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3rd September 2010
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 Starting a business in France: which legal structure? Unlike in the UK, where you can decide on an idea today and start the business tomorrow, in France the process can take up to a month so you need to allow plenty of time.Before you start, we would advise you to seek as much professional help as possible as the French system is complex and it is best to have an expert guide you through. A solicitor really is a must as s/he will be able to talk you through the best legal and tax structure to suit your type of business and growth rate. There are also many government organisations who not only offer advice, they are also the place to go for information on grants, tax concessions. For more information on where to go see Top Tips and Helpful Organisations You've done your business plan and are confident that your business will work. You also know that you can practice. Your next time is to choose the legal structure under which you will operate. This will either be as a sole trader or as a business with multiple ownership. *** SOLE TRADER Under this category are businesses run as an Enterprise Individuelle (EI) or a limited company called an EURL. Enterprise Individuelle (EI) also known as Travailleur Indépendant: This is a popular status for the self-employed, such as those categorised as profession libérale or artisan, who anticipate a modest turnover and do not intend to engage in large-scale financial activities. The latter is important as with an EI personal liability is unlimited (however large the debts you incur, you are liable to cover them). This can put your home at risk but it is possible to protect it by doing a déclaration d'insaisissabilité through your notaire. Depending on what you do, it may also be a good idea to have professional indemnity cover, called assurance responsabilité civile professionnelle. With this category there is no compulsory minimum capital. As well you will pay a progressive rate of personal income tax, rather than company or corporation tax. This means that for tax purposes no distinction is made between the enterprise’s profits and the entrepreneur’s remuneration giving you the flexibility to move money in and out of your business account. An accountant is not obligatory so once you understand how they work, you can do your own accounts - the Centre de gestion agréé offers courses in accounting. But only do them yourself if you are confident you can do it correctly. Entreprise Unipersonnelle à Responsabilité Limitée, better known as an EURL (single person limited company): There is only one shareholder or partner, if more people join then the company will be transformed into another company called the SARL. An EURL is cheaper than a SARL as there are less formal procedures to comply with. Since there are no minimal capital requirements you can, in theory at least, set up an EURL with one euro in your pocket. However, in practice you need at least €1,000 to set up an account with the bank. You will also need at least another 1,000€ to cover other start-up costs. An EURL is a good idea if you are likely to earn a high amount of money as it allows you to pay yourself a fixed income for living expenses with the remainder of your earnings taken out as dividends, which are no longer taxed at a fixed rate, but added to your personal income and taxed in accordance with your personal income bracket. The taxation regime however avoids double taxation. An EURL also gives you limited liability (limited to the capital invested). However, there is a lot more paperwork involved, both at the outset and throughout the year, and there are fees associated with owning a business. An accountant is compulsory and you can expect to pay a couple of thousand euros a year. MULTIPLE OWNERSHIP There are a number of structures for larger companies and an accountant will be able to advise you on what is available. However, the two most commonly used are: Société à Responsabilité Limitée, better known as a SARL (Limited Liability Company): A common structure for small and medium-sized businesses with between 2-50 shareholders. The conditions are as for a EURL - there is no minimal capital requirement and again you can, in theory at least, set up an SARL with one euro in your pocket. You can become a salaried employee of your SARL, entitling you to all the benefits of owning your own company, plus those of being a salaried employee. You would play charges on your personal income, drawn from the company, as well as personal tax if you reach the threshold. The company would pay corporation tax of 33 1/3%. A reduced rate is available for companies which generate little income. If an employer pays his/her employee a salary of 100, the employer pays social security charges on that 100 to the tune of approx 40%, so that employee “costs” the employer 140 in total. The employee in turn pays social security charges on his/her salary (approx 25 to 30 %). These are deducted at source. Therefore the net pay the employee actually receives is 70 to 75. Société Anonyme, better known as an SA (equivalent of a plc in the UK): The most common structure for larger business. Legislation is in the pipeline stating that from 2009 onwards no minimum share capital is required. For more information on tax see 'Tax, banking and insurance' The legal status of a spouse If your wife or husband is involved in the business, then they must have a legal status. There are three possibilities * Conjoint collaborateur – a partner * Conjoint salarié – an employee * Conjoint associé – a shareholder The status of your spouse within the enterprise does not so much depend on the type of structure your company has, but more on the financial capabilites of the business, e.g. if your spouse has the status of “employee”, the company/business will have to generate enough income to pay the spouse a salary (plus social security charges). Working in France and declaring your earning in the UK Registering as a Bureau de Liaison allows you to negotiate commercial contracts that will be concluded between clients here in France and the company back in the UK, and ensure communication and publicity on French soil. All commercial activity is prohibited, however. This means you, as the bureau’s representative, cannot conclude a contract in the name of the mother company: all bills and contracts must be sent and signed by the mother company. To set up a Bureau de Liaison you will need to be registered with the Chambre de Commerce but you won’t be liable to pay VAT, or tax here in France. To find out more about setting up a Bureau de liaison visit the website of the APCE By the FrenchEntrée team With thanks to Julia Jones of Bright Jones Law Firm (Toulouse), www.brightjones.com PREVIOUS: WILL YOU BE ALLOWED TO SET UP YOUR FRENCH BUSINESS? NEXT: REGISTERING YOUR FRENCH BUSINESS IN FRANCE Working in France Home Page 
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