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Advantages and Disadvantages of Starting a Company in France

Prabhat Nigam

| Updated: May 12, 2022 | Category: Company Registration

Advantages and Disadvantages of Starting a Company in France

Any business who wishes to tap the whole of European market wants to establish his business in European Union is naturally inclined towards opening a company in France because of big market size and easier access to both east and west Europe.

This piece of writing lists down the advantages and disadvantages of doing business in France.

What are the benefits of doing business in France?  

Following are some of the benefits of starting a company in France:

  1. Simple procedure of starting: France is known to have a simple procedure of starting a company with an average of 7 small steps to start a business which is lower than the average for G20 nations. The time required for starting a company is also very less and can be easily done in a week’s time while average time period to open a company in G20 nations ranges at 22 days. 
  2. Access to the whole European Market: France being one of the founders of the European Union and located at a prime location in Europe makes it attractive destination for making investment. France has an easy access to all of Western and Eastern Europe where goods can be transported easily. France always ranks among the top when it comes to Infrastructure development in terms of quality of roads, ports, railways and other infrastructure.  
  • Big consumer market: France ranks at the second position in terms of biggest consumer market of Europe. Any person who is thinking of starting a company in France must take into account the following figures
  • A total of 65 million people spending worth two trillion Euros every year
  • France boasts to be the world’s largest tourism industry with 83 million visitors coming annually
  • France is the second largest exporter in F&B sector and stands at 4th position in the pharmaceutical sector   
  • Conducive ecosystem for raising investment for business: Raising capital or funding for start-ups or new businesses is not very difficult in France. If the business falls within the required criteria then France can a great source for funding of their businesses at very low interest rates. Similar is the case with the resident companies who wish to raise capital for their new ventures.
  • Strong regime of protection of Intellectual Property rights: France has a very strong regime of protection of intellectual property rights. The world economic Forum has ranked France as the 12th best country in the world for protection of patents. Moreover, France is also a member of the TRIPS agreement to protect the right holders against IP infringements. The French regulatory authorities have been proactively working to prevent cases of IP infringement and also imposing regular fines up to 7500 Euros for such violation using electronic communication networks.   
  • Highly skilled workforce: France offers a highly skilled workforce and when it gets combined with the advanced manufacturing infrastructure, it significantly reduces the cost of production. France ranks at 28th position out of 100 countries when it comes to people who can speak in English.  

What are the disadvantages of doing business in France?  

Though a number of advantages exist in doing business in France, certain disadvantages also exist which an investor or promoter should be aware of before starting a company in France:

  1. High corporate tax rate: One of the biggest factors which deter investors from starting a company in France is the significant amount of taxes on businesses that have been imposed by the government. Such taxes make up for the corporate tax levied on the profits earned by the company, VAT on the gross sales made by the company and employer’s contribution towards the social security benefits of the employees. There are other kinds of levies such as wealth tax, property tax, fuel tax, tax on insurance products and local economic tax which are added to the account of a company. On top of it, the French workforce is considered to be one of the highest paid workforces in the world. It is the result of such a complex fiscal structure that has resulted in a significant number of companies filing for bankruptcy.
  • Problems in tackling local issues for foreign companies: Foreign investors will find it difficult in starting a company in France due to local barriers such as 50 percent of the population does not understand a foreign language. Further, all the working in the government departments is done in French only. All contracts must be written in French too. Since the regulatory system is so complex, the businesses take assistance from lawyers and accountants in their day to day business operations.
  • Stringent regulatory framework tilted towards labour: The labour laws in Frances[1] are highly tilted towards the labour side and does not leave much scope for the employers. Every dismissal becomes a costly affair for the employer because of the hefty severance package to be paid to the employee. In case such dismissal is a result of gross misconduct then such matter is compulsorily referred to the labour court. All of this has contributed to the high unemployment rate making it difficult for the employers to secure permit for non-European employers.  
  • Bureaucratic procedure: While registering and starting a company in France is easy, the problem begins in obtaining business and trade licenses from the government which is a complex and lengthy process making it difficult for the newly registered businesses to start with their desired business operations.

Conclusion 

Starting a company in France should definitely be considered by the businesses if they wish to tap the whole of European market. The seemingly disadvantages should not discourage anyone from starting a company in France as the advantages of opening clearly outweigh the former. Further, any business can figure out things in the complicated setup with the help of competent professionals who understand the regulatory system in and out and save the new company from regulatory and legal pitfalls.

Read Our Article: Company Registration in France: Eligibility & Benefits

Prabhat Nigam

Prabhat has done his BA LLB (Hons) and has been writing research papers since his law school days. His interest in content writing made him pursue a career in legal research and content writing. His core areas of interest are indirect taxes, finance and real estate.

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