You’ve made your decision and decided to incorporate a company in France. Beyond lifestyle, culture and amazing food, this has various less exciting implications such as taxes, social contributions and insurance, reporting obligations, etc. In this post you will find a presentation of the different type of companies and their key implications.

TYPES OF COMPANIES

France has numerous types of companies which have been gradually introduced to fill different needs. Only a few of them are relevant to modern businesses when it comes to a commercial purpose: the joint stock company (SA), limited liability company (SARL) and simplified joint stock company (SAS). Here’s a short introduction to each of them.

  • The joint stock company (SA)

The SA (“société anonyme”) is the form used for larger corporations which are – or plan to become – listed. It can have an unlimited number of shareholders, and operates with a board of director and a CEO. It comes with extensive and formal shareholders rights, making it quickly oversized for most businesses.

  • The limited liability company (SARL)

The SARL (“société à responsabilité limitée”) is conceptually what comes closer to a LLC. It can have from a single up to a hundred shareholders, is able to operate with a single general manager, and implies limited reporting liabilities. It is one of the most common forms for SMEs.

  • The simplified joint stock company (SAS)

The SAS (“société par actions simplifiée”) is a more recent form, introduced to offer more flexibility in the organisation and processes. It can have from one to an unlimited number of shareholders but cannot become listed. The management system can be tailored although it should include at least one general manager.

KEY ELEMENTS TO CONSIDER

Several points are of importance when considering which type of company to opt for. Below are highlights of the main issues encountered by entrepreneurs.

  • Costs

One of the first concerns when incorporating is making sure it’s not going to generate excessive costs/administrative burden. This priority quickly disqualifies the joint stock company (SA), as it implies mandatory procedures to ensure shareholders’ rights (strict convening, quorum and majority rules, information obligation).

The cost of managers compensations also differs, depending on the type of company and/or the number of shares held by the manager. Roughly summarised, taxes and social charges over managers’ compensations are generally a bit less costly in the SARL compared to the SA or SAS. However no minimum taxes and charges will be due when no compensation is paid to SA and SAS’ managers, contrary to SARL’s.

  • Capital structure

Another element you might want to consider is your starting and projected capital structure. If the SARL sounds obvious when you have one or few shareholders, it will soon become unsuitable if you have more, or if you’re planning to sell some of your shares. Furthermore, the SA and SAS are incomparably more suited when it comes to financing, as you’ll be able to issue multiple types of shares, bonds, options, etc.

  • Management

Management can also be a key point for you. Where the SA and SARL provide for compulsory management structures, the SAS offers the greatest flexibility as long as you appoint at least one general manger (“Président”). You can then appoint additional managers (“Directeurs Généraux”), provide rules for a directing or supervisory board, and even for scientific or strategic committees.

To summarise, the key point when choosing your company form is (A) identifying your key concerns (the list above is obviously not restrictive) and (B) project into the future and wonder where you want to be in 24 to 36 months. Point (C) is optional, but you can obviously talk it through with your lawyer!