France, as one of Europe’s largest economies, presents attractive opportunities for foreign businesses. However, understanding and navigating the legal requirements for market entry is crucial for success. This comprehensive guide outlines the essential steps and requirements for foreign businesses looking to establish their presence in France.
1. Understanding the French Business Environment
The French business landscape combines a robust economy with stringent regulations designed to protect both businesses and consumers. Foreign investors benefit from France’s strategic location, highly skilled workforce, and advanced infrastructure while navigating a complex but well-structured legal framework.
2. Types of Business Structures in France
The business landscape in France is characterized by a combination of a strong economy and stringent regulations aimed at protecting businesses and consumers. For foreign investors, the French market offers attractive opportunities, but requires strategic planning and a thorough understanding of legal and administrative requirements.
For more information on the different forms of company in France, you can refer to the French government’s entrepreneurship website and the French government’s business creation website.
SARL (Société à Responsabilité Limitée)
The SARL (Société à Responsabilité Limitée) is the most popular legal structure in France, particularly among small and medium-sized enterprises. Its administrative simplicity and legal protection make it a preferred choice for entrepreneurs. For instance, as of May 22, 2023, 1,601,873 SARLs were registered in France.
- Limited liability company structure : Partners are only liable to the extent of their contributions. Their personal wealth is protected from the company’s creditors, which secures their investment.
- Minimum capital requirement : There is no longer a mandatory minimum capital so that a SARL can be constituted with a capital of only €1. It makes this form accessible even to entrepreneurs with limited resources.
- Suitable for small to medium-sized businesses : It minimizes administrative formalities, reduces financial risks, and operates with simplicity.
- Maximum of 100 shareholders
For who ? The SARL is ideal for entrepreneurs wishing to create a limited liability company with simplified management, especially in the handicraft, commercial or service sectors.
Legal basis : Articles L.223-1 to L.223-43 and R.223-1 to R.223-36 of Commercial Code
SA (Société Anonyme)
The SA (Société Anonyme) is a structure designed for large companies and those wishing to raise funds on the financial markets. It is particularly suited to listed companies or projects requiring significant capital. In 2023, there were 30,667 SA in France.
- Public limited company structure : Shareholders have limited liability to their contributions so they cannot be held liable for the debts of the company beyond the amount of their initial investment.
- Minimum capital : The minimum capital is set at €37,000 but some regulated activities (such as banks or portfolio managers) may require higher amounts.
- More complex management structure : The management of the SA can be organized according to two models.
- Board of Directors and CEO: This model combines the management and control roles in a single body, the Board of Directors.
- Directory and Supervisory Board : This dualistic model separates management (directory) and control (supervisory board) functions, providing greater transparency in decision-making.
- Ideal for larger operations and public trading : It is one of three legal forms in France allowed to raise funds through public offerings of shares or bonds and to list its securities on a regulated market. Its public nature makes it a preferred choice for multinationals and companies seeking to attract institutional or individual investors.
For who ? The SA is particularly suited to large companies, industrial or financial groups, and companies looking to raise funds on the financial markets or go public. It is also a preferred structure for multinational companies looking to operate in France.
Legal basis : Articles L.225-1 to L.225-70 and R.225-1 to R.225-172 of Commercial Code
SAS (Société par Actions Simplifiée)
The SAS (Société par Actions Simplifiée) is a modern structure, introduced to meet the needs of companies seeking greater flexibility and simplified management. Today, it is the preferred form of foreign investors and large companies wishing to establish a subsidiary in France.
- Simplified joint-stock company
- Flexible management structure : It is based on the principle of contractual freedom of the partners, which is expressed in the statutes and therefore offers a very flexible structure with a strong place left to the intuition personae.
- Popular among foreign investors : It was created to meet the expectations expressed by the business community to adopt a flexible company structure with little formalism and that it could safely meet the need to set up assemblies and be 100% owned by the same company.
