About 30,000 new companies are set up in France every year due to the enabling conditions non-residents are provided with if carrying out business activities within the country.
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The most popular types of businesses compared by a number of key criteria are presented in the table below:
|Société a responsabilité limitée (SARL)
Limited Liability Company
|Société anonyme (SA)
Joint Stock Company
|Société par actions simplifiées (SAS)
Simplified Joint Stock Company
|Main advantages||Easy to register and manage.||Manageable delegation of authority. Public offerings are permitted.||A minimum number of partners is one. Freedom of shareholders’ action, latitude in appointing the company’s management, shaping the structure of the entity, and transferring the capital.|
|Management||One or more directors who shall be natural persons, but are not required to be co-founders.||One natural person may hold the chairmanship of the supervisory board and the position of CEO at a time, or two individuals may serve as the chairman and the CEO respectively. A maximum number of deputy CEOs is 5. The supervisory board may have from 3 to 18 members, including statutory auditor.||At least one chairman of the management board (natural or legal person) is required. SAS may also have a supervisory board with additional members in it. The company can be represented by a person so empowered by the articles of association (CEO or deputy CEO).|
|Company’s management status||A director who is a minority or a 50% shareholder may also work under an employment contract, provided that certain conditions are met (he or she works as an officer of the company, totally separate from his or her role as the director).||A chairman of the management board may work under an employment contract, provided that certain conditions are met (he or she works as an officer of the company, totally separate from his or her role as the director).||As in the case of SA, a chairman of the management board may work under an employment contract and hold a director’s position at a time.|
|Appointment and dismissal of directors||In accordance with a decision by the founders who hold more than 50% of the company’s shares. Compensation is paid for dismissals without due cause.||In accordance with a decision by the supervisory board.||In accordance with the articles of association.|
|Minimum capital||No minimum capital requirements. A capital sufficient for covering long-term costs is needed. The amount of capital is determined by co-founders when drawing up the articles of association. Restrictions are imposed on the issuance of bonds. At least 20% of the capital shall be paid up at any given time during the first 5 years from the date of incorporation.||EUR 37,000. Public offering of new shares is permitted. At least 50% of the capital shall be paid up at any given time during the first 5 years from the date of incorporation.||No minimum capital requirements. A capital sufficient for covering long-term costs is needed. The amount of capital is set out in the articles of association. Public offering of new shares is not permitted. However, the offerings are available for accredited investors. At least 50% of the capital shall be paid up at any given time during the first 5 years from the date of incorporation.|
|Capital contributions||Sweat equity is allowed: co-founder offers to the company his or her time, labour and professional knowledge. Such equity is not considered as a contribution to the capital formation, but grants the right to hold the company’s shares (profit share and participation in making collective decisions).||Sweat equity is not allowed.||Sweat equity is allowed.|
|Co-founders / shareholders||From 2 to 100 natural or legal persons, or a single shareholder (Entreprise unipersonnelle à responsabilité limitée, EURL). At least one general meeting is held per year. The Ordinary General Meeting is convened for approval of the annual financial statement and review of contracts (by simple majority).||A minimum of 7 shareholders is required, with at least one being a natural person. Not less than one general meeting is held per year. The Ordinary General Meeting is convened for approval of the annual financial statement and review of contracts (simple majority is sufficient). The Extraordinary General Meeting is held to amend the articles of association (two-thirds majority is needed)||A minimum of one (SAS unipersonnelle) natural or legal person is required. Only a few decisions are made by the Ordinary General Meeting: approval of the annual financial statement, mergers, changes in the capital, liquidation.|
|Quorum for meetings||In the case of the Extraordinary Meeting, members present or represented shall have at least 25% of shares when first convened and 20% of the shares if the meeting is reconvened.||With regard to the Extraordinary Meeting, members present or represented shall have at least 25% of shares when first convened and 20% of the shares if the meeting is reconvened. In the case of the Ordinary General Meeting, shareholders present or represented shall hold at least 20% of the voting shares. If it is reconvened, the decisions are made by the shareholders present or represented.||In accordance with the articles of association. Holding annual meetings of shareholders is not required.|
|Blocking minority||Extraordinary General Meeting: 33% + 1 vote to make amendments to the articles of association. Ordinary General Meeting: 50% + 1 vote (or majority of votes if reconvened).||Extraordinary General Meeting: 33%. Ordinary General Meeting: 50%.||In accordance with the articles of association.|
|Liability of co-founders / shareholders||Limited to the amount of their capital contributions, except in civil or criminal cases.|
|Transfer of shares||Buyer pays a 3% registration duty with a reduction, which is equal to the ratio of the number of shares purchased divided by the total number of shares issued by the acquired company, multiplied by EUR 23,000.||Buyer pays* a registration duty:
|Audit||Mandatory audit is required if at least two of the three following criteria are met: net turnover of EUR 3.1 million or more total balance sheet of EUR 1.55 million or more 50 or more employees.||Mandatory audit is required.||Mandatory audit is required, provided that the company controls the equity of one or
more companies, or itself controlled by one or more entities
at least two of the three following criteria are met: net turnover of over EUR 2 million; total balance sheet exceeding EUR 1 million; number of employees above 20.
|Taxation||Corporate tax. A company may opt for paying income tax instead of the corporate one if it has fewer than 50 employees and less than five years have passed since the date of its incorporation.|
Corporate income tax: 33.3%. The surcharges of 3.3% and 5% are applied to the companies whose CIT exceeds EUR 763,000 and whose annual turnover is above EUR 250 million.
Branch withholding tax (25%) is not levied if a parent company is resident in an EU member state.
95% of dividends may be exempt from taxation if a dividend recipient holds at least 5% of the share capital and the holding period is 2 years or longer.
Capital gains tax. In the general case, this tax is charged at the corporate income tax rate.
Tax on royalties – 33.3%.
Tax on dividends:
Standard VAT rate – 23%.
Newly established enterprises carrying out industrial and/or commercial activities enjoy tax incentives for a period of 5 years. During the first two years of operation, corporate income tax exemption of 100% is provided to such entities. 75%, 50%, and 25% exemption is granted for the third, the fourth, and the fifth years respectively.
Losses can be carried back 3 years or forward 5 years.