Do you want to start a business in France? If YES, here is a complete guide plus legal requirements for starting a profitable business in France as a foreigner.
Okay, having provided an in-depth analysis of the top 50 best small business ideas in France and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in France. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- The Harsh Truth About Starting a Business in France
- Facts and Figures of France That Will Interest You as an Investor/Entrepreneur
- Possible Challenges and Threats of Starting a Business in France
- 5 Best cities to do Business in France
- List of Legal Documents You Need to Run a Business in France
- Starting a Business in France – Economic Analysis
The Harsh Truth About Starting a Business in France
France is not a country renowned as a free enterprise economy, or one with a high level of entrepreneurial spirit. The government plays an active role in the business sector, and surveys consistently show that most students desire to work in the public sector, rather than to set up their own business. Government social charges are high and the tax and social insurance system is complex.
So whilst France may be a good resting place for those who are retired, or who have an independent means of income; it is not necessarily an attractive country for younger people who need to work and who want to make money.
Nevertheless, things are changing, albeit very slowly. The government has woken up to the fact that it needs to provide greater incentives to employment and encourage a more vibrant economy. Many of the bureaucratic hurdles to setting up a business have either been reduced or eliminated altogether.
Facts and Figures of France That Will Interest You as an Investor/Entrepreneur
- Since 2005, France has maintained a current account deficit, predominantly driven by trade in goods. Yet, in 2013, France’s trade deficit shrank to its lowest level since 2010, although this decrease was mainly caused by the fact that exports fell less rapidly than imports.
- Correspondingly, capital inflows have also fluctuated in the past, typically driven by large amounts of Foreign Direct Investment (FDI). France was ranked 10 in the world for incoming FDI in 2010 and has historically been a leading FDI destination. However, FDI experienced a large decline in 2013, contracting 77%. The countries with the largest investments in France are the united states, Germany, Italy and the United Kingdom.
- France is the second-largest exporter in Europe after its largest trading partner Germany. In particular, France consumes large amounts of imported consumer goods, which are less expensive than products “Made in France.” France is also a net importer of oil and remains sensitive to changes in prices. France is a member of the European Union (EU) and follows a trade policy similar to other member states with a common EU weighted average tariff rate.
- France and other EU member states have a number of bilateral and regional trade agreements and are members of the World Trade Organization (WTO). France is a relatively open economy; however, some barriers to trade are present.
- France exports a wide range of goods and services and has an export-to-GDP ratio close to 30%. France’s highest dollar value goods exports include machinery, aircraft and spacecraft, vehicles, electronic equipment and pharmaceutical products. Additionally, France is one of the world’s largest exporters of farm and agricultural products and is renowned for its wine, spirits and cheeses.
There may even sometimes be cost advantages in setting up a business in France. Indeed, in a recent international survey, France was rated the third most attractive country in the developed world to start a business! The reason for this rating was due to a generally lower level of costs, notably wages, transport and fuel. Despite having a reputation for tough employment laws, there are many employment contracts available that offer a lower of job protection than in the UK.
The level of company taxation for a small business is smaller than that of the UK and there are breaks you can get on social security contributions. There are many cities and regions of France that are highly successful and provide real opportunities for those seeking to start a regional based business.
And if you do not think France itself offers good business prospects, or you do not speak French, then you can use the internet to run an international business from France. France will always be France; it is not a free for all, and you have to accept some constraints.
After all, that is possibly one of reasons that makes the country such an interesting and charming one to visit and to live.
Possible Challenges and Threats of Starting a Business in France
France has long laid out a welcome mat to international firms looking to grow their business, but doing business abroad brings with it cross cultural challenges, and having local help on board can be a real asset when expanding overseas.
France is already home to more than 20,000 foreign companies running under many different However, getting used to French working habits can be difficult and cross cultural awareness is essential in order to expand seamlessly across borders. Challenges may include:
- Language barrier
Starting a Business in France as a Foreigner – A Complete Guide
1. Draft a Business plan: ideally, you should never delve into any business without first having a business plan. This will allow you to have a clear grasp on your mission statement and vision for your business, and means you can show investors – and more importantly the French business bank account manager – exactly how your business will be run.
You will need to consider who your market and customers will be, how much money you or your partners will be investing, what business experience you have and how much money you are likely to make and spend during the next few years.
