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Types of Businesses in France
At a Glance:
- There are four main types of companies in France: Entreprise Individuelle, Entreprise Individuelle à Responsabilité Limitée, Société à Responsibilité Limitée, and Société Anonyme Par Actions.
- An Entreprise Individuelle à Responsabilité Limitée is a company with no personal liability and without the need to form a separate legal identity.
- A Société à Responsibilité Limitée company is the most common type of business in France for small to medium sized companies.
- A Société Anonyme Par Actions is the most frequently used business model for large companies.
Entreprise Individuelle (EI): A Simple Start for a Small Business
A sole proprietorship — or an entreprise individuelle — is a relatively easy business to set up. If you want to choose this form of business, you won’t need to establish a separate legal entity in order to operate. Hence, there is no minimum capital investment needed. Also, there is only one person controlling the business, making it easier to manage operations and profits.
Although this form of business may be convenient, it also brings with it a lot of responsibility: an EI is legally bound to the entrepreneur, meaning that the owner is liable for all of the company’s business and debts. If your company goes bankrupt, then debt collectors have the right to seize your personal assets.
In order to start an EI, you will need to meet the following:
- proof of address in France (rental contract signed by landlord or recent bill)
- proof of identity (residence card or passport)
- French healthcare (carde vitale)
In addition — if you are married — your spouse must provide written proof that they know about the possible consequences of debt associated with this type of company. If you are an EEA national you will not need a residence permit to start an EI. However, if you are not an EEA national, you will need a residence permit in addition to the correct visa.
If your EI grows, you will always be able to change it into a limited liability company (EIRL) or a public limited company (S.A.).
Entreprise Individuelle à Responsabilité Limitée (EIRL)
This option is similar to the EI: however, with the EIRL you will be able to have limited liability without having to establish a separate legal entity. If you want to start this type of business, be cautious: your legal obligations with an EIRL are a bit hazy.
Most of the time, banks still reserve the right to ask you to instill a personal guarantee before granting a loan to you. This way, if you were to default on a loan the bank would be entitled to collect your company’s assets. If your company’s assets are not enough to cover the debt, the banks are then entitled to collect your personal assets as well.
Limited Liability Company: Société à Responsibilité Limitée (SARL)
The SARL is a private limited company that is formed with anywhere from two to 100 individual partners — either human or corporate. With this type of company, the liability is configured according to the amount that each of the partners invested in the company.
Unlike a corporation, a limited liability company does not need any minimum starting capital to be established as a business in France. However, there will need to be a minimum of 1 EUR shared capital. The company managers are appointed by the shareholders and are called directors. This type of company does not need an auditor if it has less than 50 employees and a net turnover under 3.1 million EUR. Another perk is that the transfer of company shares between shareholders in France is free of charge. Shares can also be sold to third parties not associated with the company if the majority of shareholders, representing at least half of the capital stock, agree.
Public Limited Liability Company: Société Anonyme Par Actions (S.A.)
An S.A. is commonly known as a public limited company — or a corporation. With this type of business, the founders will need to establish their business as a separate legal entity, essentially meaning that — in legal terms — the business is considered the same as a person. A corporation can enter and create its own contracts, own and sell property, and even be held liable for fraud and other crimes.
Compared with a sole proprietorship or partnership, there are different tax, auditing, and accounting requirements for an S.A. To start an S.A., you will need to have
- a minimum of seven corporate or human individuals (at least one person);
- a minimum capital share of 37,000 EUR;
- a board of directors (from three to 18 people).
In addition to these requirements, this type of company will need to have an official auditor. Contrary to a limited liability company, investors in a S.A. have the option to remain anonymous. Another positive aspect of this type of company is that transferring shares is quite simple. The major setbacks that most investors experience when trying to establish this type of corporation are the minimum starting capital, which is far beyond that of a limited liability company, as well as the more elaborate registrations requirements of an S.A.
There are still other business types in France, from variations of the aforementioned entities such as the Société par Actions Simplifiées to professional partnerships such as the Société Civile Professionnelle. The latter is typically used by business professionals in certain fields (e.g. doctors or lawyers).
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