Guide pour start a business in France

The purpose of the Enterprise Formalities Centre is to accelerate, facilitate and simplify business formalities.

In France, they are known as Centres de formalités des entreprises or CFE, which is not to be confused with the cotisation foncière des entreprises, which shares its acronym. They allow companies of any kind (EURL, individual enterprises, public liability companies, etc.) to register in a single place all the documents and declarations concerning the creation or the resumption of an activity, any modification in the situation of the company (for example, changing its name, its main activity, etc.), and the end of their activity (liquidation).

The CFEs thus prevent companies from multiplying the steps with the different organizations where they must be declared (INSEE, URSSAF, RCS, tax services, Registry of the Commercial Court, etc.).

Competences of an Enterprise Formalities Centre

The main objective of a CFE is to constitute a single organism for official formalities concerning enterprises. After receiving and checking the file of a company, the CFE is in charge of sending it to the various institutions concerned. It is important to know that the CFE is also present on the Internet, so the entire business creation process can be done online.

When creating a company, an entrepreneur must first apply to the CFE on which it depends to declare his activity by means of a P0 form (for natural entities) or a M0 form (for multi-associate companies).

The declaration serves to provide all the information about the activity of the company and it must be filed during the first 15 days of activity. In addition, the tax regime to which the company will be subject must also be stated on this declaration.

Once the declaration of existence is deposited, the CFE issues a Business Creation Deposit Receipt (in French, récépissé de dépôt de création d'entreprise or DRDCE) to the director of the company immediately and for free and transmits the declaration of existence to all the recipient bodies: the URSSAF, registry of the commercial court, INSEE, etc. This receipt remains valid until a notification of registration is sent by the pertinent organism, a process that takes a maximum of one month.

Once all the documents are properly registered, the company obtains:

• The registration in the competent official organism according to the nature of the activity of the company (for example, a company that carries out a commercial activity will be thus subject to the Registry of the Commercial Court).
• The company identifiers assigned by the INSEE (SIREN and SIRET numbers, APE code);
• The allocation of a VAT number by the Corporate Tax Service (SIE), which is essential for every commercial transaction within the European Union.

However, although the CFE is normally effective in the process of business creation, it is less efficient for changes in the activity or liquidations of companies, in which case the companies often have to come into direct contact with the organisms concerned.

Although the CFE serves to centralise all the documents of an enterprise, and forwards them to the pertinent institutions, by no means does it take care of the formalities than concern the entrepreneur himself, such as:

• Creating a bank account for the enterprise.
• Drafting the statutes of a company (which has to be done by the associates with or without the assessment of a professional).
• The publication of legal announces in an authorised journal (JAL), although it may in fact act when the announces are to be published in the BODACC.
• The registered address of the company.

The Types of Enterprise Formalities Centres

Depending on the nature of the activity carried out, as mentioned before, the competent CFE will be different. In France, there are five different types:

• CFE of the Commerce and Industry Chamber (known by its acronym as CCI), which is competent for companies dedicated to commercial or craft activities that have more than 10 employees.
• CFE of the Artisanal Chamber (CMA by its acronym), which is concerned about crafts activities unless the company has more than 10 employees, in which case it’s the competence of the CCI.
• CFE of the Registry of the Commercial Court: it is in charge of most companies created in France, such as civil societies (such as an SCI), commercial agents, etc.
• CFE of the URSSAF, which takes care of liberal or freelance professions such as lawyers, architects, engineers, authors, etc.
• CFE of the Agriculture Chamber which, as the name indicates, is responsible for activities related to farming or agriculture.

In order to create a company in France, the associates or shareholders have to put a certain amount of properties at the disposal of the enterprise in order to constitute the share capital.

This deposit of properties is known as contributions (apports in French) and they are three main types: cash contributions, in-kind contributions, and industry contributions.

In exchange for these contributions, the associates receive a proportional amount of shares: social shares (in the case of a SARL or EURL) or stocks (for example, in the case of a SAS or a SASU). The amount of each contribution will thus define the distribution of shares amongst the associates or shareholders. It's important to note that the total amount of capital can vary along the life of the enterprise depending on their needs.

