5. Business Structures in France

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

5.3. Private Limited Company in France

i. Entreprise Unipersonelle à Responsibilité Limitée - EURL

A EURL is a limited company in the ownership of one person.

Under an EURL the business is wholly owned by a sole trader and managed through a separate limited company.

The company can be established with as little capital as €1 and the owner is, thereafter, afforded limited liability from debts to the amount of the initial capital.

Capital can be entered by way of cash or assets and for a small business there is no need for an independent valuation of assets entered as capital.

In relation to taxation, an EURL can choose whether to be taxed through the personal income tax system (so no distinction between profits of business and income of owner), or to pay company tax on profits.

If the latter, your salary is a deductible expense from company profits.

You can also choose to have some of your remuneration paid as dividends, which has some important fiscal advantages, as will be seen later.

Whichever basis on which you choose to be taxed, the basis on which you will pay social security contributions will be as a self-employed person under the régime des non salariés (TNS).

The company is obliged to appoint a gérant who has formal legal responsibility for the running of the company. In effect, it is the managing director, although they have what may be regarded as traditional company secretary responsibilities. The person is normally the business owner but it may also be a third party.

If you employ a third party as the gérant then they are considered to be a salaried employee, and both employer and employee social contributions are payable.

It is possible to engage someone in a non salaried basis as gérant non rémunéréé, in which case minimal social security contributions are payable by (or on behalf of) the gérant. This can be a family member, provided it is not your spouse.

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

ii. 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 EURL discussed above, 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, 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.