Steps to Set Up a Company in France

Setting up a company in France requires a series of formalities and registrations, all of which are designed to ensure that the business is legally recognized and compliant with French regulations. This process may seem complex, but with a clear understanding of each step, it can be navigated efficiently. Here is an overview of the key stages involved in the company formation process in France.

1. Choosing a Company Name

The first step in creating a company in France is selecting a unique company name. The name must not already be in use by another business, so it is essential to verify its availability before proceeding. Entrepreneurs can check the availability of a business name through the Institut National de la Propriété Industrielle (INPI). The INPI manages trademarks and patents in France, ensuring that no intellectual property rights are infringed upon.

• Trademark Verification: If the name you choose for your company is also intended to be a brand, it is advisable to register it as a trademark with INPI. This ensures legal protection of your business identity and prevents others from using a similar name.

Once the name is cleared and available, it can be reserved for the business during the registration process. It is crucial to make sure the name complies with French naming conventions and is not misleading about the company’s activities.

2. Legal Structure and Registered Office

Next, it is essential to decide on the legal structure of your company. France offers several options, each suited to different types of businesses:

• Société à Responsabilité Limitée (SARL): A private limited company structure suitable for small to medium-sized businesses.
• Société par Actions Simplifiée (SAS): Often chosen for larger enterprises or startups due to its flexibility.
• Société Anonyme (SA): Typically used by large corporations, particularly those looking to list shares publicly.

After choosing the legal structure, you must provide a registered office address in France, known as the siège social. This is the official address for all company correspondence. If the business does not yet have a physical location in France, many companies opt for domiciliation services that provide an official address, including virtual offices, which meet legal requirements without the need for a permanent office space.

3. Filing the Required Documents

Once the company name and structure are finalized, the next step is to file the necessary documents for incorporation. The following details must be provided:

• Shareholder information: Full names, addresses, and share distribution.
• Director information: Details of the directors, including name, nationality, and role.
• Registered office address: Proof of the company's registered address in France.
• Articles of Association: These define the company’s operations, governance structure, and the roles and responsibilities of the shareholders and directors. The Statuts (Articles of Association) must be drafted carefully, as they govern how the company will operate.
• Capital deposit certificate: Proof that the company's share capital has been deposited into a French bank account.

These documents will then be submitted to the Centre de Formalités des Entreprises (CFE), which is the one-stop-shop for company registration in France.

4. Registration with the Centre de Formalités des Entreprises (CFE)

The CFE is responsible for receiving all the necessary paperwork to register a company. It acts as a liaison between various government bodies, including tax authorities, social security organizations, and statistical agencies.

The steps involved in registration include:

• Submission of documents: All required documents must be filed with the CFE, including the Articles of Association, proof of registered office, and capital deposit.
• Registration with the RCS (Registre du Commerce et des Sociétés): This is the commercial register where the company will be officially listed. Once registered, the company becomes legally recognized in France.

The CFE handles the submission of documents to all relevant authorities and ensures that the company is compliant with legal requirements.

5. Obtaining a SIRET Number

Upon successful registration, the company will be assigned its SIRET and SIREN numbers. These unique identification numbers are essential for conducting business in France.

• SIREN: A 9-digit number assigned to every company for identification purposes.
• SIRET: A 14-digit number that includes the SIREN and additional information identifying each establishment or branch of the company.

These numbers are critical for invoicing, tax declarations, and other business activities. They serve as the official identification of the company in all legal and commercial contexts.

6. Delays in Company Formation

The process of setting up a company in France is generally efficient, with the typical registration period ranging from 5 to 15 business days, depending on the complexity of the company structure and the accuracy of the submitted documents. Businesses can start trading as soon as the company is registered, provided that all necessary documentation is in place.

7. Micro-Entrepreneur (formerly Auto-Entrepreneur)

For freelancers and small businesses, the Micro-Entrepreneur status (formerly known as Auto-Entrepreneur) offers a simplified structure with minimal registration and reporting requirements. This status is ideal for individuals who plan to operate on a small scale, such as consultants or artisans.

• Tax benefits: Micro-Entrepreneurs benefit from simplified tax reporting and reduced social contributions. They are taxed on a percentage of their turnover, with rates varying depending on the type of activity.
• Turnover thresholds: In 2024, the thresholds for Micro-Entrepreneurs are €188,700 for sales of goods and €77,700 for services.

