Business Structure & Social Contribution System in France

This is a basic guide to the business structure in France. The idea is to give an understanding how business is structured in France, so that people wanting to start a business have a better idea of how the system works. If you are starting a business we recommend that you get professional advice, French Liaison is one option, an Accountant is another. At French Liaison we do have French Accountant's affiliated to us English speaking if you prefer. We are developing a webpage starting a business in France which should be on line mid December 07.

Business Structure in France

The main business categories are:

1) Enterprise Individuelle (EI) or Travailleur Indépendant (one-person business):

2) Entreprise Unipersonnelle à Responsabilité Limitée, better known as an EURL (single person limited company):

3) Société à Responsabilité Limitée, better known as a SARL (Limited Liability Company):

4) Société Anonyme, better known as an SA (equivalent of a plc in the UK):

The above list is not complete, we have listed the most common, anyone wanting more options should e-mail us or see an Accountant.

Enterprise Individuelle (EI) or Travailleur Indépendant (one-person business):

This is a popular system for people wanting to work on a self-employed basis, such as those categorized as a profession artisan, commeçant or libérale. This includes Carpenters, Plumbers, Building work, Gardeners, Shop's etc., in fact anyone that wants to run a small business who anticipate a modest turnover and do not intend to engage in large-scale financial activities. It is important to remember that personal liability is unlimited and you have to be aware that you are liable for all your debts. This could put your home at risk, however, it is possible to protect it by doing a déclaration d'insaisissabilité through your Notaire. Depending on what work you do, you should consider the option of professional indemnity cover, called assurance résponsabilité civile professionnelle.

With an (EI) you have the option of working under three different regimes,1) Micro-entreprise 2) Réel simplifie 3) Réel TVA (VAT) registered (régime réel, micro entreprise)

1) The Micro-entreprise is the most popular with people from the UK as they can earn up to 27000.00€ on services or 75000.00€ on sales without having to register for VAT, and only have to produce basic accounts. With this system you can not offset any costs you have incurred, for example Tools of the Trade, Vehicles etc. They are just given a fixed annual allowance which determines the profit. The profit is the figure that all calculations are based, with a Micro it is 50% of turnover for services. It is unlikely that anyone registering under this regime will pay Income Tax, they will however have to pay (cotisations) to Health, Social Security & Pensions from day one. Low earners can be exempt from certain contributions (cotisations), but will need professional help to achieve the reductions. The disadvantages with Micro-entreprise is that people end up paying incorrect charges unless they get professional advice, and the the fact that they can not offset startup costs, also the Company has no value. The advantages of a Mico-entreprise are that the regime is relatively simple, it is not highly regulated, low accounting charges or you can do it yourself and you can upgrade to Réel.

2) The Réel simplifie (Not registered for TVA) the advantage with this regime is you can offset any cost you have incurred in setting up your Business, purchases of equipment stock etc., also all day to day operating costs and purchases. All (cotisations) health, Social Security & Pensions are calculated based on the operating profit, in a Réel entreprise. The main advantage with a Réel is you can offset real costs, and only pay contributions on real profit also the Company has a value. The disadvantages are high accounting costs as most people will use an accountant, also it is more highly regulated and you can not down grade to a Micro for two years.

3) Réel TVA (VAT) registered. As above but registered for TVA which means that the entreprise is strictly regulated. The main disadvantage is on Labour where you have to add TVA to your labour costs.

Changes to the payment of Social Contributions (cotisations) is due to take place from 1st January 2008.

We understand there will be two systems one for people already registered and another for those who register their business in 2008. We will keep you posted on the changes when everything has been published, and it is clear how they will affect people.

Registering a Business (Enterprise Individuelle (EI) Pointers when registering

Demarcation

It must be remembered that this regime demarcation is very strict, you can not for example operate a Shop and work as Gardener under the same registration, you will have to register twice, and pay two lots of contributions.

Volunteer's Partner's Helpers etc."Conjoint Collaborateur"

You can not use volunteer's/unpaid helpers in you business with out running the risk of getting into serious trouble with the authorities. If you want your Wife or Husband to work in the Business you must ensure they are registered as an "Conjoint Collaborateur". You will pay a small extra contribution for them, the advantage is it does allow them to work legally in the Business without pay.

You can of course employ someone to work in the business, however this is very expensive. It is important to get good advice before proceeding with this option.

Business Registration Centres

Commercial: Chambre de Commerce et d’industrie
Trade/Artisans: Chambre de Metiers et Artisans
Profession Liberale: URSSAF
Agent Commercial: Greffe
Agriculture: Chambre d’Agriculture
Others: Centre d’impôts

Listed are the registration centres, these can be found in the local phone directory.

Entreprise Unipersonnelle à Responsabilité Limitée, better known as an EURL (single person limited company):

This is a 'one shareholder company' for enterprises based on one person although up to 50 partners are allowed. It is cheaper than a SARL as there are less formal procedures to comply with. Since there are no minimal capital requirements you can, in theory at least, set up an EURL with one euro in your pocket. However, in practice it is good to have a few thousand Euros if you are going to have credibility with institutions such as banks, some banks insist on a minimum amount to open a Business Account. You must also make sure you have enough cover startup costs of the business.

The advantages of a EURL if your earnings are high it allows you to pay yourself a fixed income for living expenses with the remainder of your earnings taken out as dividends which are taxed at 15.4% (up to €38,120). An EURL also gives you limited liability (limited to the capital invested).

The disadvantages are there is a lot more paperwork involved, both at the outset and throughout the year, and there are regular costs associated with with the business. Accountants can be very expensive, with a EURL you can expect to pay at least 1500.00 to 2000.00€ a year.

Société à Responsabilité Limitée, better known as a SARL (Limited Liability Company):

A common structure for small and medium-sized businesses with between 2-50 shareholders. The conditions are as for a EURL, although you may become a salaried employee of your SARL, entitling you to all the benefits of owning your own company, plus those of being a salaried employee.

The disadvantages are the same as for a EURL, and even more costs involved.

Société Anonyme, better known as an SA (equivalent of a plc in the UK):

The most common structure for larger business, you'll need a minimum of seven shareholders and capital of around €37,000, of which half needs to be subscribed on the creation of the business, and the remainder in the five years afterwards.

French Liaison can help you with every aspect of starting a business in France. We have Accountants affiliated to us also business lawyers, we have a wide range of knowledge ourselves and we will help guide through the whole procedure stage by stage. See our business startup page for more information. ( Still under construction )

French Liaison
15 rue du Temple,
24500 EYMET,
France.

E-mail: help@french-liaison.com