There are several ways to start up your business in France.
First of all you can set up a company with limited or unlimited liability. This French enterprise will be commercially, financially and tax-independent from the enterprise that, perhaps, already exists in your country.
You can choose and set up a branch of your company in France. Depending on the type of business entity, the share capital will fully or partially belong to the parent company, while your branch can be managed by your parent company or by your company in France.
While you are entering an unknown market, you can open a liaison office (bureau de liaison) or representative office (representation) that is essentially a ‘shop window’ set up by a foreign company. It is a non-commercial entity that doesn’t have accounting and it is not liable for tax or VAT in France but may therefore handle activities such as information gathering and marketing, presentation of goods and services of the parent company. As soon as the representative office intends to start commercial activities (for example, lease or sale of real estate), it is necessary to re-register it in the Chamber of Commerce.
To start and run a business in France you should establish a legal entity.
The most common legal companies structures are with limited (SARL, Société à Responsibilité Limitée) or unlimited liability (SA, Société Anonyme). The capital share of the limited company (SARL) is determined by shareholders when it is created, the capital share of the public limited company (SA) should have a minimum of €37 000.
In the first two years of activity, French law allows a registered entity to run indicating as a legal postal address of its manager, or the postal address of the relevant agencies.
Over the last few years the business registration procedure was simplified and it now takes just one to two weeks instead of few months, as it has been before. The statutory director can be exclusively an EU citizen or a non-EU citizen who has the permission to be engaged in commercial activities (Carte de commerçant or, as it is called, a business card). Any commercial activities in France are obligatory subject to accounting by certified offices.
Accounting services include:
- Drawing up your company charter
- Providing the proof of the company’s address (e.g. a copy of a lease or recent utility bill)
- Opening an account with the bank in the name of the company
- All administrative procedures for registering your company in the Chamber of Commerce.
If you are a non-EU citizen and you want to manage your company personally, you need to get a Carte de commerçant. This card is generally a permanent residence permit in France and allows you to move freely through the territory of the European Union. The period of its receipt is from six to eight months.
To register an enterprise the certified offices can charge you an approximate cost of 1,500 - 2,500 euros; accounting, depending on the options chosen and the annual turnover of your company, can cost 150 - 250 euros per month and an annual balance of about 300 - 500 euros.
Taxes in France
To set up and run an enterprise in France, it is necessary to take into account the cost of the functioning of a particular legal structure.
The cheapest, if not to say free structure is a representative office that is not taxed. The only costs are the cost of renting an office (but you can just use the postal address without renting an office) and the salary of the representative engaged in advertising the parent company. This is an ideal option for the first entry into an unknown market.
Any commercial activity in France is taxed at a rate of 33.33% on the income of the business. An income is the amount remaining after deducting all the costs for the operation of the enterprise (salary costs, costs of suppliers, depreciation, etc.). Small and medium-sized enterprises are levied at 15% on the first 38,120 € of income per year, the remaining amounts are levied at 33.33%.
You need to declare your income and pay the VAT (Taxe sur la Valeur Ajoutée, TVA) monthly or every three months, depending on the chosen taxation mode, the regularization of the difference occurs at the beginning of the next year. The VAT (value added tax) in France is levied at a standard rate of 19.6% for most goods and services. Take into consideration that the VAT calculation depends on the location of your client. If your client is in France, you are subject to a standard invoice mode and VAT must be included in your invoice. In the case that your client is in one of the EU countries or outside it, you do not include VAT in the cost of your services and you should indicate in the copy of your estimate his European VAT number. Then, in both cases, the client will pay VAT in his own country.
Salary in France
The question "to pay or not to pay" your own salary the businessman in France asks as "to pay, but how?"
There are two main types of payment his own salary by an entrepreneur. This is either the payment of salary, the size of which he determines himself, or the dividends from the enterprise profit. Both modes can be combined. The direct use of enterprise funds for personal needs, of course, is excluded.
In the case of receiving a salary, the entrepreneur pays the same taxes as any employee, taxes are calculated directly from the salary and go to different insurance, tax or social structures. The advantage of this system is that the entrepreneur receives quite full social and medical protection. The disadvantage is in its costs: taxes and social contributions accounts for about half of the salary.
The payment of dividends, as an alternative or addition to the first option, is getting profit from the shares of the enterprise. First of all, the size of dividends is determined by the profit of the enterprise and the ownership percentage of the shares. Even if this option avoids the payment of "excessive" social contributions, it is necessary to wait for an annual balance sheet, which delays the payment of dividends to February or March next year.
The most interesting option is the salary payments combined with the interest on the profits of the enterprise payment, which provides good social and medical coverage and at the same time a good monthly salary, added with the dividends payment in March of each year.