Setting up in France: SARL or SCI?

Setting up in France: SARL or SCI?

French law offers a wide variety of structures for new businesses looking to establish themselves within “l’Hexagone”. The last few years have seen a number of important reforms which have brought about changes to the way companies can be set-up and expanded. This article seeks to outline briefly two of the legal structures available; the SARL and the SCI. Both these structures frequently appeal to foreigners wishing to incorporate a company in France but for different reasons. The SARL is a “commercial” company ideal for small businesses, whereas the SCI is a “civil” company intended for holding property.


An SARL or Société à Responsibilité Limitée, is a limited liability company, particularly suited to small/medium family-run businesses.

Formation & Management

  • Quick and easy to set-up, only one shareholder being required; the company then being a EURL (Entreprise Unipersonnelle à Responsibilité Limitée).
  • Only one director (gérant) required who can perform any managerial act within the company’s best interests. A director (or minority shareholder) can also have an employment contract if certain conditions are met.
  • No need for a statutory auditor on incorporation.
  • No minimum amount of capital required or minimum value of shares needed.

One of the main advantages of an SARL is that the shareholders are only liable for the company’s losses up to the amount of their capital contribution, such capital contribution having been made in cash, in kind, or both.


  • SARLs are liable to corporation tax (Impôt sur les Sociétés), the standard rate being 33.33% of the company’s net profits.
  • A reduced rate of 15% is applicable to qualifying “PMEs” (small to medium-sized businesses) for the first €38,120 of the company’s net annual profit.
  • However, smaller SARLs can elect for personal income tax (Impôt sur le Revenu). In such a case, the directors and shareholders are individually liable for income tax depending on their earnings.


An SCI or Société Civile Immobilière as its name suggests, has a civil, rather than commercial activity and is designed to facilitate the easy acquisition and management of property. Buying to sell is not a legitimate activity for such a company, but the occasional isolated sale may be permitted.

Formation & Management

  • Again, quick and easy to set-up, only two shareholders being required and the nationality of such persons is irrelevant.
  • Only one gérant required who does not necessarily have to be a shareholder.
  • No fixed minimum value of shares and no minimum amount of capital required; the amount of capital usually reflects the value of the property being acquired, but no requirement to pay up in full at incorporation.One of the main advantages of an SCI is in relation to inflexible French laws governing the inheritance of property, particularly within families. If successors wish to sell their shares in an SCI they can do so, without forcing the other shareholders to sell the property.It is common to find an SCI used to hold property, and an SARL operating a business from that property.

    The rents collected by the SCI from the business exploiting its property are shared out (after costs have been deducted) between the shareholders, providing a supplementary revenue, which is then taxed as part of the shareholder’s personal income. If the business is later sold, the shareholders will nevertheless keep the income generated by the SCI which can then, for example, be put towards a pension.

    Finally, an SCI can offer protection during insolvency proceedings. If the business exploiting the SCI’s properties goes into liquidation, no creditor will be able to seize the property for repayment of its debts; the business and the SCI being two separate entities.


  • No requirement to pay-up the share capital of an SCI, however, the tax authorities base their calculations on the amount of subscribed shares rather than the amount actually paid-up, thereby reducing the amount of capital gains tax payable.
  • SCIs are liable to income tax (corporation tax) and are VAT-exempt due to the non-commercial nature of their activities.

Mention should also be made of the new, simplified auto-entrepreneur regime which is proving highly successful, 300,000 people having registered under it and €380m worth of business having been generated from it since its implementation just over a year ago. The regime, which promotes self-employment by basing social security charges on revenue earned rather than estimations and by exempting small businesses from VAT and corporation tax for a limited period, is helping by providing a cost-effective legal framework for doing business on a small scale, short of doing so as a limited liability company.

In conclusion, setting-up a business in France is now relatively straight-forward; there being an appealing range of legal structures on offer that can be adapted to new business initiatives. The traditional image of French business being suffocated by some of the highest taxes in Europe and burdened by antiquated administrative procedures is gradually becoming outdated. Instead, the modernisation of French company law, the simplification of the tax regime and the country’s new-found encouragement of foreign skills and expertise are doing wonders for drawing in entrepreneurs who only a few years ago would have steered clear of France.

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