5 Best cities to do Business in France
2. Choose a category: In France businesses are divided into five different categories:
- Commercial or industrial, such as running a shop, café or factory;
- Trades/artisan, which includes building trades, other manual jobs, some manufacturing;
- Independent or freelance professional – working independently and providing a service such as a dentist, writer, interpreter, musician;
- Commercial agent, where you act – negotiate or sell for example – on behalf of another company;
Each of these has its own registration center (Centre de Formalités des Entreprises or CFE) local to each department in France. You have to set up your business through the appropriate CFE and advise them of any changes, such as a new address.
List of Legal Documents You Need to Run a Business in France
Before undertaking any business transactions in France, it’s important to obtain legal advice to ensure that you’re operating within the law. Although registering your business means having to pay taxes and social security contributions, it also gives you access to healthcare, pension rights, family allowances and, for lower earners, various other means-tested benefits.
- Work and residential permit
- Business license
- VAT registration
- Intellectual property protection
- Non-disclosure agreement
- Operating agreement
License and permits You Needed to Do Business in France
Once you have decided to start a business you need to register the new business with the authorities. If you are not proposing to set up a separate company, then the registration process is very easy and cheap, as you merely need to go along to your local business registration centre to do so. If you are setting up as an auto/micro-entrepreneur, then you should refer to our Guide to Micro-Entrepreneur for information on the formalities.
If you know your way around, with suitable language competency, or you can get some informed assistance, then you can actually do it yourself, by purchasing and completing the pre-printed documents (including model articles) from APCE, the French business start-up agency. You need to be rather cautious about doing this way, but if you do so the cost should be no more than several hundred Euros.
One other approach is to make use of the services available in the business registration centre as such centres frequently assist in the formalities of company creation as well as registration. Important license and permits may include:
- Proof of address (EDF utility bill, rental agreement);
- Proof of ID (valid passport or national travel ID, residence card);
- Proof that your spouse understands liability.
- Work permit
3. Structure and By-laws: You have to decide which type of business structure – and tax regime – suits your business. There are two types of legal business structure in France:
- a sole trader (enterprise individuelle or EI);
- a company (société ), such as an EURL, SARL, SA and SAS.
Sole trader: In this legal framework, you and the business are treated as one legal entity. Your professional and personal assets are merged although you can make a ‘declaration of seizure’ to protect your home. Under this legal structure you can, as from January 2015, set up as a micro-enterprise. This merges the old auto-entrepreneur and micro-enterprise systems.
You can also opt to set up in business as an EIRL (Entrepreneur of Individual Limited Liability) where your personal assets are separate. In both cases you trade under your own name although you can take on a company or trade name.
If you take on EI status, you pay tax through your personal income tax return in the category for your business: industrial and commercial profits (BIC) for traders and artisans, or Non Commercial Benefits (BNC) for independent professionals. If you opt for EIRL status you can choose to pay corporate tax.
Company: If you choose to set up a company (société ), it will be legally separate from you. Your personal assets are protected from the company’s creditors but you may be prosecuted if you use the company’s assets for your own personal use.
Your company must have its own name, address and a minimum of assets. You act on behalf of the company, not on your own behalf. You may be taxed under corporate tax (IS) or the régime du reel. Creating a company is not so straightforward as it is for a sole trader. It involves recording your status with the tax office, appointment of officers and publishing legal notices in the press.
There are two main types of company:
An EURL or Entreprise Unipersonelle à Responsibilité Limitée is owned by a single person and run as a limited liability single shareholder company by a gérant (managing director/company secretary) who may or may not be the owner of the business and salaried/non-salaried.
A SARL or Société à Responsibilité Limitée is a Limited Liability Company with between two and 100 partners. Liability for both is limited to the capital investment.
What type of legal structure you choose depends on what business you want to start (some require a specific structure), so check with the Chambers of Commerce or relevant professional body. Other factors that will affect your choice of legal structure include whether you want to be in sole charge of the business, your turnover, if you have personal assets you want to protect or if you want to pay tax through income tax or corporation tax.
When you are done with selecting a structure, you then have to register your by-laws, either with a registered company formation agent or with a lawyer. This includes being specific about your business – what products you’ll sell or what services you want to provide and what your business hopes to become in the future.
4. Check your company name: You can check online and free of charge whether the name you want to use for your company is already in use by another company through the Institut National de la Propriété Industrielle (INPI). If you want to protect your own Business Name or logo, you must register it as a trademark (dépôt de marque) with the INPI ; if you don’t – and someone else starts using the same name or logo in the future – you will have no legal right to keep it.