- No minimum capital requirement since 2019
For who ? SAS is particularly appreciated by foreign investors for its flexibility and administrative simplicity. It is ideal for subsidiaries of multinationals, innovative start-ups and structures requiring great statutory freedom.
With its flexible structure, SAS has become the first joint-stock company in France. It combines the advantages of a contractual organization with those of legal protection, perfectly meeting the needs of international companies seeking to operate safely while minimizing administrative constraints.
Legal basis : Articles L.227-1 to L.227-20 of Commercial Code
3. Legal Requirements for Foreign Businesses
Registration Process
Setting up a business in France requires a series of steps carried out by the future representatives of the company, each of these steps is crucial to ensuring legal compliance and obtaining legal personality.
Publication of a notice of constitution
The creation of a company involves the publication of a notice of constitution in a legal notice (paper or digital). This notice must include essential information relating to the company, such as its name, legal form, registered office, and purpose.
Legal basis : Article R.232-4 of the Commercial Code
Filing of the registration file
The future legal representatives are responsible for compiling a registration dossier including all the required information related to the constitution of a company and supporting documents.
The registration file is deposited with the CFE or electronic counter (Guichet Électronique Unique). Since the 1st January 2023, all formalities are carried out exclusively via the electronic counter, which centralises the information and sends it to the relevant bodies, such as commercial courts, tax administration and social welfare agencies.
Registration in the Register of Trade and Companies (RCS)
Once the registration has been filed, the Commercial Court Registry carries out a regularity check.
- Verification of supporting documents : Registrars ensure that the information provided meets the legal requirements specific to the type of company created and that it corresponds to the documents submitted.
- Attribution of legal personality : Registration confers on the company the legal personality, allowing it to acquire rights and obligations independently of its partners. This legal personality protects the partners by separating their personal assets from that of the company.
- Obtaining proof of legal personality : Once registered, the company receives several official documents as proof of its legal personality.
- SIREN number : It is assigned by INSEE and legally identifies the company.
- Kbis extract : This official document is proof of the company’s registration and legal existence.
Legal basis : Article 1842 of Civil Code
Registration with Tax authorities and Social security organizations
After registration, several registrations must be made with the competent authorities :
- Tax service : The company must register with the tax authorities to obtain an intra-EU VAT number and ensure that it complies with its tax obligations, such as VAT declaration, corporation tax, and territorial economic contribution (CET).
- Social security bodies : Every company has to register its employees and managers with social security bodies. This formality allows the company to pay social contributions and guarantee social protection for workers.
- URSAFF for employee social coverage, self-employed social scheme for individual entrepreneurs
Required Permits and Licenses
To establish and operate legally in the French market, foreign companies must ensure that they comply with regulatory requirements for permits and licences. These requirements vary depending on the nature of the business and the geographical location of the company.
Business Activity Permit (Carte de commerçant étranger) for Non-EU Residents
Foreign entrepreneurs residing outside the European Union, who wish to carry out a commercial, industrial or craft activity in France must obtain a Business Activity Permit :
- Submission of a request to the competent prefecture
- Prepare required documents : It includes a business plan, proof of financial ability and proof of identity.
This card is essential to be able to register the company with the Register of Commerce and Companies (RCS).
Legal basis : Article L.313-10 of the Code of Entry and Residence of Aliens and the Right of Asylum (CESEDA)
Industry-specific Licenses
Some commercial activities (e.g., food service, retail, construction) in France require specific licenses, often due to their regulated nature or their impact on public safety, health, the environment, or other sensitive sectors :
- Beverage delivery licence : The sale of alcohol is subject to strict regulation with the requirement of a liquor license issued by the town hall or prefecture.
- Licence III (small beverages) : Allows the sale of non-distilled fermented beverages, such as wine, beer or cider.
- License IV (large drinks) : Allows the sale of stronger alcoholic beverages (liquors, spirits), often for establishments such as nightclubs or cocktail bars.
