Self-employed in France: What type of company should I set up?
It's no walk in the park to set yourself up as self-employed in France. But with help from the experts, we've gathered all you need to know.
Red tape, administrative hurdles, and Catch-22s left and right.
That's what you can expect when setting up a business in France. And if you're a little disheartened, don't worry you're not alone. And there is help out there.
"The most daunting thing for most people is that they really get nervous about the tax administration and all the formalities that have to be done," Harry Maxwell, a former business developer at Paris-based business advisory firm Maupard, tells The Local.
"Nothing is ever as straightforward as as it seems and it can be easy to get snowed under and panicked. But even French speakers struggle with it all."
He added, however, that most people who seek help are quite forward thinking, and typically plan ahead rather than starting up a business and figuring it out later.
And while Maxwell strongly advises people to get help setting up their employment situation, he admits that it's not impossible to do alone.
"You can figure it out alone, but I wouldn't if you're any bit unsure," he tells The Local.
"A lot of the information is available if you search it, though it's not officially available in English. But there are plenty of forums that help," he says.
"And being able to speak French is very important, but it isn't impossible to do it alone, as long as you're starting small like with an auto-entrepreneur. But setting up an incorporated company is a bit more tricky."
He added that when setting up something bigger, it's better to get help so you don't find yourself stuck with the long term and at times costly debris from mistakes that could have been avoided at day one.
With all this in mind, here are some helpful tips from the guys at Maupard, including a close look at the pros and cons of each company structure and information about which one is right for you.
READ ALSO: Everything you need to know abut starting a business in France
(AFP)
Make sure you're eligible to start a business
Before you set up your business in France, you first need to make sure you're allowed to.This means having the right visa to come and work in France.
For those coming from the European Union, (and for countries like Switzerland), you do not need a permit to live or work in France. However, if you are coming from outside the EU, whether it be from the United States, Australia or any other country, you will have to first check your visa requirements with your consulate or embassy.
Having obtained a visa, you then have to choose a company structure. Here's a guide to the five options. Note the key with * and € signs. Three €/* is good and one or none is less positive.
1. Auto-entrepreneur/micro-entrepreneur
This business model has a very simple structure. It requires an initial registration with the social and tax administrations, and then social contributions have to be paid on a quarterly basis, and income tax on an annual (or quarterly) basis. There is no share capital.
In comparison to many company structures in France, this structure is very relaxed. Social contributions are payable at only 25 percent of the normal rate, and are only paid when they are due (meaning that if your turnover is zero, you have no social contributions to pay).
Furthermore, there are no VAT declarations to be made, if you benefit from a VAT exemption (i.e. turnovers not exceeding €33,200 for services and €82,800 for goods), and no Corporate Tax to be paid either, which makes it a cost-effective business model.
Setbacks include: not being able to deduct expenses incurred from running the business, the 25 percent social contribution rate is applied to turnover and not profit; and turnover must not exceed €70,000 for services and €170,000 for goods. It is possible to change from an auto-entrepreneur into a larger company structure, but once this switch is made, it is very difficult (and can be costly) to reverse.
-
Simplicity: ***
-
Social contributions : €€€
-
Tax : €€
-
Business Expansion : Very Low
-
Recommended for: People who work from home (e.g. translators, craftsmen, journalists, consultants, developers, coaches or event organisers) with a very low turnover.
Summary: An auto-entrepreneur is for individuals who incur little/no expenses, and are unlikely to see a rise in turnover. It is ideal for launching an activity. With this scheme, you can start your own business and check its viability simply, without incurring too many costs. Essentially, the individual is the business.
2. Entreprise individuelle (BNC)
The BNC (Bénéfices non Commerciaux) for professional operations is also a simple structure, and the set-up is also straight-forward. However, the company must be registered with the French Register of Commerce (unlike in the case of an auto-entrepreneur).
The company is managed by the individual, there is no share capital necessary for this structure, nor does Corporate Tax need to be paid. Social security contributions are paid in advance and then adjusted, according to actual remuneration, for a fairer calculation of both social security contributions and income tax.
Professional expenses incurred are taken into account when calculating your taxable income with this regime. If you have multiple professional expenses, this is good news. Most importantly, however, there is no maximum turnover threshold.
