Tuesday May 27, 2008
How to start your business in France
Which type of company should you choose?
The legal structure of your company will impact on your liability and taxation. Here is a basic overview to help you make the right decision.
If you are alone, you could create an “Enreprise indiviuelle’’(sole trader) or an “Entreprise Unipersonnelle à Responsabilite Limitée” EURL (private limited company). If you have several associates you mainly have the choice between a “Société à Responsabilite Limitée” SARL (Limited liability company) or a “Société Anonyme” (Business Corporation).
No legal documents are required to set up an enterprise individuelle. It is registered in your name and your general income will be taxable to the income tax (impôt sur le revenu). If your spouse is working with you, he or she will have to be declared as an employee or as a “conjoint collaborateur” (collaborating partner) and therefore pay extra social charges.
The main downside of the enterprise individuelle is that you are liable on your property for the company debts. You can however protect your house by having a notaire write a “contrat d’insaisabilité”.
The micro enterprise, which is a sub-category of the enterprise individuelle, offers several advantages for a first time entrepreneur in France:
- You choose whether or not to be VAT registered.
- Accountancy rules are simple: keep a “journal comptable” or accountancy book, plus a copy of all your invoices and receipts.
- Inland revenue declarations are easy: simply declare your turnover on your French Inland Revenue form. The taxman will apply a standard rebate on your turnover to determine the base for your imposition (- 50% for services, – 71% for trade).
In order to opt for the micro enterprise, your yearly turnover has be less than 27000€ if your are providing services (consultancy, teaching, etc) and less than 76300€ if you are selling goods.
If you wish to protect your assets, you may create an EURL. This type of company follows the principles of a SARL, but with a sole partner. You will have to choice to opt for income tax or corporation tax.
The SARL is designed for a minimum of 2 partners and requires Articles of Incorporation (Statuts). The company has its own entity and the associates are responsible for debts only up to the amount of their contribution. Setting up a SARL costs about 1500€, including the legal contracts validated by a notaire or accountant and insertion in the legal newspapers.
There is no minimum capital requirement, so you could theoretically set up a limited company with 1€! The company will be taxed on its profits, i.e. corporation tax of 33.33%.
What if you already have a business in England?
The first option is to open a bureau de liaison or marketing office. This will limit you to marketing and business development activity, as no trade may take place. The second option is to create a succursale or branch office, which will carry out business in the name and on behalf of the main company.
This is the first of 5 monthly articles. The next article deals with how and where to register your business in France