- Health approval : Companies handling food products (processing, storage or distribution of food products of animal origin) has to obtain a health approval from the veterinary services.
- Commercial Operating Licences : Large retail stores must obtain a commercial operating license issued by the Commission Départementale d’Aménagement Commercial (CDAC).
- Health and safety compliance certificate : Public establishments, such as restaurants, hotels and shops, have to obtain a certificate of compliance from municipal or prefectural services guaranteeing that they comply with fire safety, hygiene and accessibility standards.
Local Municipality Permits For Physical Locations
Local authorizations are essential for businesses wishing to operate physical establishments such as stores, offices, warehouses, or restaurants in France. These authorizations vary depending on the municipality, the nature of the activity, and the location of the premises :
- Building Permit : It is mandatory for any construction or extension, in accordance with the Local Urban Plan (PLU).
- Change of destination : Any transformation of the use of a premises must be approved by the City Hall.
- Display permit : Outdoor display) requires a municipal permit.
- Safety and accessibility : Institutions must meet fire safety and accessibility standards for persons with disabilities.
4. Step-by-Step Market Entry Process
Initial Planning and Research
Before starting the formal registration process, foreign businesses must conduct comprehensive preparatory work to ensure successful market entry into France.
- Conduct market research and feasibility studies : It involves evaluating industry demand and customer preferences, identifying key competitors and assessing the financial viability, market size, and growth potential of the business..
- Develop a detailed business plan : A comprehensive business plan outlines business objectives, financial projections, marketing strategies, and operational processes. It serves as a roadmap for investors.
- Choose an appropriate business structure : Foreign companies must select the right legal entity based on their business model and goals.
- Select a business location : It is important to consider if the area benefits from customer proximity, average real estate costs and favorable local economic conditions.
For more information on entrepreneurship in France, you can refer to Business France website.
Legal Consultation
Engaging with qualified professionals is vital for navigating the complexities of the French legal and tax system :
- French Business Lawyers : They will assist in setting up the company and ensuring compliance with French regulations.
- Tax Advisors : Tax specialists familiar with French corporate taxes and international tax treaties will ensure proper tax planning.
- Accounting Professionals : They will maintain financial records, prepare annual returns, and ensure compliance with French GAAP (Generally Accepted Accounting Principles) or international standards.
5. Compliance and Ongoing Requirements
Tax Obligations
Understanding the French tax system is essential to ensure the sustainability and success of your business.
Corporate Tax (IS)
The Corporate tax is a tax with a standard rate of 25% that applies to profits made by the company during the tax year.
However, small businesses can benefit from a reduced rate of 15% on the first €42,500 of profits. This reduced rate applies to companies that meet the following 2 conditions :
- Turnover less than or equal to €10,000,000 during the accounting year
- Fully released at least 75% of share capital held by natural
In addition, additional taxation can be applied if the profits are distributed to partners.
Legal basis : Articles 1A and 205 of General Tax Code
For further information on Corporate Tax, click here.
VAT Registration
VAT is an indirect tax that affects consumption by taxing the value added at each stage of the process of producing or marketing a good or service. In other words, VAT relates to the turnover made by companies. Indeed, A business must register for VAT if its turnover exceeds :
- €82,800 for the sale of goods
- €33,200 for the provision of services
In France, the VAT is subject to a different rate depending on the good or service :
- Standard rate : The standard VAT rate for most goods and services is 20%.
- Reduced rates : There is a list of sectors of activity that will be eligible for one of the reduced rates. The rate of VAT collected depends on the activity of the business.
- 10%
- 5.5%
- 2.1%
The VAT collected is returned to the State. However, the business can deduct the VAT paid on its business purchases. This VAT mechanism reduces the cost for businesses, provided they comply with the registration and declaration procedures.
Legal basis : Articles 256 et seq. of General Tax Code and EU Directive on VAT
Social security contributions
Social security contributions in France are mandatory for businesses employing staff. These contributions fund public services such as healthcare, pensions, and unemployment insurance. Employers are required to contribute a percentage of their employees’ gross salaries :
- Health Insurance : It provides access to public healthcare for employees.
