The basics It’s daunting enough trying to set up a business in your own country, in your own language, but to do so in a foreign country can be frightening. To give you a helping hand, here are a few pointers about how the French administration ticks with regards to running a business in France, over and above the usual minefield of which form to complete according to your individual situation!
Guidelines on setting up a business in France
Step 1: French businesses are divided into categories of activities:
- Commercial/sales – buying and selling products
- Artisanal/trades – creating, making, fitting and selling products
- Freelance professions – pure service providers
- AgriculturalThere is a different registration centre for each category of activity, usually local to each department of France. It is through the registration centre that your business will be set up and this same authority will deal with any modifications to your business throughout its life (change of address, additional activities, etc). According to the registration centre and the type of activity, there may be a fee for registering the business. For certain business activities and if you set up a limited company you will also be obliged to register with the French equivalent of Companies House.
Step 2: Once you know what type of professional activity your business project falls under, you will need to consider which business structure suits your project and which tax regime will be applied for the management of your accounts and business income. It can never be too early to obtain advice from French professionals in order to make the right choices for your individual circumstances. Market research can also give you an idea of the turnover your future business may make and the choice of business structure will depend on how many people are involved in the business, whether they all need to earn an income from it and whether they have the relevant diplomas or experience to be able to run the type of business envisaged. The tax regimes available will be dependent on these other factors.
Be aware of social charges and taking on employees
As you may know, one of the main costs of running a business in France is the level of social charges you are obliged to pay in order to be part of the French welfare system – these charges cover your healthcare (and that of your family) and your pension, as well as a contribution to the benefits office and the French national debt. For most business structures the French have a system where you effectively pay your social charges “in advance” according to an estimated profit for the first two years and then the figures are recalculated on your true earnings once you have received your first tax advice note. This figure for self employed/sole traders is approximately 45-47% of the business “profit” (after costs and after deduction of social charges). When you employ staff, you not only pay the above social charges for your company but you also have employers’ contributions on staff wages – this means that in addition to the actual net salary the employee receives, you will have approximately 75% in addition to pay in employers’ + employees’ contributions! (Employee contributions are paid by the company on behalf of the staff). Employees are also highly protected in France – you have to draw up employment contracts for all kinds of salaried work and firing staff is not straightforward and nearly always incurs indemnities to be paid to the employee. It is important therefore to work out all the envisaged costs and consequences of employing staff before you go ahead and to make a list of all other costs for the business to make sure it is viable and will make you enough money to be able to live.
Managing the business
Once you’ve set the business up, you will need to make sure you manage your accounts and cash flow well – as in France you will be required to pay your social charges and taxes at specific dates and penalties are incurred if you do not pay on time. You will also need to manage your accounts in a certain way according to the tax regime chosen – this could be a profit and loss regime (proving all income, deducting all expenditure and finding the “true profit”) or it could be one of the simplified regimes, such as the micro entreprise regime, where you are given a fixed allowance and therefore leaving you a “fixed profit”. Whichever regime you choose or are obliged to take, the simplest way of managing your accounts is to keep everything related to the business separate from any other income or expenditure, keep receipts for everything in the business name, have a separate bank account for the business and put aside money for social charges, taxes and VAT, if applicable. Sounds easy, doesn’t it? But when you’re busy fronting your own business, the accounts side of things often get left by the wayside. Of course, we do not want to put you off running a business in France but simply wish to warn you of the eventual problems to avoid you making mistakes. Obtaining advice from professionals who are experienced in such matters is paramount for you to succeed.
You may find it easier to start your business life in France with the assistance of an accountant and you may even find that your business structure obliges you to have annual accounts drawn up. Most accountants can offer varying levels of service and fee structures accordingly but it is always imperative to get advice on your business project before going ahead. In most cases there is as much red tape to modify or close down a business as there is to set one up so getting it right first time will save time and money in the long run.
•With thanks to Debbie Bradbury, SAREG
With over 20 years’ experience in international businesses and foreign clients wishing to set up a business in France, here at SAREG our English-speaking experts can guide you through the red tape and help you choose the most appropriate solution for your individual circumstances. We are particularly experienced in property-related activities in the Alpine area and would therefore be able to assist not only with advice related to setting up and running businesses but also have a vast knowledge of the local economic area. If you would like to make an appointment to discuss your situation with one of our experts or would like advice on any other matters, please contact Debbie Bradbury on +33 (0)4 50 25 23 97 or email: [email protected].
SAREG is a group of English-speaking chartered accountants based in the Alps who can assist you with all your accountancy needs from income tax returns to setting up a business or subsidiary in France, employing staff, handling your annual accounts and who can also advise on property investment, rental income and generally guide you through the different steps required to becoming resident and joining the French system!