Contributions in cash

The contribution in cash is a deposit of money made by the associates in order to create the social capital of the company. The contribution in cash is made at the time of the creation of the company and it must be deposited in the bank account of the enterprise, in the “Caisse des dépôts et consignations” (a French organism created for investments, which can be translated as Deposits and Consignments Fund) or by using the services of a notary. The total amount will then be put on hold until the registration of the company is effective, which is justified by means of the K-bis extract. However, it is possible to opt for a partial release of said contribution. In doing so, the associates are entitled to provide, at the moment of the creation of the company, only 20 % of the capital planned for the SARL and 50 % for the SAS. The action is known as "liberation of capital" when the total amount of the share capital has been deposited. The terms to determine the contributions in cash have to be stated in the statutes of the enterprise.

Contributions in kind

Contributions in kind can take very different forms. The goods concerned by the contribution in kind are, for example, the merchandise of the company, its real estate, the commercial property, etc.

These contributions will constitute the capital of a company after carrying out an assessment to determine the value of each contribution in kind. Indeed, while it is simple to evaluate a contribution in cash (that is to say in money), the contribution in kind requires a preliminary assessment which will then translate into an equivalence determined in number of shares by means of a contribution treaty. There is often a need for a contribution commissioner, however, it means that the cost of starting the company will be higher. Nevertheless, as an exception, the associates of a SARL can unanimously decide not to resort to a contribution commissioner if they meet these two conditions:

• The contribution in kind does not exceed 30,000 euros.
• The total value of the contributions in kind do not exceed half of the share capital.

Contributions in industry

A contribution in industry is a contribution in determined by the work of the associates or shareholders, and it is materialized by the provision of the associates of their technical knowledge, their work, or the services that they provide and which benefit the company. Nevertheless, this type of contribution isn’t frequently used.

Unlike the other two types of share capital constitution, the contribution in industry does not generate the share capital of the company per se, but it gives the associates the possibility to obtain social shares or stocks. Contributions in industry are recorded in the statutes of the enterprise, where it is indicated to which associate the contribution corresponds. However, the associate concerned still takes part in the decisions of the company by means of voting, and they are entitled to the share of profits and net assets. Indeed, the contribution in industry provides several rights to the associates, but it also represents additional obligations, as they are responsible for the losses that may occur as well.

French companies are identified by the administration and public bodies thanks to two numbers, the SIREN and the SIRET.

The SIREN and SIRET numbers are issued by the French Institute of Statistics and Economic Studies (known in France as Institut national de la statistique et des enquêtes économiques or INSEE. It should be noted that this SIREN or SIRET identifier applies not only to commercial enterprises, but also to crafts professionals and companies, associations, professional unions or administration-related businesses.

The SIREN number

When a company is created in France, the INSEE assigns, once it is registered in the Sirene directory, a unique identifier called SIREN number (which stands for Système d'identification du répertoire des entreprises and can be translated as “Business Directory Identification System”). This unique identifier is used by all public bodies and administrative organisms in their relations with the company.

It consists of a 9-digit number that identifies the company according to the order of registration of the company in the Sirene directory.

The SIREN number remains the same throughout the life of the company and it cannot be changed. With regards to its suppression, it can only happen in the following cases:

• Death or cessation of the activity for a natural entity (such as an individual enterprise).
• Liquidation and dissolution of a legal entity.

The SIRET number

The SIRET number (which stands for Système d’Identification du Répertoire des Établissements and can be translated as “Directory of Establishments Identification System”) corresponds to the 9 digits of the SIREN number followed by 5 additional digits (called "NIC" for Numéro Interne de Classement or "Internal Number of Classification"). These last 5 digits make reference and allow to identify the head office and, if any, the different secondary establishments of a company.

Each company has only one SIREN number, but as many NICs as there are establishments, that is, as many SIRET numbers as establishments.

How to get the SIREN and SIRET numbers?

At the moment of their creation, all companies must submit a registration form via the Internet, by post or on the spot to the CFE, which sends it to the Registry of Commerce and Companies (RCS) as well as to the INSEE. Once the enterprise is effectively registered, it receives a SIREN number which, as mentioned above, is unique and allows it to be identified. Once allocated, the SIREN and SIRET numbers are registered by INSEE in a directory known as Sirene (which stands for Système d’identification du Répertoire des Entreprises et de leurs établissements and which can be translated as “Business and Establishments Directory Identification System”). As soon as the registration of a company is effective, the INSEE sends it a certificate of registration in the Sirene directory which states the following information:

• The SIREN number, which identifies the company.
• The SIRET number, which identifies each establishment of a single company.
• The APE code (activité principale exercée), which identifies the branch of activity of the company. This code is used for purely statistical matters, although it must appear in all the legal documents of the company.

