Doing business in France: How to create a company, the 5 bullet points

France is a great country to do business : it is a member of EU, OCDE, OMC, G7, it belongs to the European Internal Market (more than 500M consumers) and shares a strong common currency, the Euro.

And guess what ? France is ranked #1 in “trading across borders” by the Doing Business 2020 of the World Bank Group. Yes, #1, Cocorico !

France is ranked #37 in the topic “starting a business” and this middling ranking is due to two ratings: procedures (76.5/100) and time (96.5/100).

One of our jobs at In Extenso is to deal with these two topics. We know the law of course, moreover we know the procedures and we know to which administration to send this and that document. So you do not have to worry about formalities and timeframes for starting a business in France.

Do we use online procedure ? Yes, of course.

The choice of the legal form

If you intend to develop a commercial activity in France, you will have to incorporate a commercial company, the most common forms being “SARL”, “SAS” and “SA”, but if you only need to own one or several buildings through a company in order to rent them, you can create a civil company (“SCI”).

Most commercial companies share common characteristics, especially the fact that the liability of shareholders is limited to the amount of their contributions (only a couple of commercial companies do NOT guarantee a limitation of liability of their shareholders: “Sociétés en commandite” and “Sociétés en nom collectif”).

Which legal form is the best for you? This is what we can tell you after meeting you and having understood your project.

The company director

Some forms of company, for instance the “SAS”, allow you to appoint a legal entity as company director, whereas some others do not, so the CEO needs to be a natural person, like in the “SARL”.

It may be convenient to appoint a legal entity, for instance the holding company, as company director of its French subsidiary: the legal representative of the holding company will automatically be the acting CEO of the French corporation, as legal representative of the official company director.

This outline will allow the holding company to charge monthly management fees to its subsidiary on top of yearly dividends.

If the company director is a natural person, he or she does not have to live in France. If he or she does, he or she will have to own a resident permit, except for citizens of a European Union member State, of Iceland, Norway, Liechtenstein or Switzerland.

If you need more information on this topic, we can assist you, or you can read all about it on this webpage of Business France.

The rate(s) of French corporation tax

France is not known for its low tax and contribution rates. However the French corporation tax rate is gradually decreasing.

Since 1993 and until 2016, the normal rate used to be 33.33% of the fiscal result of the company, but today (in 2020) it is 28% and tomorrow (in 2022) it will be 25%!

And you know what? There is even a reduced rate for SMEs, effective since 2002 under conditions: 15%.

Quite a bargain isn’t it?

Auditors

You may have heard of “la loi PACTE” (Action Plan for Business Growth and Transformation). This law has been enforced since May 2019 and deeply reformed the cases in which the designation of an auditor is mandatory for a corporation.

Previously, any “SAS” (“Société par actions simplifiée”) owned by, or owning, another company had to appoint an auditor for a period of six fiscal years, every “SA” (“Société Anonyme”) had to do it, and for other legal forms such as “SARL” (“Société à responsabilité limitée”), it depended on a clever mix of different thresholds.

Since May 2019, everything is easier-or should be. The French Parliament introduced wheels within wheels and created new obligations for companies within a group of companies. But don’t you worry, we master all the special cases.

Furthermore, having an auditor can be reassuring, especially when you appoint, as CEO, a person based far from the headquarters of the group, since the role of the auditor is to control the management of the company and to inform each year the shareholders on the conduct of business.

Annual legal obligations

In France, commercial companies have to file their annual accounts to the Registry of the Commercial Court, after the shareholders approved the financial statements in a general meeting. 

At In Extenso, we provide accounting and legal services, among others services such as Tax, HR and Transaction services.

So yes, we can perform all these duties, so your company only has to focus on doing business in France!

You do not have a subsidiary in France yet? Feel free to contact us.