One of the main steps in creating a business is the legal choice of the company to be incorporated. It is very important to know all the types of companies that can be incorporated in France, in order to identify which one is best suited to the type of business.
Sole Entrepreneur (EI)
It is the simplest legal form of incorporation of a company. Here, the entrepreneur is the sole owner of the company, with no need for partners or partners.
Unlike other types of companies, an EI does not require minimum capital. This is because in the eyes of justice, the entrepreneur and the company are considered as one. In other words, the entrepreneur has full control of his company, not needing to report on its administration or publish its annual accounts. The entrepreneur will have to respond to any situation of the company (debts, for example).
Here, professional and personal assets merge with the exception of your main residence, which is exempt from being seized by creditors. The entrepreneur can choose to protect his other real estate, built or undeveloped, which are not being used for professional purposes, by making a declaration of inadmissibility before a notary.
There are no registration fees or fees associated with companies of this type. However, the entrepreneur has to pay income tax in the category corresponding to his commercial activity.
Individual Entrepreneur with Limited Liability (EIRL)
This type of company is similar to an EI with the difference that, in this one, the entrepreneur can limit his financial responsibility, creating a professional heritage, known as attribution heritage. Only this asset can be seized by creditors in cases of difficulties, namely debts.
The commercial name of the company must contain the expression “Individual Entrepreneur with Limited Liability” or its acronym, EIRL. This mention must be included in all professional activities, including in your documents.
Operation of a EIRL
The entrepreneur must open at least one bank account dedicated exclusively to professional activity. Thus, its accounting is independent, that is, it is subject to commercial accounting rules.
A sole proprietor may opt for this type of company during the lifetime of his business. For this, he must transfer to his patrimony all the assets necessary for the activity he carries out. In tax terms, this exchange has no added value, which is why there is no cost associated with opening an EIRL-type company.
Finally, the entrepreneur has the possibility to opt for corporation tax instead of income tax. However, he must be mindful of his choice as it is final.
Sole Proprietorship with Limited Liability (EURL)
EURL is one of the most frequent companies in France. It is considered as a public limited company constituted only by a single partner, being, therefore, subject to the same rules applied to a conventional limited liability company with some exceptions.
To open the company, at least one partner (natural or legal person) is required and the amount of minimum capital required is determined by the partner and will depend on the size of the activity, the activity and the capital requirements of the company. That is, if this initial capital is not consistent with these parameters, the responsibility may fall on the manager personally. These capital contributions can be made in cash or anything that has monetary value. At the time of incorporation of the company, at least 20% of the cash contributions must be made available.
To create a EURL, the drafting of statutes is mandatory. The Business Formalities Center (CFE) provides a template of the type of statutes that the entrepreneur must fill in properly. Then, you must send the company registration request to the responsible entities.
Operation of a EURL
The partner's liability is limited to the amount of his contributions, unless he is the manager and has committed some mismanagement of the company or has committed tax fraud. In this case, his liability may involve your personal property.
In addition, this company requires the appointment of one or more managers who will handle its administrative matters. These individuals must be a natural person, and may be the only partner or a third party. Their appointment and powers are represented in the company's statutes and, in the absence of legal limitations, they have full power to make the company's decisions.
There is no taxation at the company level, being at the company's discretion whether to choose the partner's income tax or the corporation tax.
Limited Liability Company (SARL)
SARL is the most common form of company in France. To open a company of this type, a minimum of 2 partners and a maximum of 100 partners are required, and these can be natural or legal persons.
Share capital is not mandatory. Instead, this is determined by the partners and will depend on the size of the activity, the activity and the capital requirements of the company. That is, if this initial capital is not consistent with these parameters, the responsibility may fall on the manager and/or founding partners in a personal way. These capital contributions can be made in cash or anything that has monetary value. In addition, at least 20% of cash contributions must be made available at the time of incorporation of the company. Although this capital is variable, it must remain between a minimum and a maximum defined in the company's statutes, thus there is no capital reduction without legal notice or without amendment of the bylaws.
Operation of a SARL
In terms of accountability, there is a distinction between the two types of partners: simple associates and managers. The liability of associates is limited to the amount of their contributions while managers also have their liability limited, unless there is some fault at the administrative level of the company. In that case, your liability may entail your personal property.
