French Company Registration- An Overview
All the laws which apply to companies in France are the same for local companies as well as foreign based companies. Hence setting up a company in France is quite straightforward when compared to other jurisdictions in the EU. In the EU, France is the only country that prefers public sector investment rather than starting a business. Hence it is the preferred destination for investors and entrepreneurs for starting a business.
The French government offers different forms of benefits and incentives for the company thrive. When it comes to intellectual property protection, the country is a signatory to conventions such as the TRIPS Agreement which provides significant protection for foreign intellectual property rights.
Qualified workforce carries out work in France which directly reduces the cost of production of different types of products. Apart from this, the country offers proper infrastructural facilities in terms of energy, highways, railway projects, ports and other projects.
All these attractive incentives make France one of the friendliest places for starting a business. Due to this investors should go for the process of company registration in France.
Benefits of French Company Registration
The following benefits can be afforded by the applicant by taking or considering the process of French Company Formation:
- One of the Largest Economies in the EU -
France has the second largest consumer market in the EU with 65 million domestic buyers consuming to the tune of €2 trillion annually. The tourism industry is booming with more than 83 million visitors annually. France is considered to be the second largest exporter of Food and Beverage products and 4th largest exporter of pharmaceutical products.
- Intellectual Property Protection -
France is a signatory to conventions such as the TRIPS Agreement which provides significant protection for foreign intellectual property rights. All companies in France have a unified patent registration method which provides more protection to patents in France. This would provide international patent protection. France has been ranked as the 12th best country for registering patents in the world by the World Economic Forum. The French government actively checks the cases of IP infringements and the fines can range up to €7,500 per violation.
- Low Interest Loans for Public Sector -
Public sector banks in France offer low interest loans. This low interest loan would amount to €1.5 million for financing innovation and research & development projects in companies that have (i) less than 250 employees, (ii) having less than €50 million in annual revenue and (iii) have been operational for a minimum of 3 years. For unlisted resident companies equity investment opportunities are allowed. Credit insurance at low cost is offered to all domestic companies in France.
- Tax Incentives Offered by the Government-
There are many tax incentives and allied schemes offered by the French Government. Interest rates which are offered for loans to global entrepreneurs at 2%. If the investment is made in some of the priority areas provided by the French Government, then such companies would receive exemption from payment of corporate tax for a period of 7 years. While the corporate tax rate can be as high as 34 per cent in France, the net effective tax rate can be brought down to 9% if the investments are made in the specific sectors. Apart from this, there are other social security exemptions provided by the government.
- Good destination for FDI-
According to a report taken out by accounting firm EY, France has becomes the most attractive destination for Foreign Direct Investment moving ahead of the United Kingdom. France received almost a thousand FDI projects in the year 2020 with the maximum investments made in the sphere of software and IT projects.
- Good Infrastructure-
The country offers proper infrastructural facilities in terms of energy, highways, railway projects, ports and other projects.
Eligible Business Structures under Company Registration in France
An applicant going for the process of company registration in France would have to choose a relevant business structure. The following are the business structures present in France:
- French LLC (Limited Liability Corporation)-
This form of entity is also known as SARL. This type of business is utilised by different forms of entrepreneurs to set up small and medium-size type of businesses. For forming this type of company there has to be one director, one shareholder and there is no provision of minimum share capital. The minimum amount can be decided among the shareholders. Incorporation of LLC is a very quick process. No restrictions on the residency requirements for the shareholders and directors of an LLC.
A partnership is an agreement between the partners to share the profits of the business. In a partnership type of business, the liabilities and assets of the business are shared among the partners.
- Simplified Joint Stock Company (SAS)-
This Company is similar to the French LLC. For forming this type of company there has to be one director, one shareholder and the minimum capital required is €1.Companies can be appointed as directors for managing this form of company. These kinds of companies are more suitable for both holding companies and start-up companies. The manager for these companies can be either a natural or a legal person.
- French Public Limited Company (SA)-
Like a public limited company a French public limited company would require minimum share capital for formation. The amount which is required for forming a French Public Limited Company is €37,000. There has to be minimum of two (and seven if publicly traded) shareholders and maximum of 18 and three directors for forming this type of company. However, this company has to comply with the requirements of capital. An auditor must be appointed to manage the audits.
- European Stock Corporation-
A combination of two or more EU companies can form the European Stock Corporation. However, the minimum capital which is required for forming this form of company is € 120,000.
- Branch Office-
Branch office (succursale) is a permanent establishment that is not a separate legal entity from its parent company. Such offices are set up during the starting phase of a business. Majority of control of the branch office is by foreign shareholders. All the debts of the branch office have to be Bourne by the parent company. Minimum requirement of 1 director and there is no requirement of minimum paid-up share capital.