Additionally, this structure allows you to recover VAT, but, you will also be liable for VAT and will have to make VAT declarations. The biggest downside to this structure is that rigorous accounting must be maintained. Whilst there may not be lots to be done, it is always advised to use an accountant to make sure the French accounting standards are met.
-
Simplicity: **
-
Social contributions : €€
-
Tax : €€
-
Business Expansion : Good
-
Recommended for: Individuals that may work from home, but incur professional expenses (e.g. consultants).
Summary: Perfect for those who have a turnover higher than the €33,200 that the ‘auto-entrepreneur’ allows.
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(AFP)
3. EIRL (Entrepreneur Individuel à Responsabilité Limitée)
This means being an individual entrepreneur with limited responsibility, where the company is managed by the individual. You will have to register with the above-mentioned Register of Commerce.
It follows the same scheme as the ‘Entreprise individuelle’ in terms of social contributions and tax. However, there is a possibility with this structure to opt into Corporate Tax. This may seem like a bizarre idea, to pay more tax, but if Corporate Tax is paid, the director’s salary is then deductible from the taxable income of the business.
Additionally, as the name suggests, limited responsibility means that you can declare your (non-seizable) assets and disassociate them from your business ventures, therefore protecting them.
-
Simplicity: **
-
Social contributions : €€
-
Tax : €€
-
Business Expansion : Good
-
Recommended for: Individuals that want to remain an individual entrepreneur, but want to protect their assets.
Summary: This is a good scheme for people who don’t want to incorporate a company, whilst also making sure their personal assets are separated from those of the company.
4. EURL (Entreprise Unipersonnelle à Responsabilité Limitée):
This means being a one-person company with limited responsibility. This is the creation of an actual company (SARL), but with a single shareholder, bylaws and a share capital (determined within the bylaws).
The company’s management is assumed by a manager/physical person. Twenty percent of the starting capital has to be introduced straight away, and the remainder within the five years following the incorporation.
An EURL has to be registered with the above-mentioned French Register of Commerce. The single shareholder’s responsibility is only equal to that of their contributions, but the manager of the company has criminal and civil liability for any errors committed during the years of their duties.
It is for this reason that hiring an accountant is highly advised. The manager of the EURL is subject to income tax, and the company will be liable for VAT and can be liable for Corporate Tax (if favourable as per the reasons described in EIRL, above).
-
Simplicity: *
-
Social contributions : €
-
Tax : €
-
Business Expansion : Good
-
Recommended for: Someone looking to found a business with a starting capital.
Summary: This scheme is not one that we recommend, as we believe that it is an outdated structure. It is more costly to set up than the above-mentioned structures. However, if it is a formal company structure you’re looking for… perhaps an SAS(U) is the best option (see below).
(AFP)
5. SASU (Société par Actions Simplifiée Unipersonnelle)
This means simplified one-person joint stock option company (similar to an Ltd. in England and an LLC in the US). Again, this is the creation of a formal company structure with a single shareholder, bylaws and a share capital (determined within the bylaws).
The company's management is assumed by a chairman, natural or legal person, but other management bodies may be included in the bylaws. Fifty percent of the starting capital has to be introduced straight away, and the remainder within the five years following the incorporation.
An SASU has to be registered with the above-mentioned French Register of Commerce. The single shareholder’s responsibility is only equal to that of their contributions, but the chairman of the company has criminal and civil liability for any errors committed during the years of their duties.
It is for this reason that hiring an accountant is highly advised. Compensation paid to the management bodies of the SASU are subject to income tax in the category of wages and salaries. The SASU is subject to Corporate Tax, and there is the option to make the SASU subject to income tax.
-
Simplicity: *
-
Social contributions : €
-
Tax : €€
-
Business Expansion : Very Good
-
Recommended for: Business with a starting capital with aims of expansion.
Summary: This is the option we recommend, as opposed to an EURL. However, if you are looking to set up a SASU, why not create an SAS instead? The ‘unipersonnelle’ only sends unnecessary information to the market: why insist on a unipersonal business while the modern business revolves around the partnership, and the presence of the team in the capital with stock options?
The choice of company structure is very important, and it’s important to make the right choice, use the one that suits you best, whilst staying compliant with the French tax administration and URSSAF.
