Comprehensive Explanation of French Company Types

When considering starting and registering a company in France, it is crucial to understand the various types of companies and their applicability. This guide is designed to assist you in understanding the available company forms in France and making informed choices based on your specific needs.

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In France, legal forms of companies are broadly divided into two types:

• The first type is Entrenpreneur (starting with E): an individual enterprise, in which only one person can have 100% control of the enterprise.
• The second type is Société (starting with SA): a company, which can have one or more shareholders.

The biggest difference between the two is: Société is a legally independent entity (Personne Morale).

Here are several common types of companies:

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1.Micro-entreprise

💡 Micro-Entreprise is suitable for freelancers and is associated with the EI (Individual Entrepreneur) company type. It is the simplest and most convenient form of company, similar to sole proprietorship.

Its characteristics include:

• Micro-Entreprise is similar to sole proprietorship in France.
• No VAT (Value Added Tax) is required.
• The application process is simple and can be done online.
• Low tax rates, and taxes are tied to personal income tax.
• If your turnover exceeds the specified limit for two consecutive years, you must convert it to another company form.
• You can only choose the IR (Income Tax) reporting option.
• It is suitable for entrepreneurs test their concepts and ideas with minimal costs in the initial stages of their business.

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💬: Alice is a freelance writer who chose the Micro-Entreprise form to quickly start her business with full control. Micro-Entreprise doesn't require significant initial capital or operating costs, which is a significant advantage for new freelancers as it allows them to test and develop their business ideas at minimal costs. Income is directly linked to personal income, making tax reporting convenient.

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📢: Micco assists you in registering a Micro-Entreprise quickly and conveniently, typically within 3 days.

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2.EURL-Single Person Limited Liability Company

💡 EURL: Entreprise Unipersonnelle à Responsabilité Limitée

💡 EURL is a form of individual business which means one person owns 100% of the company. It is also known as SARL unipersonnelle (Single-Person Limited Liability Company).

Its characteristics include:

• The company's only shareholder is responsible for the company's debts only up to the amount they have contributed in capital, with a minimum contribution of 1 euro.
• If the sole shareholder is also the company's operator, they have TNS status (self-employed worker).
• Simple to establish and manage, with options to choose between income tax (IR) or corporate tax (IS) for taxation.
• Choosing EURL allows for easy expansion by amending the company's articles.
• When the company has two or more shareholders, it becomes an SARL (Limited Liability Company).
• Ideal for those starting a business alone but planning to recruit new shareholders in the future and prefer the IR tax reporting.

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💬: Tom, a renowned photographer with a well-established client base and annual turnover exceeding €75,000, decided to operate his own studio full-time. He chose EURL because of its minimal initial contribution requirement (just 1 euro) and its ability to provide personal asset protection while keeping operations simple.

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📢: Micco assists you in registering an EURL quickly and conveniently, helping you efficiently manage your studio's operations and finances.

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3. SASU-Single Person Simplified Joint-Stock Company

💡 SASU: Société par actions simplifiée unipersonnelle

💡 SASU is suitable for companies initiated by a single person. It is the most popular company type among individual entrepreneurs.

Its characteristics include:

• Minimum registered capital is 1 euro.
• The company is only liable for the amount of contributed capital.
• You can keep your ARE subsidy allowance in the absence of income.
• The chairman of the board is treated as a salaried worker.
• Transitioning from SASU to SAS (Multi-Person Simplified Joint-Stock Company) is convenient.
• Ideal for those seeking freedom and flexibility in their company structure.

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💬: Lucy plans to start an interior design business in France, focusing on home and restaurant designs. Given the need for flexibility and potential future expansion in her business, she chose to establish an SASU. As an independent legal entity, SASU protects her personal assets from business debts. If her business grows in the future and additional partners join, she can easily convert SASU into a multi-shareholder SAS, offering convenience for business growth.

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📢: SASU's flexible management structure and limited liability characteristics make it ideal for sole shareholders, ensuring long-term development possibilities and convenience.  Contact Micco if you want to create a SASU.

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4.Entrepreneur Individuel-Individual Entrepreneur with Limited Liability

💡 EIRL：Entreprise Individuelle à Responsabilité Limitée

💡 EIRL is a form of individual business where one person owns 100% of the company.

• EIRL became Entrepreneur Individuel after February 15, 2022.
• The company and the individual operator are legally considered the same entity.
• The sole operator of the company is personally liable for all company debts.
• Company profits are treated as the operator's sole income, with only the option of IR (Income Tax) for tax reporting.
• Salaries paid to the operator cannot be offset from company profits unless the IR reporting option is chosen.
• The sole operator of the company has TNS status (self-employed worker).
• Suitable for entrepreneurs engaged in small personal businesses.

💬: Steve, a furniture designer, chose EIRL as the legal form for his studio in France. This choice allowed him to protect his personal assets from business debts, ensuring that in case of financial difficulties, his personal assets such as his house and car would not be used to repay business debts. This was crucial for a furniture designer who needed to invest in materials and tools. It also simplified tax and accounting procedures, eliminating the need to worry about complex business management tasks. This was a secure and convenient choice for an independent entrepreneur in the early stages of his business.

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5.SAS-Simplified Joint-Stock Company

💡 SAS: Société par Actions Simplifiée

💡 Introduced by the government to encourage entrepreneurship, SAS is a legal form suitable for small and medium-sized businesses.

• Half of the registered capital must be paid initially, with the remainder to be paid within 5 years, with a minimum registered capital of 1 euro.
• Partners enjoy significant freedom and can decide on the organization, operation, and management model of the SAS.
• The executive body can consist of 3 to 5 general managers appointed and supervised by the board of directors.
• At least two shareholders, and shares can be freely bought, sold, or exited.
• The company is only liable for the amount of capital contributed.
• SAS companies cannot issue stocks to the public but are generally suitable for companies planning short-term listings.
• The chairman of the board is treated as a salaried worker.
• Transitioning from SAS to SARL (Limited Liability Company) is simple.
• Ideal for those seeking freedom and flexibility in their company structure.