The SARL is managed by one or more appointed managers within the partners or a third party. Their appointment and powers are represented in the company's statutes and, in the absence of legal limitations, they have full power to make the company's decisions.
The partners meet at least once a year in an Ordinary General Assembly (AGM). Here, matters such as the annual approval of accounts and ordinary decisions are discussed. For decisions that result in a modification of the statutes, an Extraordinary General Meeting (AGE) will have to be convened.
Finally, the company's profits are subject to corporation tax. However, it is possible to opt for income tax if the company is constituted by a family (parents, siblings, spouses, among others).
Public Limited Company (SA)
It is a company usually associated with large businesses where several people, natural or legal, come together. Here, participation is based on the capital they invest in this company. There is no maximum number of partners, however, a minimum of 2 or 7 is required in the case of a publicly traded company.
In order to open a company of this type, a minimum share capital of €37,000 is required, with at least half of this capital provided at the time of incorporation.
Operation of an SA
In terms of responsibility, there is a distinction between the two types of partners: shareholders and directors. Shareholders' liability is limited to the amount of their contributions, while directors can respond personally in the event of company misconduct.
An SA is made up of a Board of Directors, a President and CEO. However, they can also be managed by a Supervisory Board and a Board of Directors.
In a normal structure, a Public Limited Company is managed by a Board of Directors made up of 3 to 18 shareholders. This council determines the guidelines for business activity. The executive director appointed by this board, or, failing that, the chairman of the board of directors, is responsible for taking the company's administrative decisions and represents the company in meetings or negotiations with third parties.
There are two types of meetings in this type of company: Ordinary General Assembly (AGO) and Extraordinary General Assembly (AGE). The frequency of occurrence of these is not regulated. Shareholders meet at least once a year for an AGM where the annual approval of the accounts and ordinary decisions are made, requiring a majority of votes to be accepted. At an EGM, more radical topics are addressed such as amendments to the bylaws where approval by a 2/3 majority vote is required.
The appointment of an auditorium is not mandatory unless the balance sheet exceeds €4,000,000, turnover exceeds €8,000,000 or the company has more than 50 employees.
Registration of a SA
The registration of a Public Limited Company in the Commercial Registry of Companies (RCE) has a cost of €39.42. Depending on the department it is included in, registration in the Business Directory (DM) has an average cost of €130. If the company is publicly traded, a fee for publication of a legal notice must be paid, which has an average value of €230, depending on the department in question.
Finally, the profits of this type of company are subject to corporation tax.
Simplified Corporation (SAS)
In order to open a company of this type, a minimum of one or more partners is required, whether individual or collective. It does not have a maximum number of partners. The minimum share capital is freely defined by the partners and depends on the size, activity and capital requirements of the company. However, at least half of the value of cash contributions must be paid at the time of incorporation.
Operation of an SAS
A SAS may not make an offer to the public of financial securities or the admission to trading on a regulated market of its shares. However, you may make offers of financial securities if they are intended exclusively for qualified investors acting in their own name or for asset management companies acting on behalf of third parties.
In terms of responsibility, there is a distinction between the two types of partners: simple associates and management. The liability of simple members is limited to the value of their contributions. On the other hand, management can respond personally in the event of company misconduct.
A Simplified Stock Corporation is headed by a single president, whether this is a natural or legal person. The first president of this company must be appointed in the articles of association. The partners freely determine in the articles of association the conditions of entry and exit of the company. However, some decisions must be taken collectively, such as approval of accounts, change of capital, among others.
The appointment of an auditorium is not mandatory unless the balance sheet exceeds €4,000,000, turnover exceeds €8,000,000 or the company has more than 50 employees.
Registration of a SAS
The registration of a Simplified Joint Stock Company in the Companies Register (RCE) has a cost of €39.42. Depending on the department it is included in, registration in the Business Directory (DM) has an average cost of €130. The creation of SAS implies the publication of a legal notice that has an average value of €230, which varies with the department in question.
Finally, the profits of this type of company are subject to corporation tax.
Simplified Sole Proprietorship (SASU)
This type of company has been increasing in France as it has interesting characteristics for an entrepreneur who wants to create a business on his own. It is a derivation of an SAS with the particularity of being constituted only by one partner, singular or collective. This single partner makes the decisions alone, according to the formal rules established in the statutes.