If you'd like profession help, you can get in touch with experts at Maupard. Visit www.maupard.com.
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See Also
Red tape, administrative hurdles, and Catch-22s left and right.
That's what you can expect when setting up a business in France. And if you're a little disheartened, don't worry you're not alone. And there is help out there.
"The most daunting thing for most people is that they really get nervous about the tax administration and all the formalities that have to be done," Harry Maxwell, a former business developer at Paris-based business advisory firm Maupard, tells The Local.
"Nothing is ever as straightforward as as it seems and it can be easy to get snowed under and panicked. But even French speakers struggle with it all."
He added, however, that most people who seek help are quite forward thinking, and typically plan ahead rather than starting up a business and figuring it out later.
And while Maxwell strongly advises people to get help setting up their employment situation, he admits that it's not impossible to do alone.
"You can figure it out alone, but I wouldn't if you're any bit unsure," he tells The Local.
"A lot of the information is available if you search it, though it's not officially available in English. But there are plenty of forums that help," he says.
"And being able to speak French is very important, but it isn't impossible to do it alone, as long as you're starting small like with an auto-entrepreneur. But setting up an incorporated company is a bit more tricky."
He added that when setting up something bigger, it's better to get help so you don't find yourself stuck with the long term and at times costly debris from mistakes that could have been avoided at day one.
With all this in mind, here are some helpful tips from the guys at Maupard, including a close look at the pros and cons of each company structure and information about which one is right for you.
READ ALSO: Everything you need to know abut starting a business in France
(AFP)
Make sure you're eligible to start a business
Before you set up your business in France, you first need to make sure you're allowed to.This means having the right visa to come and work in France.
For those coming from the European Union, (and for countries like Switzerland), you do not need a permit to live or work in France. However, if you are coming from outside the EU, whether it be from the United States, Australia or any other country, you will have to first check your visa requirements with your consulate or embassy.
Having obtained a visa, you then have to choose a company structure. Here's a guide to the five options. Note the key with * and € signs. Three €/* is good and one or none is less positive.
1. Auto-entrepreneur/micro-entrepreneur
This business model has a very simple structure. It requires an initial registration with the social and tax administrations, and then social contributions have to be paid on a quarterly basis, and income tax on an annual (or quarterly) basis. There is no share capital.
In comparison to many company structures in France, this structure is very relaxed. Social contributions are payable at only 25 percent of the normal rate, and are only paid when they are due (meaning that if your turnover is zero, you have no social contributions to pay).
Furthermore, there are no VAT declarations to be made, if you benefit from a VAT exemption (i.e. turnovers not exceeding €33,200 for services and €82,800 for goods), and no Corporate Tax to be paid either, which makes it a cost-effective business model.
Setbacks include: not being able to deduct expenses incurred from running the business, the 25 percent social contribution rate is applied to turnover and not profit; and turnover must not exceed €70,000 for services and €170,000 for goods. It is possible to change from an auto-entrepreneur into a larger company structure, but once this switch is made, it is very difficult (and can be costly) to reverse.
-
Simplicity: ***
-
Social contributions : €€€
-
Tax : €€
-
Business Expansion : Very Low
-
Recommended for: People who work from home (e.g. translators, craftsmen, journalists, consultants, developers, coaches or event organisers) with a very low turnover.
Summary: An auto-entrepreneur is for individuals who incur little/no expenses, and are unlikely to see a rise in turnover. It is ideal for launching an activity. With this scheme, you can start your own business and check its viability simply, without incurring too many costs. Essentially, the individual is the business.
2. Entreprise individuelle (BNC)
The BNC (Bénéfices non Commerciaux) for professional operations is also a simple structure, and the set-up is also straight-forward. However, the company must be registered with the French Register of Commerce (unlike in the case of an auto-entrepreneur).
The company is managed by the individual, there is no share capital necessary for this structure, nor does Corporate Tax need to be paid. Social security contributions are paid in advance and then adjusted, according to actual remuneration, for a fairer calculation of both social security contributions and income tax.
Professional expenses incurred are taken into account when calculating your taxable income with this regime. If you have multiple professional expenses, this is good news. Most importantly, however, there is no maximum turnover threshold.