This structure offers flexibility, but businesses must remain under the turnover limits to retain this status.

8. Branch vs. Subsidiary

Foreign companies looking to expand into France can choose between opening a branch or setting up a fully independent subsidiary. Both options have their pros and cons:

• Branch: A branch is an extension of the parent company and is not a separate legal entity. It shares legal and tax responsibilities with the parent company, which means the parent company can be held liable for the actions of the branch. Branches are simpler to set up but may not offer the same level of legal protection as a subsidiary.
• Subsidiary: A subsidiary, on the other hand, is an entirely separate legal entity, with its own tax liabilities and legal responsibilities. This means that the parent company is not liable for the actions or debts of the subsidiary. Setting up a subsidiary in France offers greater flexibility and autonomy, though it involves more administrative complexity.

The process of setting up a company in France involves several steps, but with the right preparation and understanding of the legal requirements, it can be done efficiently. From selecting a company name to completing registration with the CFE, every detail is essential to ensure that the business is legally compliant and ready to operate.

 Taxation for Businesses in France

When setting up a business in France, understanding the country's tax structure is crucial. Here’s an overview of the main taxes applicable to companies, including corporate tax, VAT, social charges, and other business-related taxes, as well as tax incentives designed to support innovation.

1. Corporate Tax (Impôt sur les Sociétés)

As of 2024, the standard corporate tax rate in France is set at 25% for all businesses. This rate applies to profits made by corporations, whether they are domestic or multinational. Small businesses benefit from a reduced corporate tax rate of 15% on the first €42,500 of taxable income, provided their turnover is below €10 million and they meet certain criteria.

Businesses that are just starting up or reinvesting in innovation can also take advantage of several tax reliefs, which we will explore later in this section.

2. VAT (Taxe sur la Valeur Ajoutée)

VAT in France is a consumption tax applied to most goods and services. The standard VAT rate is set at 20%, with reduced rates applying to specific goods and services:

• 10% VAT: Applied to items such as restaurants, transport, and non-essential services.
• 5.5% VAT: Applied to basic necessities like food, water supply, books, and certain eco-friendly products.
• 2.1% VAT: This lowest rate applies to specific products such as prescription medications covered by social security.

Businesses with a turnover exceeding €85,800 (for sales of goods) or €34,400 (for services) must register for VAT. Once registered, they are required to collect VAT on sales and submit regular returns to the French tax authorities.

3. Social Charges (Charges Sociales)

Employers in France must contribute to social security, which covers pensions, healthcare, unemployment insurance, and other employee benefits. These contributions, referred to as social charges, are one of the heaviest burdens for employers and range between 40% and 50% of the employee’s gross salary. The contributions cover various aspects:

• Health insurance: Employers contribute to France's universal health system.
• Pension contributions: These fund employee retirement benefits.
• Unemployment insurance: A mandatory contribution to the national unemployment fund.

Employees also contribute a smaller percentage of their gross salary towards these social programs, but the bulk of the responsibility falls on the employer.

4. Other Taxes

Businesses operating in France may be subject to several additional taxes, including:

• CFE (Cotisation Foncière des Entreprises): A local tax based on the rental value of the company’s real estate. It applies to all businesses, regardless of size or profit levels.
• CVAE (Cotisation sur la Valeur Ajoutée des Entreprises): This tax is being phased out and will be fully abolished by 2027. In 2024, businesses with turnover exceeding €500,000 will pay a reduced CVAE rate of 0.28% of their value-added tax base.
• CET (Contribution Economique Territoriale): This local business tax consists of the CFE and the CVAE. The phasing out of CVAE means the CET burden will be lessened over the coming years.

5. Tax Incentives

France offers several tax incentives aimed at encouraging business innovation and investment, including:

• Crédit d'Impôt Recherche (CIR): A research tax credit that allows companies engaged in research and development to deduct up to 30% of qualifying R&D expenses. This incentive is one of the most generous in Europe and can be claimed even if the company is not yet profitable.
• Crédit d'Impôt Innovation (CII): An additional tax credit for SMEs that innovate and develop new products. This credit can cover up to 20% of eligible expenses related to product design and prototyping.

Navigating the French tax system can be complex, but it is also filled with opportunities for businesses to reduce their tax burden through credits, deductions, and exemptions. Understanding how to leverage these benefits is crucial for maximizing profitability. With the right guidance, businesses can not only comply with their tax obligations but also take full advantage of the numerous incentives France offers to promote innovation and growth.

