SUBSIDIARY ENTITY SET UP IN FRANCE

Launching a subsidiary overseas takes time and eats up funds – and the venture has no guarantee of success. Foreign companies moving into the French economy typically choose a limited liability company, Société a Responsabilité Limitée (SARL), or a private limited liability company, Société a Responsabilité Limitée (SELARL). The branch (Branche) or representative office (Bureau de Liaison) are other less popular options.

The subsidiary is a legal entity in France, entirely independent of the foreign parent company, and incorporation follows the regulations of the French Companies Code. It is incorporated as a local company, and its registration must be published in the Official Gazette with all necessary documents filed at the Centre de Formalités des Enterprises. Once the subsidiary is legally established, other crucial factors must be dealt with. Tax processing, filing accounts, legal compliance, workforce management, payroll, and recruitment add to a hefty workload.

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How to Set Up a French Subsidiary?

The main company types in France are:

  • Limited Liability Company (Société a Responsabilité Limitée, SARL)
  • Private Limited Liability Company (Société d’exercice libéral à responsabilité limitée, SELARL)
  • Single Person Limited Liability Company (Enterprise Unipersonelle à Responsabilité Limitée, EURL)
  • Public Limited Company (Société Anonyme)
  • Simplified Joint Stock Corporation (Société par actions simplifiée)
  • French Sole Proprietorship (Enterprise Individuella)
  • Commercial Partnership (Société et norm collectif)

When entering the French market, and to set up an entity in France, you will have to follow the process below:

  • Decide on the company type that suits your business’s nature and goals. The most common choices for a foreign business to establish its subsidiary in France are the limited liability company, Société a Responsabilité Limitée (SARL), or a private limited liability company, Société a Responsabilité Limitée (SARL). Other options include a branch (Branche) or representative office (Bureau de Liaison).
  • Check the proposed subsidiary name is unique with the French Patent and Trademark Office.
  • Draft and notarize the Articles of Association, including reasons for setting up the company, manager’s responsibilities, and office address.
  • Registration must be published in the Official Gazette with all necessary documents filed at the Centre de Formalités des Enterprises.
  • Obtain Certificate of Incorporation, ‘Extrait de Kbis’.
  • Company documents must be stamped at the Commercial Court.
  • The SARL must have a resident registered agent and a registered address for official correspondence.
  • Only one director is required; between one and 50 shareholders, fewer than 25 removes the need for annual general meetings.
  • File all shareholders on the National Register (Institut National de la Propriété Industrielle, INPI).
  • The minimum share capital of one Euro must be deposited in a French corporate bank account.

Once the subsidiary is registered and before operating payroll for staff, these steps apply:

  • Apply with Form 2043 to the Ministry of Economy and Finance for employees’ for individual tax numbers.
  • Register employees with their local tax office (Service des Impôts des Particuliers)
  • Register with the Agence Centrale des Organismes de Sécurité Sociale (ACOSS) so employees are covered by the five funds of the social security system and the Unions de Recouvrement des Cotisations de Sécurité Sociale et d’Allocations Familiales, (URSSAF), which handles social security deductions.

Benefits of Setting Up a French Subsidiary

France has many attractions as a prime target for international expansion. Companies establishing a subsidiary will enter one of the world’s most potent and diverse economies and the European Union. Nearly 30,000 companies in France have foreign capital, employing over 10% of the workforce.

The parent company is in an ideal location to explore further expansion by establishing a subsidiary. France has borders with eight nations and coastlines facing the Atlantic Ocean, Mediterranean Sea and North Sea. The economy includes massive industrial and agricultural sectors. At the same time, Paris is the European Union’s leading financial centre and ranks above London and New York as cities home to the most Top 500 businesses.

Benefits of setting up a subsidiary include:

  • The subsidiary is a separate legal entity from the parent company.
  • The subsidiary can operate under its own business name and pursue independent business activities once it has obtained relevant licences.
  • The subsidiary has the same legal standing as local companies and can be eligible for French Government tax incentives and benefits.
  • Companies operating a limited liability subsidiary are not liable for specific share capital requirements other than issuing a minimum of one Euro.
  • The parent company is not liable for the obligations and debts of the subsidiary.

Subsidiary Laws in France

Companies expanding into France will typically set up either a limited liability company Société a Responsabilité Limitée (SARL) or a private limited liability company, Société a Responsabilité Limitée (SELARL). They must meet requirements under the Commercial, Civil, Monetary and Financial Codes.

Registration and Documentation:

  • A limited liability company must have at least one director and between one and 50 shareholders, and they must be named in the National Register (Institut National de la Propriété Industrielle, INPI).
  • All companies in France must register with the Registry of Commerce and Companies.
  • Certificate of Incorporation, ‘extrait de Kbis’.
  • Registration must be published in the Official Gazette with all necessary documents filed at the Centre de Formalités des Enterprises.
  • All commercial documents must be stamped at the Commercial Court.
  • Notarized Articles of Association of the parent company must be supplied, giving reasons for setting up the subsidiary and proposed business activities.
  • You must obtain a Tax Registration Certificate.
  • You must register a representative and office address.

Accounts and Taxation:

  • Entities were subject to 25% Corporate Income Tax in 2022.
  • File CIT returns by April 15 of the following year.
  • Register with the Tax Administration and Ministry of Economy and Finance.
  • Register for Value Added Tax with the Service des Impôts des Entreprises (CGI) within two weeks of starting trading.
  • Dividend income is taxed at 12.8% or general tax rates after deducting 40% for company tax already paid.
  • A withholding Tax of 30% is applied to dividends paid to non-resident individuals or companies.

Management:

  • Annual general meetings are not required if there are fewer than 25 shareholders.
  • Company directors who are residents of the European Union, European Economic Area nations or Switzerland can operate as directors on the same basis as French residents. Others must apply for a residence permit.

LOOKING TO EXPAND INTO FRANCE?

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