the flexibility to take on casual labour without having to pay full cotisations – for the usual wage of 8.67€ per hour, expect to pay 12€ including cotisation payments. Also, the bottom line is that many Brits do come to France and successfully run a business, whether it be a gite, a small shop or as an artisan. The trick is to be thoroughly prepared so you can handle any start-up shocks, especially financial ones. See the results of FrenchEntrée's survey on what is it like to work in France? BEFORE YOU BEGIN Once you've decided what you want to do in France, you need to discover not just whether your business is viable but also whether you will be able to practice it. Is your profession regulated? In France, many professions are regulated and you may find that to practice you will need to show qualifications or even get French qualifications (on top of the ones you already have) before you can trade. This is most likely to effect those in profession libérale (see below) but other professions and trades are also affected – for example, those wanting to practice alternative medicine such as reflexology. So, before you go any further, find out the status of the profession/trade you propose to do – and that you have the necessary qualifications to do it. Do this by visiting your local Chambre de Commerce or Chambre de Metiers. You can also take a look at APCE which lists alphabetically those professions that are regulated, and what you need to do. See also NARIC. To register, what you will need to show that you are qualified varies not just amongst trades and professions but also individual Chambres. Be prepared with as much paperwork as possible from certificates as well as documents that confirm your identity (translated into French). A photographic record of your work will be very useful. As well as determining whether you need to be regulated, your profession also determines which business category you fit into and therefore what 'regime' you come under. Your 'regime' determines what taxes and social charges you pay and to whom. This should be relatively simple, but if your profession is different to the norm, or is not easily categorised, then be prepared for a lot of to-ing and fro-ing. It took David Turner one year to find an organisation that would accept him. ‘I’m a freelance writer, working as a journalist for newspapers and magazines, as well as being the author of non-fiction books,’ he says. ‘Neither of the two organisations who were supposed to oversee my payments would accept me because I did not fit into any existing categories. They did not have anything for a freelance journalist, and to fit in as an author I had to have royalties, which is not the case for much of what I do.’ John spent almost a year going between two different organisations before he was accepted. ‘I just kept on writing and phoning until one accepted me,’ he says. 'I knew that if I didn't, some day down the line I would be hit with a bill for a back payment of thousands of euros, because of course it would not have been my fault that no orgnisation would accept me!' If in doubt about which category you come under, or are struggling to find one to take you, track down a French business that’s similar to yours and ask them what category they belong to. And be determined! To find out more about registration you should visit your local Chambre de Commerce or Chambre de Metiers (trades). Details of where to find them will be in the phone book or ask your maire. These, however, are the main categories: * Artisan Generally, manual-based professions from building (builder plus electricians, painters and decorators) but also professions such as bakers, mechanics and even hairdressers. Artisans are expected to have both qualifications and/or experience. Check with the Chambre de Metiers if you are unsure whether you fit into this category. * Profession Libérale These are further categorised into: - Legal - Medical/Para Medical - Technical - Artistic/Teaching Included in this are also architects and surveyors as well as accountants and insurance agents. As well, this category covers those in independent occupations with an artistic, personal service or intellectual role – authors, journalists, web designers, illustrators, musicians, painters and interpreters. For a complete list of profession libérale see the Chambre Nationale des Professions Libérales * Commercial and Industrial (including commercial agents) Fairly self-explanatory – this category covers those whose work is commercial or industrial such as running a shop, café and restaurant. One of those peculiarities of French bureaucracy is that this category includes letting property that is furnished – but not unfurnished. It also covers those such as estate agents who act as a representative for a company (other than themselves) in the negotiation for the sale, purchase or letting of contracts for goods or services. * Agriculture This covers people whose whose income comes from farming activities whether animal or arable. Is your business viable? Once you know you can practice, the next step is working out whether there is the demand for the service you will be offering. The most popular professions amongst expats appear to be in hospitality (gites, bars and restaurants), building (painters and decorators, builders, electricians etc) and real estate. If you plan to do the same you need to do your research so you can be sure there is a market that you can tap into. If it is competitive, is there something else you can offer that will make you different? The best way to do this, is to sit down and make a business plan which not only looks at the marketplace but takes into account all your costs. For help on how to do this see Doing a Business Plan For more information on running a gite in France see FrenchEntrée's comprehensive Gite Zone. NEXT: LEGAL STRUCTURES: WHAT ARE THEY & HOW TO THEY WORK? By the FrenchEntrée team With thanks to writer Heidi Fuller-Love, and solicitor Julia Jones of Bright Jones Law Firm (Toulouse), www.brightjones.com * Some names in this article have been changed Working in France Home Page Looking for a property in France? Use FrenchEntrée's Property Finders to help you find your property and to help you through the buying process 
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