If you’re going to create a website then check that the name you want is available through the AFNIC, the registry for domain names.
5. Business Bank Account: Next you’ll need a business bank account. So once you’ve arranged a meeting with a bank manager (bank account introductions can be set up by company formation agents) you need to be prepared to go through your business plan and answer any questions about your company.
6. Deposit Capital: in order to start a business in France, you will have to open a business bank account and deposit at least 4000 € of share capital into the account. (The law states there is only a 1 € minimum, but no bank will actually set you up with an account with such a low amount).
Your share capital will be unblocked as soon as the banker receives the Kbis – the certificate of your new company which normally takes about 2 weeks. If you end up not going through with the company formation, then your capital will be returned to you immediately.
7. Legal Publicity: Next you must publish an announcement in an authorized newspaper such as Le Figaro or Le Monde or a business publication.
8. Incorporation: This is where your application will receive all the official stamps from the French government departments such as the tax office, the Centre des Formalités des Entreprises or Chambres des Métiers and the Greffe du Tribunal de Commerce that looks after all the incorporations at the Commercial Court.
9. Registration: When you receive the ‘extrait Kbis’ (the certificate of incorporation) you will be provided with a registered number which is your company ID number that must be written on all official documents and invoices.
When the Kbis arrives, your bank manager can activate your business bank account and your share capital will be unblocked. You will also receive a welcome letter from the tax office with a VAT number and tax officer contact details.
10. Accountant: Appoint a professional French accountant called an ‘expert comptable’. They will be the 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.
Some occupations are regulated in France, including accountants, veterinary doctors, hairdressers, builders and even wine dealers. If your business is one of these regulated professions, you will have to be registered with the appropriate organization and may need to prove that you have the right qualifications, experience and insurance liability before you can set up your business.
List of Government Agencies and Parastatals that are In-charge of Registering Businesses and Issuing Licenses and Permits in France
Registration is administered by local centres de formalités des entreprises (CFE), which checks your application and submits details to the relevant agencies (for a small fee). The CFE will provide you with a form M0, which is for the creation of a company.
Among other things, form M0 asks you to list the intended activity or activities of your company, from which information the authorities will allocate to it the financial regimes under which it must operate. It’s essential to take professional advice (e.g. from an accountant) and to make sure you know the implications of your choice of activity before completing form M0.
You have three months in which to change your mind (by notifying your tax office); thereafter you’re stuck with your nominated regimes until the end of the year that follows your year of registration. The documentation you need to register:
- A copy of the announcement of company formation from the appropriate journal or a copy of the request for publication made to the journal, along with its confirmation of acceptance;
- At least two copies of the articles of incorporation, which must be in French, if you’re setting up a limited company;
- Written nomination of the managing director (MD), if it isn’t part of the articles of incorporation;
- A signed declaration by the MD that he has no criminal convictions ( attestation sur l’honneur de non-condamnation);
- A copy of the MD’s identity card or passport;
- Carte de commerçant for a non-EU citizen;
- Proof of the company’s address (e.g. a copy of a lease or recent utility bill);
- A statement from the MD if the company is to be set up in his residence for the first two years, and proof of his residence.
When the CFE receives your completed dossier and form M0, it issues you with a receipt. The receipt itself doesn’t mean that you’re registered and doesn’t allow you to begin trading. However, it does allow you to set up utility accounts in the name of your business, to take an entry in the telephone book, and to notify the post office of your business address.
The CFE then sends your details to the following organisations:
- The Institut National de la Statistique et des Etudes Economiques (INSEE), France’s national statistics office, which enters your company on the national register of businesses and issues your SIREN, SIRET and NAF code (see below);
- The tax authorities;
- The social security agencies – URSSAF (for family allowances), the CAM (for medical cover) and the relevant caisse de retraite (for pensions) – which will send you demands for contributions;
- The Greffe du Tribunal de Commerce (applies only to businesses classed as commercial or industrial), which enters your business on the Registre National du Commerce et des Sociétés (RNCS);
- The Répertoire des Métiers-: if you’re an artisan; the relevant social security and labour inspection organisations if you have employees.
Registration costs between around € 200 and € 350 depending on the body you must register with. When your company has been entered in the appropriate register, you receive confirmation, which takes the form of a certificate issued by the relevant authority. You need copies of your certificate to establish credit with suppliers, as well as to get the bank to release your blocked funds and to set up a company bank account.
