If you’re living in France and considering starting up a small business, you’ll be presented with two main options. You can go the route of the Micro Entreprises – a self-employed option, great for people who want to turn their hobby into a small business or who want to bring in a bit of extra cash while continuing to work. Or there’s the limited liability option called a SARL, the standard business model which also allows for growth.
For anyone about to start a business in France, it can sometimes be confusing knowing which route to choose especially as the laws and regulations change so frequently. (For example, the Micro Entreprises scheme has just swallowed up what used to be the previous self-employed regime of the Auto-Entrepreneur). So to make it easier we’ve drawn up a list of comparisons so you can see exactly what’s on offer with each structure.
As seen on the chart, there are limits for an ME but these can change slightly depending on your previous year’s turnover. For example, the €82,200 threshold for trading companies (which deal in products or food, etc.) can rise to €90,300 if the turnover of the previous year is below €82,200. Accordingly the €32,900 threshold for a service-based business can rise to €34,900 if the lower threshold wasn’t reached the previous year.
It gives a little bit of leeway for your company to earn more but if your business goes over those figures, the government will ask you to move up to the next business structure. This is the point when most businesses turn into a limited company called a SARL. If you’re sure that your business is going to reach those targets straight away, then it makes more sense to open a SARL immediately as trying to move across from the ME regime to a SARL can sometimes be complicated. And why do two lots of paperwork when you only have to do one!
How do you register a business in France?
You can register as an ME online. All you have to do is go to www.guichet-entreprises.fr and it will take you through the process. You have to be able to either read or speak French in order to do this, so make sure you understand everything before you fill in the forms as mistakes will delay the process. All in all, it should take about two weeks. Things can get a little complicated if your business is very original or crosses over into multiple business categories. (Unfortunately, more than any other country, France likes everyone to be placed into a category neatly – if you’re an innovator who has come up with a one-of-a-kind business, then you may need to pay the tax office a personal visit.)
A SARL takes about three weeks to open. It’s best to do this either by post or in person by presenting your documents to the tax office yourself. You need to make sure you register your statutes with a registered company formation agent or with a lawyer. (A word of advice - agents are less expensive than lawyers!) When registering your statutes, you need to be specific about your business – what products you’ll sell or what services you want to provide and what your business hopes to become in the future. If you have only one shareholder then you can opt to open a EURL (Entreprise Unipersonelle à Responsibilité Limitée) but if you have more than one shareholder you need to choose a SARL. For more information on how the SARL process works, you can click here for a list of eight steps on how to open a company in France.
If choosing the SARL option you will need a business bank account. It’s best to go armed to your chosen bank with a business plan so they can see exactly what your company has to offer. (For more information, click here on how to write a successful business plan written by Dawn Z Bournand, a US expat who is now a successful entrepreneur coach based in France). If you already have a personal bank account in France it’s worthwhile approaching that bank first, as at least they have some idea of your income and expenses from which to make their decision.
MEs don’t need to have a “business” bank account but they do need to have a separate account which is used only for their business dealings. Unfortunately, many banks try to push professional business bank accounts to ME clients even though this is not mandatory. Just check to see how much they charge for a business bank account - if it’s no more than €6 a month, then it might be worth it. Any more than that however and you could be out of pocket.
The other option is that as an ME you can also choose to go for the EIRL option (entreprise individuelle à responsabilité limitée) which files a list of business only and private only belongings. There is no difference between this and a standard ME, just that the private and business assets are separated, which avoids private assets being taken away in case the business goes belly up.
For more information, click here on how to open a business bank account in France.
As with most businesses, it’s very important to look after your finances. As an ME, you will need to keep an unalterable log of incomings and outgoings (for example not an Excel file but a handwritten log that can't be changed). Although a chartered accountant is not necessary for an ME, it may be worth spending a bit of money on one if you’re nervous or confused about tax, and also to save you from the headache of dealing with French paperwork. As the French government has a love of multiple departments (who might seem to do the same thing but actually do something very slightly different) you may get various pieces of paperwork through the post that can get a tad confusing for an expat.
Another word of warning - you may also be targeted by scammers who use official-looking letterheads and scare you into thinking you have to pay certain charges when you absolutely don’t. A chartered accountant can sort the wheat from the chaff for you.
For a SARL however, a chartered accountant is absolutely necessary. And you have to make sure it’s a properly registered accountant called an ‘expert comptable’. These are regulated professionals who are legally obliged to keep you up to date with all the tax laws and are held legally responsible for the good standing of your accounts. They can also help you with VAT returns and payrolls.
For MEs, the tax rate applied assumes a fixed rate of expenses depending on your activity type. If you don't earn enough to pay tax then tax is zero, but social charges are still due which can take out a sizable chunk from your budget.
With a SARL you are able to off-set your expenses against your income. You’re looking to pay 15% corporation tax if your profits are less than €38,120 and if your turnover is less than €7.63 million. Above those limits, then you’ll be paying the significantly higher amount of 33.33% corporation tax.
The other option you need to consider is how long you’ll be staying in France and whether you’d like to continue your business if you return home or move country once again. The ME option won’t allow you to carry on your business if you move to another country. In order to qualify for ME status you have to both live and work in France. However, the SARL status can continue if you move away from France. As long as you continue to have a business interest in France and pay your French business taxes, you can still continue to have your French company. All you have to do is to have a registered address in France which allows you to receive mail. (If you don’t have one, then you can click here for more information on how to obtain a registered address).
Whatever option you choose, make sure you fully research each structure and talk to a registered company formation agent, or tax expert to discuss your options.
If you need more in-depth information, you can download our FREE brochure on how to open a business in France, or for more advice on how to start your business, please go to www.eurostartentreprises.com, email our Euro Start Entreprises team through our contact page or call our company formation experts on 0033 (0) 1 53 57 49 10 and we’ll be happy to help.
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