Starting a business in France

France is the third-largest economy in Europe and the sixth largest in the world in terms of GDP (as of 2020). The country benefits from a wide range of assets to attract investors looking to set up a company : a business-friendly environment, sophisticated and stable financial market, and a well-educated labour force

In 2021, 66% of foreign investments in France came from Europe, followed by North America (19%) and Asia (8%). Germany is the leading investor in France.

Legal system

The French legal system is governed by civil law with a dual judicial system that is comprised of:

  • Ordinary courts (that handle criminal and civil litigation between private parties).
  • Administrative courts.

The French legal system is based on civil law. The main rules governing trading companies derive from statutory law codified in the Civil and Commercial Codes.

Most EU legal instruments are directly integrated into national law and apply between individuals, without having to be implemented into national law. Individuals can also invoke EU law directly before the national courts.

Company structures

There are numerous types of company structures provided by French law, but the main trading companies take one of the following forms.

  • For SMEs :
  • Société par actions simplifiée (SAS) simplified company limited by shares ; or
  • Société à responsabilité limitée (SARL) private limited company.
  • Large businesses: société anonyme (SA) public limited company.

These three types of business structures are created for trading purposes and provide shareholders with limited liability protection up to the amount of their shareholding.


In a simplified company limited by shares or SAS, the founding partners freely determine in the articles of association the share capital and the rules for organising the company, in particular the appointment and dismissal of directors and the procedures for adopting collective decisions: quorum and majority conditions, right of veto, etc.

Contributions may be in cash or in kind. At least half of the amount of the cash contribution must be paid up at the time of incorporation, the rest within 5 years.

Certain decisions must nevertheless be taken collectively, such as approval of the accounts and distribution of profits, share capital modification, merger, dissolution of the company, appointment of auditors, etc. The law requires the designation of a president, who represents the SAS vis-à-vis third parties.

The appointment of an auditor in SAS is not mandatory except in special cases.

Advantages of the SAS :

  • Contractual flexibility: partners are free to determine the rules of operation and transmission of shares
  • liability of the partners limited to their contributions
  • evolving structure facilitating partnership
  • possibility of setting up an SAS with a single partner (and therefore of creating a wholly owned subsidiary)
  • possibility of granting share subscription or purchase options to the company’s managers and/or employees
  • credibility with partners (bankers, customers, suppliers)

The SAS nevertheless requires :

  • costs and formalism in setting up the company
  • great rigour in drafting the articles of association

Drafting the articles of association can be complex due to their flexibility and often requires the support of an adviser.


Statutory auditors must be designated when at least one of the following criteria is met:

  • The SAS controls / is controlled by one or several companies.
  • Two of the following thresholds are reached:
  • the SAS has 50 employees.
  • the total balance sheet of the SAS exceeds EUR4 million; and
  • the turnover of the SAS (excluding VAT) is superior to EUR8 million.
  • One or several shareholders representing 10% of the share capital request the appointment of a statutory auditor before a court.

The SAS must be incorporated with the Commercial and Companies Registry (Registre de commerce et des sociétés) and is subject to accounting and tax reporting requirements.


A SARL is a company with a minimum of two and a maximum of 100 partners, managed by a natural person. The status can be chosen by craftsmen, traders, industrialists and liberal professions, but it cannot be used for the legal, judicial or healthcare professions, with the exception of pharmacists. The Commercial code precisely defines and regulates its functioning.

The SARL is a frequently chosen company structure because of its many advantages:

  • It can be set up easily and with little capital: The partners freely determine the amount of share capital.
  • The liability of the partners is limited to the amount of their contribution.
  • It allows for the family-owned nature of the company to be promoted, if appropriate.

However, the legal framework of the SARL is strict, rendering it unsuitable for businesses with an external growth strategy. Public offerings by an SARL are prohibited, and the shares cannot be admitted to a regulated market.


Shareholders have the right to: receive dividends, vote at shareholders’ meetings and are granted access to corporate information.

Transfers of shares are restricted and subject to the agreement of the majority of the shareholders representing at least 50% of the shares. The articles can require a greater majority.

It is mandatory to appoint statutory auditors when at least one of the following criteria is met:

  • Two of the following three thresholds are reached:
  • the SARL has 50 employees;
  • the total balance sheet of the SARL exceeds EUR8 million;
  • the turnover of the SARL (not including VAT) exceeds EUR4 million.
  • One or several shareholders representing 10% of the share capital request the appointment of a statutory auditor before a court.

The SARL must be incorporated with the Commercial and Companies Registry and is subject to accounting and tax reporting requirements.

SA (Société anonyme)

An SA is a capital company. It brings together shareholders who invest in the company’s capital.

The SA must have a minimum of 2 shareholders, or 7 if it is listed on the stock exchange. There is no maximum threshold of shareholders.

It can be managed by a board of directors comprising between 3 and 18 members, with a chairman and CEO appointed from among its members, or by a supervisory board with a management board.

A minimum capital of €37,000 is required for its creation. It should be noted that contributions in technical skills and knowledge, know-how or work, etc. are not permitted (apport en industrie).

The shareholders meet at least once a year in an ordinary general meeting (AGM). These meetings allow for the annual approval of the accounts as well as the taking of ordinary decisions by majority vote.

Extraordinary general meetings (EGMs) are meetings to amend the company’s articles of association. The amendment of the articles of association requires the agreement of 2/3 of the shareholders.

This type of business vehicle is most suitable for large businesses, including companies listed on the stock exchange. This form is designed to facilitate fundraising through the entrance of new investors in the share capital.

SAs are heavily regulated by the law. However, due to its strict obligations, the SA is a business form that often reassures investors and trading partners.

