"With the French business system having eight tiers, setting up a new company can feel like climbing eight mountains," says Katya Puyraud from Paris-based EuroStart Enterprises.
"Some of them are easier than others but for most entrepreneurs wishing to create a company in France, each step conquered can feel like a small victory.
Here Puyraud maps out the route to successfully setting up a company, in eight stages.
1. The Business plan
This small mountain is like a practice run to test the strength of your business idea. You need to include these key elements within the document:
• Your market – who are your customers?
• Your investment – how much money are you or your investors bringing to the table?
• Your added value – what life and work experience will you bring to the business?
This plan will eventually be looked at by a banker in order to check your suitability for a business bank account. It’s so much easier to tackle any difficulties at this stage than leaving it until later when you may have spent precious funds and gone down a path that leads you off a steep cliff.
2. Structure & By-laws
Now we’re getting further into the mountain range as we approach the first legalities of the French system. Firstly, you need to tackle the question: what type of company do I choose? Here are the three common structures of companies in France:
SARL – The most popular form of company. The French version of a Limited or LLC company. It has at least one shareholder and one director.
SAS – Societé Par Actions Simplifieé which is a Simplified Stock Company for a joint venture between a French company and a foreign partner.
Branch – An extension of a foreign company in France.
Once you’ve chosen your structure, you’ll need to register your by-laws. This can be done two ways – either by a registered company formation agent or a lawyer.
When you come to do your by-laws you have to be very specific about your activity description. For example, if your business is selling mountain climbing ropes but later on you decide that you’d like to sell mountain climbing boots as well, if that’s not written into your by-laws you might end up being fined if the sales represent more than 20% of your turnover.
3. The Banker
This is a mountain that casts a big shadow on many entrepreneurs as they approach it, but if you’ve studied the terrain you’ll have no problem.
When meeting the banker you will go through the “stress test”. Unlike in Britain and America where banks can’t wait to take your money off you, France is a little more reticent. Your business plan will be scrutinized thoroughly before any sort of cheque book or credit card is issued.
But despite the interrogatory nature, the banks are actually doing you a favour. By examining the financial aspect of your business idea, they are giving you an expert opinion on whether your business is likely to succeed in France.
4. Share capital
In order to open a business bank account you’ll need €4,000. This is contrary to the €1 minimum the law actually authorizes but most banks ask for a payment of at least €4,000 in share capital to know that you are serious about doing business.
So now you have to pay the share capital into the company’s bank account. But as the company is not yet registered, the account is not activated. Therefore your money is blocked. This is a wonderful example of the French system – it asks you for money you haven’t earned yet because your business hasn’t opened, and then it blocks that money because your business hasn’t been registered.
But don’t worry – the capital will be unblocked as soon as the banker receives the certificate of your newly formed company (approximately 2 weeks).
5. Legal publicity
This mountain is like a pleasant little walk in the park – all you have to do is publish an announcement in an authorized newspaper.
Have a look in the business section classifieds of Le Figaro. It’s like the births and deaths announcements but for companies. Your advert will be to announce that your company is almost ready to be ‘born’ or to trade.
This is your equivalent of scaling Everest because things can get a little complicated – especially if you’re not French.
It’s the part where your application has to get stamped by all the different French government offices and this is where enlisting an expert guide such as a company formation agent can really help.
Your application will need to go to:
- The tax office (for the by-laws)
- The Centre des Formalités des Entreprises or Chambre des Métiers (depending on your activity)
- And finally the Greffe du Tribunal de Commerce – who are in charge of the incorporations at the Commercial Court
7. Registered numbers
Once you’ve managed to reach the summit of the incorporation process you will be rewarded after a few days with the all-important ‘extrait Kbis’ which is the certificate of incorporation of your company.
With this document you’ll be provided with a registered number – your company ID number – which you will have to write on all official documents and invoices.
With the Kbis, the banker can also release the share capital and your bank account will be activated. Around two weeks later, you’ll receive a welcome letter from her tax office with a VAT number and a contact of your tax officer.
You’re almost at the end of your journey, but there’s one last thing do before you hang up your mountain boots – hire a chartered accountant.
In some countries you can deal with your bookkeeping and accounts yourself and in England you can fill in a tax return on-line, no problem. But in France we strongly advise you to appoint a professional – an ‘expert comptable’. Because if you get into a pickle with your taxes or accounts, the French system is not very forgiving.
An ‘expert comptable’ is a regulated professional who is legally obliged to keep you up to date with all the tax laws and is held legally responsible for the good standing of your accounts. He can also help you with VAT returns and payrolls.
The End of the Road
So there you have it. You’ve reached the summit. But now you have a whole new mountain range in front of you – it’s called your new business. May it bring you all the thrills and excitement of a real mountain adventure.
Katya Puyraud, is from EuroStart Enterprises, which is based in Paris, which offers help and advice on opening a business in France. For more information visit www.eurostartenterprises.com