It’s important to know that it's the SIREN number that authorizes the company to issue invoices (and to operate legally in a market). To obtain a SIREN and SIRET number, the company must register in the CFE of the department where its head office is located. Both its SIREN and SIRET numbers will then be mentioned on the K-bis extract of the enterprise, which is an official document certifying the legality of the company and which is obtained after its registration.

Note that a K-bis extract makes reference to the official document sent to a legal entity, whereas in the case of natural entities, it’s called K extract, although the document contains the same information and has the same legal effects.

The Registry of Commerce and Companies is an organism that belongs to the Commercial Court and which is used to register companies.

The RCS is known as “Registre du commerce et des sociétés” or “RCS” in French, and the aim of such organism is to centralise all the legal information of the companies operating in France in a single registry and to communicate their existence to the public. If a company is not inscribed in the Registry of Commerce and Companies, it does not legally exist.

The RCS conditions the rights of the companies registered and regulates their professional activity by acknowledging their existence.

Who has to register in the RCS?

Any enterprise performing a commercial activity, whether it’s a natural or a legal entity, has to register either in a Chamber of Commerce and Industry or in the Commercial Court (in the RCS, for this matter, as it’s the organism in charge). On the other hand, civil right companies (such as a real estate company or a holding company) can only be registered in the Commercial Court.

There are, however, two exceptions when the registry in the RCS isn’t mandatory: In the case of a commercial agent or the EIRL (a type of individual enterprise with limited liability). This is due to the fact that both of them have their own specific registry organisms.

The company has to choose its RCS according to the registered address of its head office, that is, the registry has to be made in the organism operating in the prefecture where the main establishment is located. In case of having any secondary establishment, they will have to be included in the registry as well.

The registry demand is one of the steps to create an enterprise, and it’s made by means of a M0 form (for legal entities) or a P0 form (for natural entities). Once the registry is complete, the company obtains:

• A SIREN number, made up of 9 digits.
• A RCS number, which includes the mention RCS, the municipality of the corresponding RCS, the character “A” (for natural entities), “B” (for commercial companies), “C” (for economic interest groupings), or “D” (for civil societies), and the SIREN to complete it. For example, for a SASU, it would look like “RCS Paris B 123456789”
• A K-bis extract that contains all the company information. In the case of natural entities, they obtain a K extract instead, which essentially contains the same information as the K-bis.

The SIREN and RCS numbers, together with the registered address of the head office and the legal form of the company have to be published in every legal document emitted by the company (such as a contract) as well as the website of the company if there is one.

Having made a correct request to register the company, the RCS will make a publication in the BODACC, although it isn’t necessary for individual enterprises neither for single-associate companies such as an EURL or a SASU. This publication is automatic for the rest of companies and it’s meant to officially inform about the creation of the enterprise or any change in it.

What are the consequences of not being registered?

A company that carries out a commercial activity without having informed the RCS about it is not operating legally. If the activity is detected, a court can decree an ordinance to make the company pay a penalty fee.

Conversely, if the company intentionally gives wrong or incomplete information when registering, it may be requested to pay a sanction of up to 4,500 euros and the director can be sentenced to six months of jail and the suspension of his right to manage an enterprise.

What are the deadlines to register a company in the RCS?

An individual company must have completed its registry in a maximum period of 15 days after having started its professional activity. Alternatively, if the natural entity behind it wishes to, it can be registered up to one month before starting to operate.

With regards to any legal entity, there’s not a minimum neither a maximum period to complete the registry. Nevertheless, it’s generally made as soon as possible after the associates concerned have signed the statutes of the company, published a legal announcement in an authorised journal (known as JAL in France), and have made a deposit of the constitution capital.

What is the cost of the procedure?

The registry of an individual company in the RCS has a rate of 28.68 euros. For auto-entrepreneurs, however, the formality has no cost, although it is compulsory to do it.