- Representative Office-
A representative office (bureau de représentation) is an office which is not allowed to carry out any operations related to sales. The office is registered only to establish presence of the company in France. However, this office can be controlled by foreign shareholders. Similar to the case of Branch Office, there is no requirement of minimum paid-up share capital and only 1 Director is required to set this company.
Eligibility Criteria for French Company Formation
The following eligibility criterion has to be sufficed for company registration in France:
- Objects Clause-
The objects clause in the memorandum of association must state that objects for which the company is formed for.
- Information on Key Executives-
When making an application for Company registration in France, all key information related to the executives must be provided. Such information would include information on the name of the shareholders, registered address of the shareholders and other information. Apart from this, other information must be provided related to the shareholders. This would include information to visa.
- Information on Directors-
Information on the directors of the company must be provided.
- Minimum Capital-
An applicant for company registration in France also has to suffice the minimum capital requirement for company formation in France. If the applicant forms a French LLC or a Simplified Joint Stock Company then the minimum capital shall be decided by the shareholders among themselves in the AOA which can be as low as €1. However, if the company is a French Public Limited Company then the minimum capital required is €37,000. One fifth of the authorised capital has to be paid at the time of registration.
Procedure for Company Registration in France
An applicant going for the process of company registration in France has to follow the below prescribed method:
- Select an Appropriate Structure
- Check the Name on Website of (French Patent and Trademark Office) (INPI) and Commercial court Registry
- Open Corporate Bank Account for depositing the company’s share capital
- Consider what the shareholders and guarantors are (PSC)
- Prepare Documents for Running the Company
- Register the Company
- Select an Appropriate Structure-
First and foremost, the applicant for company registration in France has to choose an appropriate business structure or business vehicle. This would depend on the business requirements of the applicant. If the applicant wants to start an entrepreneurship business then it would be suitable to go for the French LLC.
- Check the Name on Website of (French Patent and Trademark Office) (INPI) and Commercial court Registry-
In the next step, the applicant would have to check for a unique name. The name of the company must not conflict with any other names which are taken by French Companies and should not be offensive. The name check can be carried out in the Institute National de la Propriete Industrielle website (https://www.inpi.fr/fr ). This is the French Patent and Trademark office. The name must also be checked on the Commercial Court Registry.
- Open Corporate Bank Account for depositing the company’s share capital-
In the next step, the applicant would have to open a corporate bank account. There are different types of banks such as BNP Paribas, HSBC and Societe Generale which provides banking services to business. For selecting a suitable bank, it is recommended to have a comparison on the services offered by all banks.
- Register at Centre de Formalites des Enterprises-
After opening a corporate bank account, the applicant would have to register at the Centre de Formalites des Enterprises for company registration in France. All other compliances related to business and tax would also be carried out through this institution.
For other kinds of businesses such as the ones related to trades/ artisans and for the independent or freelance professionals, the institution to get the registration is e Chambre des Métiers et de l’Artisanat (CMA). Similarly, if the business is agriculture related, then the appropriate authority to register business is at Chambre d’Agriculture (CA).
- Publish Legal Notice of Incorporation on JAL Announces legales-
In the next step, the applicant would have to publish a legal notice of the incorporation in the local gazette JAL Announces legales. This process is needed to publicly and formally introduce the company to the business world.
- Receiving the Identification Number-
Once the Centre de Formalites des Enterprises receives the documentation then such information would be provided to the Register Nationale des Enterprise. After this, the company would receive the SIRENE (Systeme Informatique pour le Repertoire des Enterprises), SIRET and NAF (Nomenclature des Activities Francaises) number.
Corporate Tax in France
All companies that are registered in France have to pay corporate tax. The following taxes would be applicable:
- Corporate Tax payable in France is 34%. This would be applicable for all businesses which are established in France. Hence an applicant wanting to go for company registration in France would have to pay this percentage of corporate tax.
- There is 20% VAT levied in France. VAT is an indirect tax which is charged on all businesses in France.
- Withholding Tax is charged on all dividends in France. 25% withholding tax is charged on all businesses that distribute dividends. The new withholding tax rate has been made applicable from 1st January 2022.
- Companies have to file corporate tax return by 30th April.
- Companies that invest in priority sectors are exempted from corporate tax payment. This exemption would be applicable for seven years.
Documents for Company Registration in France
The following documents are required for company formation in France:
- Information on the Founders of the Company- This will include information on the address, visa, passports and any other relevant information.
- Company’s shareholders identification documents which need to be translated and notiarised
- Information regarding the managers of the company and their identification papers and appointment letters
- Charter of the SARL
- Appointment of Manager Document
- Application Form for Registration and Fees
- Statement that the manager does not have any criminal convictions
- Memorandum of Association and Articles of Association which must be notarised
- Board Resolution( If required)
- Application forms issued by the Trade Registrar
- Publication of the decision to open the company in the National Gazette