Director Responsibilities in France

In France, directors have a wide range of legal duties and responsibilities that are regulated by the French Commercial Code. These duties focus on ensuring that directors act in the best interests of the company, its shareholders, and other stakeholders. Below are the key responsibilities and risks associated with the role of directors in French companies.

1. Legal Duties

Directors of companies in France, whether they are managing directors (gérant in an SARL) or the president of an SAS, are bound by specific legal duties to manage the company in accordance with French law. These include:

• Duty of loyalty: Directors must act in the best interests of the company. They are expected to avoid any conflicts of interest and must not use their position for personal gain or act in ways that would harm the company or its shareholders.
• Duty of care: Directors are required to exercise due care and diligence in managing the company’s affairs. This means they must make informed decisions, based on accurate financial and operational information, and take into account the potential risks and benefits to the company.
• Compliance with laws: Directors must ensure that the company complies with French laws, including corporate governance, tax regulations, and labour laws. They are responsible for ensuring that the company submits all required filings to authorities (such as tax returns, financial statements, etc.) and operates within legal guidelines.
• Protection of company assets: Directors are responsible for safeguarding the company’s assets and ensuring that they are used for legitimate business purposes. This includes ensuring that the company remains solvent and avoiding fraudulent activities.

2. Personal Liability

While directors enjoy limited liability in French companies, meaning their personal assets are generally protected, there are circumstances where they can be held personally liable for the actions or failures of the company. This liability can arise under the following conditions:

• Mismanagement: If directors are found guilty of serious mismanagement that leads to financial losses for the company or its shareholders, they can be held personally liable. This could involve reckless financial decisions, failure to file taxes, or neglecting to comply with regulatory obligations.
• Fraudulent behavior: Directors involved in fraudulent activities (e.g., deliberately misleading shareholders or creditors) can face both civil and criminal liability. Fraudulent directors can be fined, disqualified from holding directorships, or even face imprisonment in extreme cases.
• Insolvency: In cases where a company becomes insolvent, directors may be held personally liable if it is determined that their actions contributed to the insolvency. They can also face liability if they continue trading while knowing the company was unable to pay its debts (referred to as wrongful trading).

3. Nomination and Resignation of Directors

Nomination of Directors

The process for appointing directors depends on the type of company:

• In an SARL, the gérant (managing director) is usually appointed by the shareholders during a general meeting, and their responsibilities are outlined in the company’s statutes.
• In an SAS, the president is appointed according to the procedures established in the company’s Articles of Association. The shareholders have the flexibility to define the roles and responsibilities of directors.

After appointment, the company must notify the Registry of Commerce and Companies (Registre du Commerce et des Sociétés or RCS) of the new director, and the appointment is then published in a legal journal.

Resignation of Directors

A director may resign from their position at any time. However, the resignation must follow the procedures outlined in the company’s statutes. Additionally:

• The resignation must be reported to the Registry of Commerce within one month of the director’s departure.
• In cases where the resignation could jeopardize the company’s operations, the director may need to provide a notice period, ensuring a smooth transition.

Even after resigning, a director can still be held liable for actions taken during their tenure, especially if any claims or liabilities arise due to mismanagement or negligence during their time in office.

4. Sanctions for Non-Compliance

Directors who fail to comply with their legal obligations can face several sanctions, including:

• Disqualification: Directors can be disqualified from managing a company if they engage in misconduct, such as breaching their duties or failing to comply with corporate governance requirements. A disqualified director cannot serve as a director or manager of any company for up to 15 years.
• Fines and penalties: Directors can be fined if they fail to meet the company’s statutory obligations, such as submitting financial statements or paying taxes.
• Criminal penalties: In cases of fraud, embezzlement, or serious legal violations, directors can face criminal charges, which may lead to imprisonment or significant fines.

The role of a director in France comes with significant responsibilities and legal obligations. Directors must act in the best interest of the company, comply with all relevant laws, and protect the company’s assets. While limited liability generally protects directors from personal losses, failure to meet these duties can result in personal liability, fines, or even criminal penalties. Having a clear understanding of these responsibilities, along with expert legal and accounting support, can help directors navigate these challenges effectively.