- Retirement Pensions : It ensures retirement income based on salary and years of contribution.
- Unemployment Insurance : It covers income support for employees in case of job loss.
The rates vary depending on the type of contribution, the employee’s salary, and specific employment conditions. Self-employed individuals are also subject to social security contributions based on their income.
Legal basis : Articles L.242-1 et seq. of the Social Security Code
For further information on social security contributions, click here.
Local business taxes
Businesses in France are subject to local taxes like the Contribution Économique Territoriale (CET) which consists of two components :
- Cotisation Foncière des Entreprises (CFE) : It is calculated based on the rental value of business premises.
- Cotisation sur la Valeur Ajoutée des Entreprises (CVAE) : It applies to businesses with annual turnover exceeding €500,000 and is based on the value added by the business.
Additionally, businesses may be subject to other local taxes depending on their location and industry, such as property taxes or waste disposal levies.
Legal basis : Articles 1447 et seq. of the General Tax Code
Employment Regulations
French employment law is characterized by strong protection for employees, requiring businesses to comply with various regulations designed to ensure fair working conditions and safeguard workers’ rights.
35-hour workweek regulations : There is a standard workweek of 35 hours but employers can request employees to work beyond this limit. Any additional hours have to be requested in advance and compensated as overtime.
Legal basis : Article L.3121-11 of Labor Code
Mandatory benefits and leave policies : Employees are entitled to a minimum of five weeks of paid vacation per year, in addition to public holidays, and several paid leave.
Sick Leave : It is under certain conditions and the amount paid depends on the length of employment and specific health insurance schemes.
Maternity and Paternity Leave: Mothers are entitled to a minimum of 16 weeks of maternity leave and fathers to 25 days of paternity leave.
Legal basis : Articles L.3141-1 and L.1225-1 of Labor Code
Strong employee protection measures : French labor law offers robust protections for employees, including dismissal protection, workplace safety and health and collective bargaining and trade unions.
Legal basis : Articles L.1232-1 and L.4121-1 of Labor Code.
Collective bargaining agreements : These agreements are negotiated at the industry or company level and can provide additional benefits beyond statutory requirements, such as higher minimum wages, extra paid leave, or enhanced protections for employees.
Legal basis : Articles L2211-1 to L2212-2 of the Labor Code
6. Common Challenges and Solutions
When entering the French market, foreign businesses often encounter specific challenges that require thoughtful strategies and proactive solutions.
Language Barriers
The predominance of the French language in business, legal, and administrative contexts can create obstacles for companies unfamiliar with it. Contracts, regulatory documents, and communications with local authorities must often be conducted in French. Misinterpretation of key terms may lead to compliance issues or operational delays.
Solution : Engage bilingual professionals and ensure all official documents are properly translated
Administrative Procedures
France’s administrative framework is detailed and can be overwhelming for foreign businesses. Establishing a legal entity, obtaining permits and licenses, complying with tax regulations, and fulfilling labor law obligations require navigating intricate processes. Delays or errors in documentation may result in penalties or rejection of applications.
Solution : Work with local experts and maintain organized documentation
Cultural Considerations
Cultural differences, including business etiquette, communication styles, and consumer behavior, can impact partnerships and customer engagement. For instance, hierarchical decision-making, punctuality, and formalities are valued in French business culture. Misunderstanding these nuances may hinder negotiations or brand reputation.
Solution : Invest in cultural training and local market understanding
7. Conclusion
Entering the French market requires careful planning and attention to legal requirements. While the process may seem complex, following the proper procedures and seeking professional assistance can help ensure a successful market entry. Foreign businesses that take the time to understand and comply with French regulations will be better positioned for long-term success in this dynamic market.
Ready to start your business journey in France? Contact the French Chamber of Commerce or consult with a qualified legal professional to begin your registration process.
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