COMPANY FORMATION IN FRANCE
Types of Companies and the “Ideal” Structure for Foreign Investors
France, as one of Europe’s leading economies, offers a strong investment environment for foreign entrepreneurs. With its strategic location within the European Union, advanced infrastructure, skilled workforce, and government incentives, establishing a company in France presents significant opportunities for investors aiming to access both the European and global markets.
Indeed, approximately 16,000 foreign-owned companies currently operate in France, employing around 2.2 million people and accounting for 13% of total national employment. The French legal system is quite open toward foreign investors. A foreign real or legal person may be a company founder or manager in France, and there is no requirement to have a local partner or reside in the country. In this environment, one of the first steps toward a successful venture is choosing the appropriate type of company.
- Main Types of Companies in France
There are several legal forms available to those who wish to start a business in France. Broadly speaking, these include sole proprietorships (individual enterprises), partnerships (such as general or limited partnerships), and capital companies (limited and joint-stock forms). Foreign investors generally prefer limited-liability corporate structures, as these protect the investor’s personal assets and offer corporate flexibility. The principal types of capital companies in France are as follows:
- SAS (Société par Actions Simplifiée – Simplified Joint-Stock Company):
A non-public joint-stock company distinguished by its flexible organizational structure, simple management model, and wide contractual freedom. It is suitable for businesses of all sizes, from small start-ups to large-scale enterprises. It can be incorporated with as little as €1 in capital and, since it is not publicly traded, is subject to lighter regulation.
- SASU (Société par Actions Simplifiée Unipersonnelle – Single-Member Simplified Joint-Stock Company):
This is the single-shareholder version of the SAS. It can be established and managed by a single person who owns all of the capital. It is viewed as a practical solution for foreign investors due to its low bureaucratic burden and quick formation process. If additional shareholders later join an SASU, it automatically becomes a multi-shareholder SAS.
- SARL (Société à Responsabilité Limitée – Limited Liability Company):
The traditional form most preferred by small and medium-sized enterprises. Similar to the Limited Liability Company (LLC) model in other jurisdictions, it can be incorporated with a minimum capital of €1, making it accessible for SMEs. Shareholders’ liability is limited to their capital contributions, and the number of shareholders is capped at 100.
- SA (Société Anonyme – Public Limited Company):
A classic joint-stock company form designed primarily for large-scale or publicly listed companies. It requires significant capital and adheres to strict governance rules. A minimum of €37,000 must be contributed as initial capital, and the company is managed by a board of directors, typically with at least several shareholders. It is the mandatory structure for public offerings or stock-exchange listings, and thus rarely chosen by SMEs.
In addition to the above company types, foreign businesses may also open branches or representative offices in France. However, these do not constitute separate legal entities; representative offices are not permitted to engage in commercial activities, while branches operate as extensions of the parent company. For investors intending to conduct long-term and fully independent operations, establishing a distinct legal entity under one of the company types listed above is the most suitable option.
- Tax Regime for Companies in France
The French corporate taxation system varies depending on the size of the enterprise, its annual profit, and its business sector. To stimulate investment and employment, the standard corporate income-tax rate (Impôt sur les sociétés) was reduced from 33.3% to 25% in 2022. This rate applies to the vast majority of companies regardless of sector or scale.
For small and medium-sized enterprises (SMEs), a reduced 15% corporate tax rate applies to the first €42,500 of taxable profit. To qualify for this preferential rate, the company’s capital must be fully paid up, its annual turnover must be below €10 million, and at least 75% of the capital must be held by natural persons.
In addition to corporate income tax, all businesses are subject to CFE (Cotisation Foncière des Entreprises) a local property tax, CVAE (Cotisation sur la Valeur Ajoutée des Entreprises) a corporate value-added tax, and their combined form, CET (Contribution Économique Territoriale) a local economic contribution tax. The rates of these levies vary depending on the company’s location and the nature of its activities. Employers must also pay mandatory social-security contributions for their employees, which constitute a major financial obligation. Additional sector-specific taxes or contributions may also apply depending on the line of business.
- The Most Profitable and Advantageous Company Form for Foreign Investors
Selecting the right corporate form is of critical importance for investors seeking to maximize profits and ensure smooth operations. Considering both financial benefits and legal convenience, the most advantageous and most frequently chosen structure for foreign investors in France is the Simplified Joint-Stock Company (SAS). According to 2022 data, SAS companies represented 65% of all new business formations in France. The single-member version, SASU, has also become increasingly popular. The main advantages of the SAS/SASU structure include:
- The articles of association may freely determine shareholders’ rights and obligations and the powers of management bodies. The internal rules of the company can thus be tailored to specific needs. In SAS companies, new shareholders may be admitted without the approval of existing ones. Managers may also be legal entities, provided that a natural person is appointed to represent that entity. This requirement arises under Article L227-7 of the French Commercial Code, which mandates the designation of a natural representative for any legal-entity manager.
- The appointment of a single Président (“President”) suffices for management purposes; unlike an SA, there is no obligation to establish a board of directors. Compared with an SARL, incorporation is simpler, more flexible, and more investor friendly.
- Neither shareholders nor managers are required to be French nationals or residents. Consequently, foreign investors may form an SAS alone or with foreign partners without the need for a local director. However, a valid address must be provided for registration and bank-account opening purposes; in practice, this requirement is often fulfilled through a virtual office or representative address.
- Shareholders’ liability for company debts is limited to their subscribed capital.
- The SAS form is highly flexible in admitting new investors. Capital injections and share transfers can be carried out more freely and at lower cost within the statutory framework. The SAS structure allows an unlimited number of shareholders, whereas an SARL requires the consent of all existing members for new admissions, involves higher fees and restrictions on share transfers, and limits the total number of shareholders to 100.
- Conclusion
France offers a highly attractive environment for foreign entrepreneurs, thanks to its legal predictability, investor-friendly legislation, and direct access to the EU market. In this context, the SAS or SASU is generally the most suitable company model for investors due to the advantages it provides. Prior to incorporation, it is essential to tailor the articles of association to the specific needs of the business and to clearly define corporate-governance mechanisms.
