Setup your business
When somebody wishes to create a business in France, he will have the option of operating under a company structure or as a sole trader. Both options have pros and cons and the nature of the business will determine which structure, but also, which tax regime to choose.
When somebody wishes to create a business in France, he will have the option of operating under a company structure or as a sole trader. Both options have pros and cons and the nature of the business will determine which structure, but also, which tax regime to choose.
a) Operating with a company structure
Company structures are often used to separate your private to professional assets. Considering that France has a system where creditors can take possession of your personal assets, it is sensible to set up a structure to own your personal assets, ie properties, and a structure to run your business.
Unlike in England, France offers a large variety of company structures depending on the size of your business, activity, shareholders. Here are the main structures that you may wish to consider in the future to trade in France:
- The limited liability company in France (SARL)
The SARL is the type of company most commonly used in the context of business creation in France; it offers the advantage of a simple structure in which the liability of the partners is limited to the amount of their contributions. Its capital, whose law does not set any minimum amount, is divided between at least two partners. It is managed by one or more managers, partners or not.
- The single-person limIted liability company (EURL)
This can be considered as a special category of limited liability company as the EURL has only one shareholder. Its operating rules are very similar to those of the SARL. The main difference concerns its tax system: its profits are automatically taxed on income tax in the shareholder's name, although an option for corporation tax is possible.
- The simplified joint stock company (SAS)
This relatively new form of company has had some success. SAS is not suitable for business creation by an individual. Indeed, the rules governing it are similar to those of the SA. However, some measures make it simpler. Thus, no minimum amount for share capital is required. In addition, the appointment of an auditor is reserved for SAS of a certain size or with capital ties to other companies The SAS must have at least two partners, responsible within the limit of their contributions. Compared to SA, it offers the advantage of flexibility: the law allows shareholders the possibility of freely organising its operation in the articles of association. This flexibility requires the informed advice of a qualified professional because it can lead to the development of rules that would be difficult to apply later on.
- The simplified single-person joint-stock company (SASU)
This is a special category of SAS with only one partner. Only a few operating rules differ from those applicable to SAS, simplifying legal formalism in particular. Like SAS, SASU is rarely adapted to a start-up company.
In terms of tax, the Finance Act for 2018 (Article 84) continues the program of the gradual reduction of the corporate tax rate (IS) up to 25% in 2022. It is 28% for profits below € 500,000 and 33.3% (or 1/3) above. The rate will then decrease to:
31% above € 500,000 in profits in 2019
28% of all profits in 2020
26.5% in 2021
One important point is that there is a transitive regime for small companies that have: an annual turnover below 7.6m€, a capital share owned by individuals for at least 75%. In this particular case, corporate tax is only 15% up to 38,120€ and 28% above it.
When somebody wishes to create a business in France, he will have the option of operating under a company structure or as a sole trader. Both options have pros and cons and the nature of the business will determine which structure, but also, which tax regime to choose.
When somebody wishes to create a business in France, he will have the option of operating under a company structure or as a sole trader. Both options have pros and cons and the nature of the business will determine which structure, but also, which tax regime to choose.
a) Operating with a company structure
Company structures are often used to separate your private to professional assets. Considering that France has a system where creditors can take possession of your personal assets, it is sensible to set up a structure to own your personal assets, ie properties, and a structure to run your business.
Unlike in England, France offers a large variety of company structures depending on the size of your business, activity, shareholders. Here are the main structures that you may wish to consider in the future to trade in France:
- The limited liability company in France (SARL)
The SARL is the type of company most commonly used in the context of business creation in France; it offers the advantage of a simple structure in which the liability of the partners is limited to the amount of their contributions. Its capital, whose law does not set any minimum amount, is divided between at least two partners. It is managed by one or more managers, partners or not.
- The single-person limIted liability company (EURL)
This can be considered as a special category of limited liability company as the EURL has only one shareholder. Its operating rules are very similar to those of the SARL. The main difference concerns its tax system: its profits are automatically taxed on income tax in the shareholder's name, although an option for corporation tax is possible.
- The simplified joint stock company (SAS)
This relatively new form of company has had some success. SAS is not suitable for business creation by an individual. Indeed, the rules governing it are similar to those of the SA. However, some measures make it simpler. Thus, no minimum amount for share capital is required. In addition, the appointment of an auditor is reserved for SAS of a certain size or with capital ties to other companies The SAS must have at least two partners, responsible within the limit of their contributions. Compared to SA, it offers the advantage of flexibility: the law allows shareholders the possibility of freely organising its operation in the articles of association. This flexibility requires the informed advice of a qualified professional because it can lead to the development of rules that would be difficult to apply later on.
- The simplified single-person joint-stock company (SASU)
This is a special category of SAS with only one partner. Only a few operating rules differ from those applicable to SAS, simplifying legal formalism in particular. Like SAS, SASU is rarely adapted to a start-up company.
In terms of tax, the Finance Act for 2018 (Article 84) continues the program of the gradual reduction of the corporate tax rate (IS) up to 25% in 2022. It is 28% for profits below € 500,000 and 33.3% (or 1/3) above. The rate will then decrease to:
31% above € 500,000 in profits in 2019
28% of all profits in 2020
26.5% in 2021
One important point is that there is a transitive regime for small companies that have: an annual turnover below 7.6m€, a capital share owned by individuals for at least 75%. In this particular case, corporate tax is only 15% up to 38,120€ and 28% above it.