The rules applied in a SAS are applied in a SASU with some particularities. In a SASU company, the president can be the only partner or a third party. The appointment of an auditorium is also not mandatory unless, at the end of the second year, EUR 1 million of the balance sheet total is exceeded, EUR 2 million in turnover, the average number of employees exceeds 20 employees or if this control other companies.
Partnership Company (SNC)
This type of company is less widespread than the other types due to the joint and indefinite liability for all the personal assets of each of the partners for the company's debts. An SNC is especially geared towards projects between people who know and trust each other. Shares cannot be sold, even between partners, unless they decide unanimously, without prejudice to a contrary clause in the articles of association.
To form an SNC, at least 2 partners, singular or collective, are required, and there is no maximum number provided by law. All these must have the quality of trader and it is possible to include minors in this partnership if they have been authorized by the guardian judge or by the president of the high court. No minimum share capital is required for this constitution, which is freely defined by the partners, depending on the size, activity and capital requirements of the company.
Functioning of a CNS
An SNC is managed by one or more managers, which may be partners or third parties. If there is nothing previously defined in the bylaws, all partners are considered managers. In the absence of legal limitations, the company's manager or managers have the full power to act on behalf of the company.
The partners meet at least once a year in a general meeting where all decisions are taken unanimously, unless the statutes decide otherwise. However, certain decisions must be taken unanimously, including the revocation of the associate manager, the transfer of shares and the transformation of the company into SAS.
The appointment of an auditorium is not mandatory unless the balance sheet exceeds €4,000,000, turnover exceeds €8,000,000 or the company has more than 50 employees.
Registration of a CNS
The registration of a Partnership Company in the Commercial Registry of Companies (RCE) is free of charge. The only expense that partners have to worry about at the time of incorporation is the publication of a legal advertisement in the Official Journal of Commercial Associations and Foundations, whose average value is €44 or €150 if this publication exceeds 1,000 characters.
Finally, regarding the taxation involved, each partner is personally taxed on its share of income tax in the category of industrial and commercial profits. The company can opt for corporation tax.
Cooperative and Participatory Society (Scop)
A Scop is a cooperative society of the SARL, SAS or SA type. Its partners are mostly employees gathered around the same economic project and the same values. This company can be created in all sectors of activity: commerce, industry, crafts, services, multimedia and some legally regulated professions (architects, veterinarians, among others).
To create a SAS-type Scop, at least 2 partners are required. For a SARL-type Scop, at least 2 partners are required and a maximum of 100. Finally, for an SA-type Scop, the minimum is 7 partners. Regarding the required minimum share capital, the amount of €18,500 is stipulated for a Scop SA, which must be paid ¼ of its value at the time of incorporation and €30 for a Scop SARL or SAS, which must be paid in full at the time of incorporation. of incorporation.
How a Scop works
In this company there are two types of partners: the associate employees of the company and the external investors partners. In the first case, no partner can hold more than half of the capital and participate in the company's strategic decisions during the general meeting and their liability is limited to the value of their contributions. On the other hand, these external partners can be natural or legal persons, who do not work in the company and correspond to a minority of it.
In a SARL or SAS type Scop, a manager is elected by the partners for a term of 4 years while in an SA type the term is for 6 years. These directors are responsible for the company's misconduct and can be dismissed at any time by the general meeting or the board of directors.
The appointment of an auditorium is mandatory every 5 years in a Scop SA. In other cases, the audit is not mandatory. If the balance sheet is more than €1,000,000, the turnover is more than €2,000,000 or the company has more than 20 employees, then it is already necessary.
Registering a Scop
For a company to qualify as Scop and benefit from the legislative regulations, it must be registered by individual decree on a list drawn up by the Ministry of Labour. This list is published each year in the Official Journal.
The registration of this company in the Commercial Registry of Companies (RCE) is free of charge. Thus, the only expense that partners have to worry about at the time of incorporation is the publication of a legal advertisement in the Official Journal of Commercial Associations and Foundations, whose average value is €44 or €150 if this publication exceeds 1,000 characters .
Finally, with regard to the taxation involved, each partner is personally taxed on its share of income tax in the category of industrial and commercial profits, and the company can opt for corporation tax.