Additionally, this structure allows you to recover VAT, but, you will also be liable for VAT and will have to make VAT declarations. The biggest downside to this structure is that rigorous accounting must be maintained. Whilst there may not be lots to be done, it is always advised to use an accountant to make sure the French accounting standards are met.
-
Simplicity: **
-
Social contributions : €€
-
Tax : €€
-
Business Expansion : Good
-
Recommended for: Individuals that may work from home, but incur professional expenses (e.g. consultants).
Summary: Perfect for those who have a turnover higher than the €33,200 that the ‘auto-entrepreneur’ allows.
(AFP)
3. EIRL (Entrepreneur Individuel à Responsabilité Limitée)
This means being an individual entrepreneur with limited responsibility, where the company is managed by the individual. You will have to register with the above-mentioned Register of Commerce.
It follows the same scheme as the ‘Entreprise individuelle’ in terms of social contributions and tax. However, there is a possibility with this structure to opt into Corporate Tax. This may seem like a bizarre idea, to pay more tax, but if Corporate Tax is paid, the director’s salary is then deductible from the taxable income of the business.
Additionally, as the name suggests, limited responsibility means that you can declare your (non-seizable) assets and disassociate them from your business ventures, therefore protecting them.
-
Simplicity: **
-
Social contributions : €€
-
Tax : €€
-
Business Expansion : Good
-
Recommended for: Individuals that want to remain an individual entrepreneur, but want to protect their assets.
Summary: This is a good scheme for people who don’t want to incorporate a company, whilst also making sure their personal assets are separated from those of the company.
4. EURL (Entreprise Unipersonnelle à Responsabilité Limitée):
This means being a one-person company with limited responsibility. This is the creation of an actual company (SARL), but with a single shareholder, bylaws and a share capital (determined within the bylaws).
The company’s management is assumed by a manager/physical person. Twenty percent of the starting capital has to be introduced straight away, and the remainder within the five years following the incorporation.
An EURL has to be registered with the above-mentioned French Register of Commerce. The single shareholder’s responsibility is only equal to that of their contributions, but the manager of the company has criminal and civil liability for any errors committed during the years of their duties.
It is for this reason that hiring an accountant is highly advised. The manager of the EURL is subject to income tax, and the company will be liable for VAT and can be liable for Corporate Tax (if favourable as per the reasons described in EIRL, above).
-
Simplicity: *
-
Social contributions : €
-
Tax : €
-
Business Expansion : Good
-
Recommended for: Someone looking to found a business with a starting capital.
Summary: This scheme is not one that we recommend, as we believe that it is an outdated structure. It is more costly to set up than the above-mentioned structures. However, if it is a formal company structure you’re looking for… perhaps an SAS(U) is the best option (see below).
(AFP)
5. SASU (Société par Actions Simplifiée Unipersonnelle)
This means simplified one-person joint stock option company (similar to an Ltd. in England and an LLC in the US). Again, this is the creation of a formal company structure with a single shareholder, bylaws and a share capital (determined within the bylaws).
The company's management is assumed by a chairman, natural or legal person, but other management bodies may be included in the bylaws. Fifty percent of the starting capital has to be introduced straight away, and the remainder within the five years following the incorporation.
An SASU has to be registered with the above-mentioned French Register of Commerce. The single shareholder’s responsibility is only equal to that of their contributions, but the chairman of the company has criminal and civil liability for any errors committed during the years of their duties.
It is for this reason that hiring an accountant is highly advised. Compensation paid to the management bodies of the SASU are subject to income tax in the category of wages and salaries. The SASU is subject to Corporate Tax, and there is the option to make the SASU subject to income tax.
-
Simplicity: *
-
Social contributions : €
-
Tax : €€
-
Business Expansion : Very Good
-
Recommended for: Business with a starting capital with aims of expansion.
Summary: This is the option we recommend, as opposed to an EURL. However, if you are looking to set up a SASU, why not create an SAS instead? The ‘unipersonnelle’ only sends unnecessary information to the market: why insist on a unipersonal business while the modern business revolves around the partnership, and the presence of the team in the capital with stock options?
The choice of company structure is very important, and it’s important to make the right choice, use the one that suits you best, whilst staying compliant with the French tax administration and URSSAF.
If you'd like profession help, you can get in touch with experts at Maupard. Visit www.maupard.com.
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