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💬:  Tim and Helen planned to establish a clothing company, and they chose SAS because of its flexibility and growth potential, making it suitable for their startup.

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📢:  Micco not only helped them quickly register the company but also provided customized management and equity advice, ensuring a smooth partnership.

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6.SARL-Limited Liability Company

💡 SARL: Société à Responsabilité Limitée

💡 Suitable for companies with multiple partners' contributions.

• No minimum capital requirement, and contributions can be in cash, assets, or industrial investments.
• Minimum of two shareholders, with a maximum of 100.
• Partners are only liable up to the amount of their contribution.
• SARL defaults to IS (corporate tax), but under certain conditions, partners can choose to pay IR (income tax) for up to the first five fiscal years.
• Salaries paid to the legal entity can be offset against company profits, except when choosing IR taxation.
• If the legal representative holds a minority share or an equal share with other shareholders, he/she is treated as a salaried worker; if it holds a majority share, it is treated as TNS (non-salaried worker).
• SARL is the preferred legal form for construction and restaurant entrepreneurs. It is an ideal choice for those seeking freedom and flexibility in their company type.

💬:  Suppose James and his family plan to open a restaurant in France. In that case, they chose SARL (Limited Liability Company) because it is suitable for collaborative ventures, provides liability protection, and offers an appropriate management structure and tax advantages for the restaurant industry.

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📢:  Micco helped James easily complete the SARL registration process and provided comprehensive guidance, including equity distribution, business plan writing, and compliance with specific regulations in the French restaurant industry.

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7.SARL de famille-Family Limited Liability Company

💡 SARL de famille possesses all the characteristics of SARL (Limited Liability Company) but can enjoy certain specific tax benefits and allows for free transfer of shares.

• All members must be blood relatives or in a civil partnership (marriage or PACS).
• Similar to SARL, with the only difference being the operation of a family business.
• Capital gains tax on the sale of company shares can be exempted.
• By default, IS (corporate income tax) must be paid, but shareholders can choose to pay IR (income tax) indefinitely.
• Each partner can offset their personal tax burden using company losses based on their ownership percentage in the family limited liability company.
• Avoids double taxation on profits; as a partner in a family limited liability company, you only need to pay IR (income tax) if the company is profitable.
• Through SARL de famille, you can fully benefit from the LMNP (Non-Professional Furnished Rental) tax system, allowing taxpayers to benefit from tax deductions when purchasing new or old furnished rental properties.

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💬: John and his son jointly invested in opening a Chinese restaurant in Paris. John, considering his imminent retirement, wanted to transfer his assets to his son more easily. By investing in the restaurant, he converted his assets into company shares, making it easier to transfer his assets to the next generation at a lower cost.

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8.SCI-Civil Real Estate Company

💡 SCI：Société Civile Immobilière

💡 In France, there are five forms of SCI companies, with the most common being "management and leasing SCI." It is suitable for managing and leasing properties, including both under construction and existing ones, which the partners have purchased, invested in, or built themselves.

• Requires a minimum of two partners to jointly purchase a property for rental income.
• Easier management and transfer of shares compared to other forms.
• Protects your personal assets.
• Defaults to IR (individual income tax), but if engaged in furnished rental business, IS (corporate tax) must be paid.
• The primary purpose cannot be to profit from buying and selling properties.
• Allows exemptions from inheritance tax, gift tax, etc.
• Ideal if your partners in property investment are not family members.

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💬: Robert, his mother, and his younger brother planned to jointly purchase a property in order to generate rental income. They chose SCI as the most common option. SCI allows you to choose between personal income tax or corporate income tax for taxation. Choosing personal income tax disqualifies you from using depreciation as a method of calculating income for commercial real estate, whereas corporate income tax allows for depreciation and requires professional accountants to handle annual tax returns.

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After understanding the company types mentioned above in France, how can you choose the right one based on your business needs?

When making the choice, there are several key points to consider, but first, let's answer a few simple questions:

• Do you want to operate the business on your own or with partners?
• Does your business require a specific company type, or are there any types that are unsuitable for your business?
• Do you meet the conditions for selecting a certain company type?

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After considering the above questions, you can think about which type is most suitable for your project, your development plans, and your personal preferences. For example:

• Do you plan to have many investors in your company?
• Do you prefer more freedom in how the company operates, or do you lean towards strict legal regulations to ensure security?
• If you want to be the company owner, which social security system is more suitable for you?
• How much administrative and accounting workload can you handle?

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Of course, when choosing a company type, you should also consider other factors, such as the level of responsibility you want to take on and how taxes will be handled, among other things.

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If you're starting a business and are unsure which company type is right for you, it's normal to find the selection process a bit complex. However, don't worry, Micco offers trilingual consulting services in Chinese, English, and French. After understanding your needs, we can recommend the optimal solution for you and assist you in registering your company with ease.

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Here's a reference for you:

• Opening a restaurant with partners: Open an SARL.
• Starting an import-export company with partners: Open an SARL or SAS.
• Establishing a tech startup with partners: SAS.
• Running a single-person joint-stock company: SASU.
• Running a small business with low revenue (<75K€): Micro-Enterprise.
• Running a small business with higher revenue: EURL.
• Investing in real estate with partners: SCI.
• Taking out a loan to invest in real estate and want to minimize taxes: LMNP.
• Taking out a loan to invest in real estate, annual rent income exceeds 23K, and want to minimize taxes: LMP.
• Partnering with children to open a restaurant: SARL de famille.

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