Starting a Business in France – Economic Analysis
The French economy is highly diversified, and institutional strengths like strong protection of property rights and a comparatively efficient regulatory framework facilitate entrepreneurial activity. Various reforms have been attempted to boost the economy’s lagging competitiveness and flexibility, but progress has been uneven.
- 2016 Economic Freedom Score-: 62.3 (down 0.2 point)
- Economic Freedom Status-: Moderately Free
- Global Ranking-: 75th
- Regional Ranking-: 32nd in Europe
- Notable Successes-: Rule of Law and Open Markets
- Concerns-: Management of Public Finance and Labour Freedom
- Overall Score Change Since 2012-: –0.9
Responsible for more than half of GDP, the government still dominates major sectors of the economy as a large shareholder in many semi-public enterprises. Various stimulus measures have resulted in a deterioration of public finance. Despite recent reform efforts, the labour market remains rigid, undermining long-term productivity and employment growth.
Economic growth is projected to rise gradually to 1.3% in 2017 and 1.6% in 2018 thanks to lower oil prices, less fiscal contraction and the cumulative effects of sustained monetary stimulus. Rising wages, exchange rate pass-through and stabilising energy prices should bring a pick-up in inflation, despite significant economic slack.
Low energy prices, strengthening external demand and pro-competitive reforms are expected to underpin an increase in consumption and export volumes. However, declining house prices and weak business confidence are continuing to weigh on investment, and unemployment will decline only slightly.
Budget deficit reductions over 2016-17 are assumed to be based on spending restraint, while income and corporate taxes and social security revenues are reduced as a share of GDP. This structural consolidation effort is the minimum necessary to control still rising public debt, but automatic stabilisers should be allowed to play freely to avoid endangering the still fragile recovery.
Factors or Incentives Encouraging Investors to Venture into Business in France
- France is ranked first, ahead of the united kingdom and Germany, for its effective corporate tax rate on R&D operations, thanks notably to France’s research tax credit. France is also the third leading recipient of R&D activities after Germany and the United Kingdom.
- The French government’s “Responsibility and Solidarity Pact” means that labour costs will be reduced by €30 billion by 2017. As of the second quarter of 2014, hourly labour costs in French industry (€36.81) were lower than in Germany (€38.49).
- France is ranked third in the world for having healthcare infrastructure that matches the needs of society. It is also ranked eighth in the world for life expectancy at birth (81.7 years).
- In 2013, France received 16% of all job-creating foreign investments in Europe. Almost one employee in nine in France works for a foreign owned subsidiary, while in the manufacturing sector this figure is one in five. These are higher levels than in Germany, Spain or Finland.
- French industry has a smaller carbon footprint relative to GDP than the United Kingdom, Japan, Germany and the United States. France has very competitive electricity rates: €74 / MWh (exc. VAT) for manufacturers, compared with €84 in Germany, and €124 in the United Kingdom. (First half of 2014, Consumption between 500 and 2,000 MWh)
List of Well Known Foreign Brands in France
You have to know that France is one of the largest economies in the world, with at least 79m foreign travellers per year. France is also the home of industrialised luxury goods, which under the direction of LMVH has rapidly evolved from a collection of craftsmen and women, to a consolidated megalith contributing €217 billion to the global economy.
- Louis Vuitton
- Christian Dior
- Christian LOUBOUTIN
- YSL (YVES SAINT LAURENT)
List of Well Known Indigenous Entrepreneur in France
Some of the world’s most successful entrepreneurs are French, but a significant portion of these bright lights of business seek to escape their home country once they make a substantial part of their fortune. This is due largely to the tax structure and government regulations in France, which essentially punish financial success and put roadblocks in the way of starting or expanding a business. Indigenous entrepreneurs in France include;
- Pierre Schaeffer
- Xavier Neil
- Bernard Tapie
- André A. Jackson
- François-Henri Pinault
- Jean-Marie Hullot
- Julien Moutte
- Loïc Le Meur
- Ned Lamont
- Philippe Kahn
List of 10 Well Known Indigenous Businesses in France
French economy is different than any other modern economy country. In France, there are many famous companies such as LOREAL, AXA, BNP Paribas, Renault, Dior, Capgemini and Saint-Gobain etc. After UK and Germany, France stands as the third largest economy in Europe and sixth largest economy in the world.
- Total S.A
- BNP Paribas
- GDF Suez