 Employment and Human Resources in France

When establishing a company in France, one of the most important aspects to consider is the employment system, which is governed by a robust set of labour laws aimed at protecting employee rights. Understanding the types of employment contracts, labour regulations, and recruitment processes for international talent is crucial for ensuring compliance and successful workforce management.

1. Employment Contracts in France

In France, there are several types of employment contracts that businesses can use, each with specific legal requirements. The most common contracts are:

• Contrat à Durée Indéterminée (CDI): The CDI is the standard and most secure form of employment in France. It has no fixed duration and provides employees with long-term job security. Employers must comply with strict legal requirements when terminating a CDI, including providing legitimate reasons (such as economic downsizing or professional misconduct) and observing notice periods that vary based on the employee's length of service.
• Contrat à Durée Déterminée (CDD): The CDD is a fixed-term contract used for temporary positions. It must be justified by specific circumstances, such as replacing an employee on leave or handling a temporary increase in workload. The maximum duration of a CDD is 18 months, after which it can only be renewed once. CDDs have a defined start and end date, and if the employer wishes to retain the employee after the contract ends, it is often converted into a CDI.
• Interim Contracts (Contrat de Travail Temporaire): Also known as temporary work contracts, these are used for short-term employment needs, often through an agency. Interim contracts are typically used to fill seasonal or urgent roles, and employees under such contracts enjoy the same rights as regular employees, including access to health benefits and paid leave.

All employment contracts in France must include key information such as the job title, salary, working hours, and duration of the contract (for CDDs and interim contracts). Furthermore, contracts should be written in French, and any discrepancies with foreign languages should defer to the French version.

2. Labour Regulations in France

French labour law is one of the most protective in Europe, with extensive regulations designed to safeguard employee rights. Here are some key aspects:

• 35-Hour Workweek: The legal working week in France is 35 hours for full-time employees. Any work beyond 35 hours is considered overtime, and employees are entitled to additional pay or compensatory rest. While the 35-hour workweek is the norm, certain sectors have flexibility agreements in place, allowing companies to adjust hours based on the industry or employee agreements.
• Minimum Wage (SMIC): The Salaire Minimum Interprofessionnel de Croissance (SMIC), or minimum wage, is updated annually. As of 2024, the SMIC is set at €11.52 per hour for full-time workers, amounting to roughly €1,747 per month for a standard 35-hour week. This ensures a basic level of income protection for all workers in France.
• Statutory Leave: Employees in France are entitled to five weeks of paid holiday per year, regardless of the contract type. Additionally, employees have rights to maternity and paternity leave. Maternity leave typically lasts 16 weeks, and paternity leave has recently been extended to 28 days, allowing fathers to take more time off to care for their newborns. French law also provides for sick leave, which is typically paid at a reduced rate through the social security system.
• Social Security Contributions: Employers in France are required to make significant social security contributions, which fund the healthcare system, pensions, unemployment benefits, and family allowances. These contributions can amount to roughly 40-45% of an employee’s gross salary, a factor that employers must take into account when hiring staff.

3. Recruitment of International Talent

France’s Talent Passport and EU Blue Card programs make it easier for businesses to recruit highly skilled workers from outside the European Union. These visa systems are specifically designed to attract professionals in industries such as technology, engineering, and research.

• Talent Passport: This visa is tailored to skilled professionals, researchers, and entrepreneurs who wish to work in France. It is granted for up to four years and allows the visa holder to bring their immediate family members. The Talent Passport is ideal for senior executives, artists, researchers, and tech entrepreneurs.
• EU Blue Card: This is a work permit for non-EU nationals with high-level qualifications and an employment contract in France. To qualify, applicants must hold a university degree and have a job offer with a salary of at least 1.5 times the average gross annual salary in France. The EU Blue Card is issued for one to four years and offers mobility across the EU, making it an attractive option for foreign professionals.

In addition to these visas, there are other work permits available for short-term assignments or seasonal work. StMatthew Global can help businesses navigate the complex immigration processes and obtain the necessary work permits for their international staff, ensuring smooth onboarding and compliance with French immigration law.

Navigating the employment landscape in France requires an understanding of the country's contract types, labour regulations, and options for recruiting international talent. By adhering to France's employment laws and making use of available visa programs, businesses can successfully hire and manage a diverse and productive workforce. StMatthew Global provides comprehensive assistance in managing HR responsibilities, from drafting compliant employment contracts to securing work permits for international employees, ensuring that your business meets all legal requirements.