When starting a business in France, you will have to choose a legal form to help define the tax regime of your company and to carry out your professional activity.
Depending on the activity, the type of project, the number of associates or shareholders combined, among other considerations, the choice of the company will lead to a legal form that will be the most suitable for it.
The individual enterprise
It is a type of company made up by a single associate, often referred to as self-employed.
Such an enterprise has no legal existence distinct from its owner and has no separate legal entity nor patrimony. In other words, as the single associate is the sole owner of the business, it is he who gets all the profits and, if any, the one who suffers all the losses.
Single-associate companies
An entrepreneur can create a single-associate company. It will be an EURL or a SASU. Unlike the individual company, an EURL and a SASU have a separate legal entity independent of that of the entrepreneur. The entrepreneur has the status of single-associate and his financial responsibility is limited to the liability of the company. A single associate has the option to subject his company to both tax regimes: the income tax (known in France as IR) or to the corporate tax (known as IS), whereas in an individual company, the only option is to be subject to the income tax.
Multi-associate companies
Multi-associate companies are, as their name suggests, companies with multiple associates. They have the society status and therefore, the company has a legal entity. They may operate according to a civil or commercial form depending on the nature of the activity performed.
The best-known multi-associate companies are public limited companies (called société anonyme or SA in France), limited liability companies (société à responsabilité limitée or SARL), simplified joint stock companies (société par actions simplifiée or SAS) and general partnerships (société en nom collectif or SNC).
The limited liability company (SARL)
The SARL is constituted by at least two associates and a maximum of one hundred. It also assumes the existence of a share capital, which will be determined by the associates in a general assembly. In case of making their contribution in cash, it is possible to release only one fifth of the capital at the time of the constitution of the company and pay the remaining within five years from the registration of the company. This legal form allows all the associates to limit their responsibilities to the amount of their respective contributions.
It’s important to note that a SARL can be created from only one euro as capital. However, the total amount of liability should be in accordance with the activity carried out.
The Public Liability Company (SA)
A public liability company (SA) is a capital enterprise consists on the operation of major accounts and companies wishing to enter the stock market. The SA must have at least 7 shareholders and it is constituted with a minimum capital of 37,000 euros. A SA is represented by a general director and it must have a supervisory body, responsible for representing the shareholders' general assembly, defining with them the business strategy, and controlling the actions carried out by the executive power.
The Simplified Joint Stock Company (SAS)
The SAS is constituted with a share capital freely determined by the shareholders in the statutes of the company. At the moment of its creation, half of its capital can be released if the shares correspond to contributions in cash (the release of the remaining capital has to be made within five years).
This particularly flexible legal form allows the partners to organize precisely, in the statutes, the functioning of the society.
The General Partnership (SNC)
This legal form is rarely chosen by a multi-associate company because it has the disadvantage of not protecting the personal patrimony of the associates, who are indeed fully responsible for the debts of the company with their personal property. It can be constituted without a minimum amount of capital by at least two associates who have the status of trader. It is managed by one or more directors. With regards to the tax regime, a SNC is normally taxed according to the income tax unless otherwise specified at the moment of its creation.