For every legal entity, the registration fee is 41.50 euros. However, they have to add as well the price of the rest of formalities that they have to carry out in order to register the company properly, as well as the corresponding VAT for each of them. These fees include, besides the registry in the RCS, the BODACC publication, the publication of the legal announce for the type of legal forms concerned, and the registry in the French Intellectual Property Institute (known as INPI).

A legal notice is an advertisement that mentions the creation of a company.

These legal notices must appear in a journal authorised to publish legal ads (known as JAL in France), and which must be distributed in the district of ​​the head office of the company (it can be a local, regional, or national journal).

The vast majority of legal notices concern the life of companies. They range from the small single-associate limited liability company (called EURL) to the big public limited company (known as SA), which is listed on the stock market. Posting a legal ad is not always mandatory, as in the case of individual companies. Such publication can sometimes be avoided, but most of the time, considering the formalities of company creation, it is necessary to inform third parties of the life of the companies.

When to publish a legal notice

The first publication of a legal advertisement by a company takes place when it is created, following the draft of its statutes. Whatever the chosen legal form (EURL, SARL, SASU, SCI...), the formalities to register the company include the publication of a legal ad in an authorized newspaper that is distributed, as mentioned above, at least on a weekly basis in the department of the head office of the company.

Other cases that involve the publication of a legal notice, which has to be made by the director of the company himself, or any person who represents him are, for example, a transfer of the registered address of the head office, a change of associates or directors, a modification of the activity of the company or its official name, etc.

It’s also mandatory to make two publications in an authorised journal for most of the processes that involve stopping the professional activity or closing the company. The first publication will be made to indicate that the activity is suspended whereas the latter is to inform about either the end or transfer of the company, or the decision to resume the activity. These procedures include, for example, the process of dissolution and liquidation or a “mise en sommeil”.

The legal ad can appear in national an authorised daily journal, such as Les Echos or Le Parisien, or in other regional ones like La Gazette du Val d’Oise, as long as the head office is located in the department. Many newspaper normally request the authorisation to publish legal ads, so a commission, under the control of the prefectural authority, meets every year to study and decide on the list of authorised newspapers for the following year. The list is then published every 15th of December and it can be found online.

Once your advertisement is published, you will receive two documents in your mailbox: a legal certificate of the publication in the journal of legal notices (this document is authentic and is the one that gives the announcement value for legal purposes), and a copy of the journal itself containing your legal notice.

The content of a legal notice

The mandatory information that must appear in any legal notice and which will make up its content in order to make a proper publication is, depending on the type of company, the following:

• The official name of the company, its acronym, and logo.
• The legal form.
• The amount of constitution capital.
• The address of the head office, which can be proven by means of a domiciliation agreement, a lease contract, etc.
• The activity that the company will carry out (to be presented in few words to reduce the cost of the legal notice).
• The duration of the company (normally up to 99 years at most).
• Identity of the Registry of Commerce and Companies (known in France as RCS) corresponding to the company in question.
• Complete names and addresses of the directors and other associates (in the case of SAS and SASU) who have the power to decide on the company.

The information to be included in the legal advertisement comes from:

• The statutes of the company.
• The decisions taken in the general assembly, or by the single-associate, depending on each case.
• Other legal documents at your disposal (the K-bis extract, for example).

As far as the appearance of a legal notice in the journal is concerned, the law stipulates a standard format, as it is not a commercial advertisement. Every legal ad adopts the style of the newspaper in which it appears. Each newspaper has a standard model that applies to the text when you enter it. The only possible customisation of a legal notice is the use capital letters and writing in bold some parts of the text like the name of the company.

The price of a legal ad is fixed by law, so it doesn't matter which journal you choose. However, the price of the publication does vary depending on its length (the price is per line of text, so the longer the text is, the more expensive is the legal notice). Generally, this cost is between 125 and 225 euros without including the taxes.

An EURL is a limited liability company (known in France as SARL) with only one associate.

It can also be called a ‘SARL unipersonnelle’, and together with the SASU, they are the two types of single-associate companies in France.

Single-associate companies are subject to more rigorous management and formalities that are more expensive than those of individual companies. For compulsory formalities, there are certain costs that are unavoidable (legal announce, registry, etc.)

