Are you interested in starting a business in France? If YES, here is a complete guide plus legal requirements for starting a 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.
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.
Why Start a Business in France?
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.
Starting a Business in France as a Foreigner – A Complete Guide
- General Overview
France today is one of the most modern countries in the world and is a leader among European nations. It plays an influential global role as a permanent member of the United Nations Security Council, NATO, the G-8, the G-20, the EU and other multilateral organizations.
France re-joined NATO’s integrated military command structure in 2009, reversing de Gaulle’s 1966 decision to take French forces out of NATO. Since 1958, it has constructed a hybrid presidential-parliamentary governing system resistant to the instabilities experienced in earlier, more purely parliamentary administrations.
In recent decades, its reconciliation and cooperation with Germany have proved central to the economic integration of Europe, including the introduction of a common currency, the euro, in January 1999. In the early 21st century, five French overseas entities – French Guiana, Guadeloupe, Martinique, Mayotte, and Reunion – became French regions and were made part of France proper.
France’s economy is the fifth largest in the world and represents around one fifth of the Euro area gross domestic product (GDP). Currently, services are the main contributor to the country’s economy, with over 70% of GDP stemming from this sector.
In manufacturing, France is one of the global leaders in the automotive, aerospace and railway sectors as well as in cosmetics and luxury goods. Furthermore, France has a highly educated labour force and the highest number of science graduates per thousand workers in Europe.
In the external sector, France’s closest trading partner is Germany, which accounts for more than 17% of France’s exports and 19% of total imports. France’s primary exports are machinery and transportation equipment, aerospace equipment and plastics, while primary imports include machinery, automobiles and crude oil. Additionally, France is the most visited country in the world, making tourism a prominent sector in the economy.
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.
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)
Starting a Business in France – Market Feasibility Research
Preliminary data show that the French economy expanded 0.5% over the previous quarter in Q1, which nearly doubled the growth rate seen in Q4. The acceleration in the first quarter came on the back of stronger domestic demand, which more than offset a negative contribution from the external sector.
Recent indicators, however, paint a mixed picture of the economy. In April, the composite PMI crossed into expansionary territory, while business confidence surged to a seven-month high.
On the other hand, soft readings in consumer confidence from February to April is a source of concern. Meanwhile, on 28 April, rail workers joined student protestors and staged the seventh general strike since March. Rail workers staunchly oppose Europe-wide deregulation that will reduce protective work practices in the rail industry.
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
5 Best cities to do Business in France
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.
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 – Legal Aspect
- 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
Best Legal Entity for Business in France
It is not ordinarily necessary to establish a separate legal company structure to start and run a business in France. As a general rule, you have the choice to either operate a business as a sole trader, or to establish a limited company.
A sole trader is called an Enterprise Individuelle, whilst the most common limited company structures have the acronyms EURL and SARL. It is also possible to opt for the legal status of EIRL – Entreprise individuelle à responsabilité limit, a status that grants a strong degree of limited liability, but without the need to establish a company.
We can, therefore, summarise the four main business structures as follows:
- Entreprise Individuelle (EI)
- Entreprise Individuelle à responsabilité limitée (EIRL)
- Entreprise Unipersonelle à Responsibilité Limitée (EURL)
- Société à Responsibilité Limitée (SARL)
There are also a number of legal structures for public limited companies, partnerships, investment companies and certain professions libérales, e.g. SCP, SEL, SA, SAS, SNC, SCM!
If you are proposing to rent out property then you may wish to establish a rather specialist type of property company called a Société Civile Immobiliiére. The SCI is mainly used for home purchase, but can also be used as a legal vehicle to let out unfurnished property.
Most people setting up a business in France do so on a sole trader basis. Whilst it is possible to later migrate to a limited company, there are fees and taxes associated with doing so, particularly if you are transferring business assets to the new company.
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
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.