Shareholders have the right to: receive dividends, vote at shareholders’ meetings and are granted access to corporate information.

An SA must be incorporated with the Commercial and Companies Registry and is subject to accounting and tax reporting requirements.

Establishing a presence in France from abroad

Representative Office (bureau de représentation)

Establishing a representative office is in general the first step before establishing a branch or a subsidiary in France. It cannot conduct commercial operations and enter into contract with other companies for, or on behalf of, the parent company. Its purpose is solely to look for business opportunities for the parent company. It is not subject to French accounting and tax requirements.


A foreign  company may establish a  local  branch (succursale), which is a permanent establishment that is not a separate legal entity from its parent company.

Establishing a branch is a cost-effective option compared to setting up a subsidiary and allows the foreign parent company to conduct business operations in France through a non-distinct legal entity.

A local branch in France is considered a permanent establishment and therefore is subject to French accounting and tax requirements. Additionally, the parent company is liable for the debts and obligations of its French branch.


A subsidiary is a separate legal entity from its foreign parent company.

Advantages :

  • The foreign parent company keeps ultimate control of the subsidiary.
  • Limited liability protection for the foreign parent company, meaning that it cannot be held liable for the subsidiary’s debts.

Main disadvantages :

  • A subsidiary is subject to all legal, accounting, and tax obligations that apply to a French company.
  • Losses emanating from the subsidiary cannot generally be offset against the parent company’s profits

Foreign investment

All foreign investments must be declared with the French Central Bank, and with the Public Treasury who can verify whether or not any prior authorisation is required. Prior authorisation from the Minister for the Economy is required for foreign investments undertaken in sectors considered sensitive (e.g. energy, water supply, and public health).

Establishment aids and incentives

Foreign and local investors can benefit from various financial incentives depending on various considerations, for example the:

  • Size of the company
  • Sector and location involved
  • Level of contribution to research and development (R&D) and certain specific activities encouraged by the government.


Laws, contracts and permits

Employment relationships in France are mainly regulated by:

  • EU regulations
  • The Labour Code
  • Industry and company collective bargaining agreements
  • Internal regulations and practices
  • Individual contractual terms

EU, EEA and Switzerland nationals have the right to work in France, provided they have valid ID.

Non-EU nationals must obtain a work permit or a visa authorising them to work in France. If the non-EU national lives outside of France, the employer must submit a work permit application to the French local authorities.

Termination and redundancy

Under the 2017 Macron Laws, a Social and Economic Committee (CSE) must be elected in all  companies employing at least 11 employees for the duration of 12 months consecutively. In companies employing 50 employees and more, the CSE must be consulted on all projects impacting the general running of the company and/or its economic or legal structure. For collective redundancy, a specific consultation procedure applies.

When a project impacts the health, safety and/or working conditions of employees, the employer must also consult the CSE. In companies that employ at least 50 employees, the CSE has the right to appoint representatives to their board meetings or to the supervisory boards and to shareholders meetings, in a consultative capacity.

Minimum wage

The French minimum monthly wage represents €1,678.95€ for a 35-hour workweek as of August 2022.


Taxes applicable to businesses

Corporate Income Tax and its Additional Contribution

French corporate income tax (CIT) applies on a territorial basis. CIT is in general levied at the standard rate of 26.5%.However, companies with an annual turnover below  EUR7.63 million and fulfilling certain conditions  are subject to a CIT rate of 15% on the percentage of their net profit lower than or equal to EUR38,120.

SMEs with an annual turnover between EUR7.63 million and EUR10 million starting their fiscal year on or after 1 January 2021 benefit from a reduced CIT rate of 15% on the percentage of their net profit  that does not exceed EUR38,120. They will only be subject to the 26.5% rate on the fraction of their net profit exceeding EUR38,120.For fiscal years starting on or after 1 January 2022, a 25% CIT rate will apply for all companies.

Two co-existing parent-subsidiary regimes are applicable, based respectively on French domestic tax law and EU law (Directive (EU) 2015/121). These regimes allow a qualifying parent company to benefit from reduced taxation on capital gains realised by the parent company on:

  • The sale of “participations” (titres de participation)
  • Dividends received from its subsidiaries.


VAT is applicable on the sale of goods, delivery of assets and supply of services, and paid by the end consumer of the goods/services. This broad scope includes exceptions, which are set out in the Tax Code.

However, some exempt transactions can be deemed taxable if a VAT election is made.

VAT rates are applicable in France since 1 January 2016 (depending on the goods and services supplied and/or on the business area):

  • Standard rate: 20%.
  • Intermediary rate: 10%.
  • Reduced rate: 5.5%.
  • Super reduced rate: 2.1%.

Territorial Economic Contribution (TEC)

The TEC is a local tax levied by the French departments and regions, made up of the following two components:

  • Business property tax (cotisation foncière des entreprises), based on the rental value of the property used for the company’s business.
  • Companies added value tax (cotisation sur la valeur ajoutée des entreprises), based on the added value by the business on a yearly basis.

The overall amount of TEC due by the company cannot exceed 3% of the annual “added value” produced by the company.

Tax residency in France

Companies are subject to CIT on profits of any business carried out in France, regardless of whether they are registered in France. Under the principle of “restricted territoriality” of CIT provided by Article 209-I of the Tax Code, profits made by a French company from businesses carried out outside France are not subject to French CIT.

A business is carried out in France when a French or foreign company performs regular business on French territory through an autonomous establishment or dependent representatives. If a foreign company realises multiple transactions in France which constitute a “complete business cycle”, the whole operation will be seen as a business operated in France liable to CIT.

This content is provided for information purposes only and shall not engage DELCADE’s liability and/or replace a French lawyer’s opinion on the matter