The EURL has the advantage of limiting the associate's liability to the amount of capital that he has invested for its constitution. Unlike an individual enterprise, which obliges the associate to be liable for the debts of the company unlimitedly and even responding with his own patrimony, the EURL protects the patrimony of the single associate. Therefore, in this case, the single associate will only be required to respond for the debts of the company up to the amount of the capital he has invested on the company.

Characteristics of an EURL

The particular characteristics of the EURL are described in the enterprise statutes which are written at the time of its creation.

As mentioned above, the EURL is composed of a single associate. This associate is most often a natural entity, but the associate can also be a legal entity (except another EURL).

The EURL has a share capital of at least 1 euro and there’s not a maximum amount. You can deposit the totality of the capital at the time of the company creation, or 20% of the capital at least when creating it and the rest within a five years period. However, you should beware, if the amount of the initial capital is not consistent with the economic requirements of the activity, the personal patrimony of the associate could be engaged.

An EURL is directed by a natural entity, more specifically a manager. This manager is most often the single associate of the EURL. However, he may also be a third party as long as he is a natural entity.

The EURL can be subject to two types of taxes according to the nature of the associate:

• If the single associate is a natural entity, the EURL will have to pay the revenue tax (IR in French). In this case, the partner has the same tax obligations than an individual entrepreneur. However, in certain cases and at the request of the associate, the business may be subject to a corporate tax (IS).
• If the single associate is a legal entity, the EURL will have to pay the corporate tax. In this case, the remuneration received by the associate-manager is subject to the revenue tax according to the regime of company directors.

According to the contributions made and to the personal tax regime of the single associate, and that of the tax regime of the EURL (revenue tax or corporate tax), the amount of tax exemptions at the time of the registration of the statutes varies.

The creation of an EURL must be advertised in a journal authorised to publish legal announcements (known in France as JAL).

You must also register your company in the Registry of Commerce and Companies (known in France as RCS). The process is carried out through the enterprise formalities centre (called CFE), which is in turn responsible for transmitting the necessary information to the various bodies concerned, such as the registry of the Commercial Court, the tax service, etc. Once the registration is complete, the company obtains a K-bis extract that proves that it’s carrying out a legal activity.

Conclusion

The EURL is thought for a business creator whose potential for business development is likely to remain rather modest. Therefore, its formalities of creation, its management and its administration will normally remain simple. If the EURL grows and the capital of the company increases, the single associate can decide to become a SARL with other associates participating in it.

The K-bis of a commercial company is its identity card.

It is, in fact, an extract from the commercial register issued by the registry of the Commercial Court. It is considered as the only official document attesting and proving the legal existence of a company.

Although it doesn’t have a fixed duration, in most cases, to be opposable and to be authentic for administrative procedures, the extract must be less than 3 months old.

Content of the document

The extract K or K-bis informs about the activity of the company and gathers all the mentions presented to the Registry of Commerce and Companies (known in France as RCS):

• Name of the corresponding registry;
• Company name, acronym, and logo;
• Identification number (the SIREN number) and NAF code;
• Legal form (ltd, inc...);
• Total amount of the company constitution capital;
• Registered address of the head office and principal establishment, and any secondary establishments in the European Union or the European economic area;
• Duration of the company (up to 99 years);
• Date of constitution;
• Detailed activity;
• Domain name of the company's website;
• Function, surname, given name, date of birth, municipality of birth, nationality and address of the director, shareholders, associates, or any other member involved in the management of the enterprise;
• Reference of the authorizations required for regulated professions.

In addition, it includes all the decisions of the Commercial Court in terms of insolvency procedures: safeguards, recovery, and liquidations.

How to obtain a K-bis extract?

The information given on the K-bis extract is public. Everyone can therefore access it by making a request for K-bis extract from the registry concerned.

The request for a K-bis extract can be made directly online, by mail, or by physically going to the RCS, providing:

• The corporate name,
• The acronym or name of the company,
• The SIREN number.

A K-bis extract costs € 2.96 if it’s requested physically in the registry, € 3.96 by mail and € 3.70 by electronic means.

The K extract for an individual enterprise

The K-bis only concerns legal persons. Individual companies inform about their legal existence by means of a "K". The K includes the same information as the Kbis extract, but it is not an authentic instrument signed by a notary. Any newly created individual company obtains a ‘K’ extract by post.

