5. Business Structures in France

1. 5.1. Types of Legal Structure
   5.2. Self-Employed
   5.3. Sole Trader
   5.4. Limited Company
   5.5. Status of Spouse

5.4. Private Limited Company in France – Société à Responsibilité Limitée (SARL)

If the business has more than one owner then it becomes a 'SARL', where the same basic rules apply as those for a sole trader (EURL) discussed previously, but in a slightly more complicated way, as more than one person is involved!

The minimum amount of capital required to set up the company is €1 and there is no maximum. Capital be entered in the same way as an EURL, that is, by way of cash or assets.

The profits of the SARL will be assessed for income tax through the system of company taxation.

However, since August 2008, the option of being taxed under the system of personal income tax (l’impôt sur le revenu (IR) is available to all small to medium sized SARLs under 5 years old, whether or not it is constituted of family members. Whether it would necessarily be in your interests to be taxed in this way you would need to discuss with your accountant.

There is also a particular kind of family business where owners can elect for a form of partnership taxation, called le régime des sociétés de personnes, effectively the system of personal income tax. In this case the legal structure for the company will need to be that of SARL de famille.

Directors of a SARL taxed through the system of company taxation will be liable for personal income tax on the salary paid to them by the company. The salary is a deductible expense from company profits. You can also choose to have some of your remuneration paid as dividends, which has some fiscal advantages, as will be seen later.

As with an EURL, there continues to be a need to appoint a gérant to have legal responsibility for the running of the company. If you wish, you can appoint more than one gérant, such as may be desired for a husband and wife team.

The gérant will be considered a majority shareholder if they (with their spouse and/or children) hold more than 50% of the capital of the company.

Your social security contributions will depend on whether or not you hold a majority stake in the company. If you are the majority shareholder then you are treated as a self-employed person under the régime des non salariés (TNS); if you are a minority (or equal) shareholder, then you are treated as a salaried employee, under the régime des salariés (TS).

Those other directors who are minority shareholders will be also treated as salaried employees of the company for the purposes of social security contributions.

The French business agency, APCE, have provided a model set of Articles that could be used by anyone proposing to set up an SARL, although we would recommend you took professional advice on it before you adopted it automatically.