France Summary Guide
Business Forms in France
The main forms of business structure in France likely to
be of interest to a small business are self-employment, sole
trading and the limited company. It is also possible to form
a business by way of a Public Limited Company (although this
won’t be of interest to an independent) or a Partnership.
There are a number of fees and taxes involved in setting up
a Limited Company in France so although the benefit of limited
liability may be appealing, the costs of setting up a Limited
Company may be prohibitive.
A Self-Employed individual or Sole Trader (Entreprise Individuelle
– EI) may start up in business very easily. The individual
is totally liable for the debts of the business. It is however
possible to make a declaration through a notary (notaire)
to protect your home and non-business assets from creditors.
As self-employed, taxes will usually be levied under the Personal
Income Tax regime. A self-employed person must also register
and pay social security contributions as a percentage of turnover.
As stated above, since 2009, it has been possible for certain
self-employed people to establish their micro-businesses under
the ‘auto-entrepreneur’ regime. In addition to
the aforementioned tax benefits, the registration requirements
are reduced, and a more favourable regime for the payment
of social charges is available, as described below.
Under the micro-social simplifié system, aimed principally
at business people running a part-time operation, or those
in the ‘professions libérales’ (which include
doctors, lawyers, designers, architects, and sometimes accountants)
instead of being required to register with the Chambre du
Commerce, or the Chambre de Métiers, the businessman
or woman just needs to fill in a form (available here: http://www.auto-entrepreneur.fr/doc/formulaire-inscription.pdf),
and submit it to the Centre de Formalité des Entreprises.
With regard to the payment of social and fiscal charges (which
are otherwise imposed as a set yearly amount – not the
most flexible state of affairs for a small business), these
will be imposed at the following rates (and can be paid either
monthly or quarterly):
- Trading activities (such as e-commerce and retail): 13%
of turnover
- Services (such as consulting, tuition): 23%
In order to be eligible for the auto-entrepreneur regime,
yearly income (before starting the business) must be below
EUR2,519-EUR7,500 (the threshold varies depending on familial
situation). Once operating under the regime, annual turnover
must not exceed EUR80,000, for commercial activities, or EUR32,000
for those providing services.
A Limited liability single shareholder corporation (Entreprise
Unipersonelle à Responsibilité Limitée
- EURL) is in effect a Limited Company (SARL) with a solitary
owner, and is known as a EURL. It can have between 2 and 100
shareholders.
There isn’t a minimum capital requirement for the establishment
of this form of business, and the owner benefits from the
limited liability status. The owner may elect to pay tax under
the Personal Income Tax scale or to pay Company Tax.
The person running the company must be the legally responsible
person (Gerant); this is usually the owner. If the owner elects
to pay taxes under the Company Tax regime, their salary is
paid by the company as a deductible expense – part of
this income may also be paid in dividends.
Limited Company (Société a Responsabilité
Limité - SARL). Again, there is no minimum capital
requirement. A SARL will pay tax through the Company Tax system
and directors of the company will pay tax on their salaries
via the Personal Income Tax system. This is a straightforward
form of business to set up and is suitable for small, family
businesses as well as larger enterprises.
A slightly different form of SARL, known as SARL de Famille,
is an option for a family business to pay tax under the Personal
Income Tax regime (partnership taxation). A spouse who is
involved in running a family business must be afforded some
form of legal status in such a business structure (ie partner,
shareholder or employee).
A new business must be registered at one of the Business
Registration Centres in France (Centre des Formalites des
Entreprises – CFE). These business centres will notify
the tax and social security authorities of the existence of
the business and will co-ordinate registration for these taxes.
Registration can be done on a do-it-yourself basis, though
it is advisable to obtain some assistance and advice. If done
largely alone, the cost should be around EUR250. For large
and more complex business forms, it is essential to appoint
an accountant or notary to complete the registration. Their
fees are likely to be in excess of EUR1,000. A company cannot
trade until the registration has been completed.
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