Conclusion

Any natural entity (micro entrepreneur) or legal entity (Inc., Ltd...) that carries out a professional or commercial activity must register in the RCS after its creation. The lack of registration may be considered a crime of concealed work.

The K-bis extract allows the company to certify its registration in the RCS to any person who requests it.

The K-bis of a commercial company is its identity card.

It is, in fact, an extract from the commercial register issued by the registry of the Commercial Court. It is considered as the only official document attesting and proving the legal existence of a company.

Although it doesn’t have a fixed duration, in most cases, to be opposable and to be authentic for administrative procedures, the extract must be less than 3 months old.

Content of the document

The extract K or K-bis informs about the activity of the company and gathers all the mentions presented to the Registry of Commerce and Companies (known in France as RCS):

• Name of the corresponding registry;
• Company name, acronym, and logo;
• Identification number (the SIREN number) and NAF code;
• Legal form (ltd, inc...);
• Total amount of the company constitution capital;
• Registered address of the head office and principal establishment, and any secondary establishments in the European Union or the European economic area;
• Duration of the company (up to 99 years);
• Date of constitution;
• Detailed activity;
• Domain name of the company's website;
• Function, surname, given name, date of birth, municipality of birth, nationality and address of the director, shareholders, associates, or any other member involved in the management of the enterprise;
• Reference of the authorizations required for regulated professions.

In addition, it includes all the decisions of the Commercial Court in terms of insolvency procedures: safeguards, recovery, and liquidations.

How to obtain a K-bis extract?

The information given on the K-bis extract is public. Everyone can therefore access it by making a request for K-bis extract from the registry concerned.

The request for a K-bis extract can be made directly online, by mail, or by physically going to the RCS, providing:

• The corporate name,
• The acronym or name of the company,
• The SIREN number.

A K-bis extract costs € 2.96 if it’s requested physically in the registry, € 3.96 by mail and € 3.70 by electronic means.

The K extract for an individual enterprise

The K-bis only concerns legal persons. Individual companies inform about their legal existence by means of a "K". The K includes the same information as the Kbis extract, but it is not an authentic instrument signed by a notary. Any newly created individual company obtains a ‘K’ extract by post.

Conclusion

Any natural entity (micro entrepreneur) or legal entity (Inc., Ltd...) that carries out a professional or commercial activity must register in the RCS after its creation. The lack of registration may be considered a crime of concealed work.

The K-bis extract allows the company to certify its registration in the RCS to any person who requests it.

The K-bis of a commercial company is its identity card.

It is, in fact, an extract from the commercial register issued by the registry of the Commercial Court. It is considered as the only official document attesting and proving the legal existence of a company.

Although it doesn’t have a fixed duration, in most cases, to be opposable and to be authentic for administrative procedures, the extract must be less than 3 months old.

Content of the document

The extract K or K-bis informs about the activity of the company and gathers all the mentions presented to the Registry of Commerce and Companies (known in France as RCS):

• Name of the corresponding registry;
• Company name, acronym, and logo;
• Identification number (the SIREN number) and NAF code;
• Legal form (ltd, inc...);
• Total amount of the company constitution capital;
• Registered address of the head office and principal establishment, and any secondary establishments in the European Union or the European economic area;
• Duration of the company (up to 99 years);
• Date of constitution;
• Detailed activity;
• Domain name of the company's website;
• Function, surname, given name, date of birth, municipality of birth, nationality and address of the director, shareholders, associates, or any other member involved in the management of the enterprise;
• Reference of the authorizations required for regulated professions.

In addition, it includes all the decisions of the Commercial Court in terms of insolvency procedures: safeguards, recovery, and liquidations.

How to obtain a K-bis extract?

The information given on the K-bis extract is public. Everyone can therefore access it by making a request for K-bis extract from the registry concerned.

The request for a K-bis extract can be made directly online, by mail, or by physically going to the RCS, providing:

• The corporate name,
• The acronym or name of the company,
• The SIREN number.

A K-bis extract costs € 2.96 if it’s requested physically in the registry, € 3.96 by mail and € 3.70 by electronic means.

The K extract for an individual enterprise

The K-bis only concerns legal persons. Individual companies inform about their legal existence by means of a "K". The K includes the same information as the Kbis extract, but it is not an authentic instrument signed by a notary. Any newly created individual company obtains a ‘K’ extract by post.

Conclusion

Any natural entity (micro entrepreneur) or legal entity (Inc., Ltd...) that carries out a professional or commercial activity must register in the RCS after its creation. The lack of registration may be considered a crime of concealed work.

The K-bis extract allows the company to certify its registration in the RCS to any person who requests it.

A holding company is a privileged tool for a good patrimony management and an excellent vehicle fror securities transmission.

Holding companies are associations, normally created among relatives, whose sole purpose is the management of a securities portfolio. A holding company is known in France as “Societé Civile de Portefeuille” or SPC, and they are often established to ease the process of transfer of securities after the decease of a direct relative in an inheritance process. They can also be transmitted by means of donations.

Both holding companies and real estate companies are created according to the French civil law. However, holding companies are less widespread in France than real estate companies, although they are not of no lesser interest. Instead of real estate, their activity mainly involves managing a large portfolio of securities via a legal entity that can be subject to two types of taxation, and it depends on the volume of revenues derived from the securities and the decision of the members to choose either one. Holding companies are thus known as “transparent” if they are subject to the income tax (IR in French), or “opaque” if they are subject to corporate taxes (IS in French).

Holding companies subject to an income tax (IR)

When a holding company is subject to an income tax, the associates are taxable in accordance to the different revenues derived from their corresponding shareholdings. Therefore, the capital gains are taxable from the moment that any money is generated, and the dividends are taxable with the benefit of the 40 % allowance according to a progressive scale or the flat-rate lump-sum deduction.

When the shares are dismembered, the “usufructuary” (life tenant, who is normally the deceased’s spouse) is entitled to the dividends (fruits) and the owners of the freehold (the descendants, normally the children, of the deceased), to the sums set aside (products). Capital gains may be allocated to the owners of the freehold or the usufructuary on the basis of the property sold.

These rules may of course be subject to conventional derogations between the parties.

Holding companies subject to a corporation tax (IS)

In some rare cases, the holding company opts for the corporation tax instead. The company is then known as "opaque" instead of transparent, as in the previous case. In this case, taxation occurs at company level and not at the individual level of each associate.

This option is advantageous only for securities that generate a great amount of benefits, and which are generally heavily taxed, so in the case of a company composed of associates who do not have the need to perceive any funds held by the holding company. The corporate tax is the same for any type of company in France (33.33%)

However, all the associates should be aware that, the outflow of funds is very penalizing and they will quite possible be subject to a double tax (IS + IR + social security).

Advantages of a Holding Company

• Preparing the transfer of the patrimony while retaining the revenues: the holding company allows the owner of the securities to start transmitting his patrimony to his heirs while he’s still alive at a lower tax rate (allowance for the value of the life interest trust (or usufruit), an allowance of € 100,000 per parent and per child). The founders reserve for themselves the right to collect every revenue.
• Ensure continuity in the management of the patrimony and prevent the heirs from dilapidating too quickly their part of heritage: as the founder, the owner retains full powers of management and disposition on the property attributed to the company (which, in turn, is subject to an appropriate drafting of the statutes of a company in compliance with the French civil code).
• Anticipating the disadvantages of joint possession: the transmission of real estate directly creates a joint possession between the heirs with two major drawbacks, namely the unanimous decisionmaking for any action concerning it and the possibility of each coindividual to leave the joint possession by forcing its sale. With a holding society, each one of the heirs receives clearly differentiated shares of the society that do not enter the field of family joint possession. Normally the remaining associates buy the share should a member wish to leave, but a third party can also purchase it. In any case, the society isn’t dissolved because an associate leaves.
• Eliminate unwanted people: the insertion of approval and preemption clauses makes it possible to control the entry of new undesirable associates (associates' spouses and heirs, etc.).
• Organise the management of the patrimony after death: as the founder, the owner retains full powers of management over the patrimony. A substitute manager may be appointed to manage the company in the event of incapacity of the founder or following his death. Said substitute manager is normally the “usufructuary” and should be cautious when redacting the company statutes so as to grant themselves the right to plural vote, as the children can decide to sell the actives in the securities portfolio, which results in a fund outflow which makes the usufructuary liable in terms of taxation. The decisions concerning the company will be made by the designed person. The tutelary judge is excluded from the management and the free disposal of the properties attributed to the holding company.