The different legal types of companies in France
In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what the different legal types of companies exist in France.
What are the main legal forms of companies that someone can create in France?
The limited liability company (Société à Responsabilité Limitée or SARL)
The SARL offers the advantage of a simple structure in which the liability of the partners (“associés” in French) is limited to the amount of their Initial Investment in capital.
The initial capital of the SARL, of which the French law sets a minimum amount of one euro, is divided between at least two partners.
The one-person” limited liability company (“Entreprise unipersonnelle à responsabilité limitée” or EURL)
A special type of SARL is the EURL with only one partner.
Its operating rules are very similar to those of the SARL. The main difference concerns its tax system: its profits are automatically taxed as income in the name of the partner, although it is possible to opt for corporation tax.
The simplified joint stock company (“Société par Action Simplifiée” or SAS)
This relatively recent form of company is enjoying some success (especially for start-ups). Many SAs have been transformed into SASs. The rules governing it are similar to those of the SA. However, some measures make it simpler. For example, there is no minimum amount of share capital required, you can create a SAS with €1!
The public limited company (“Société Anonyme” or SA)
The SA is formed by at least two shareholders with a minimum capital of €37,000. The number of shareholders is at least seven if the limited company is listed on the stock exchange. It is managed by a chairman and a managing director (who may be one and the same person) and by a board of directors composed of at least three people.
It is subject to the obligation to appoint an auditor (“commissaire aux comptes” in French), especially if it is listed!
General partnership (“Société en nom collectif” or SNC)
This form of company is rarely used because it has the disadvantage of not protecting the assets of its partners: they are indefinitely and jointly and severally liable for the company’s debts out of their personal assets.
What are the main characteristics that must be borne in mind when creating a company in France?
Let’s review what are the advantages of the main types of companies:
SAS vs SA
Compared to the SA, the SAS offers the advantage of flexibility: the French law allows the partners to organize its operation freely in the firm’s status. The writing of the status requires the advice of a qualified professional, as it can lead to the development of rules that would be difficult to apply later.
Because of its cumbersome operating rules, the SA should be reserved for projects of a certain size. It is also used when shareholders who are not involved in the business want to exercise control in the board of directors. The main advantage of this status is that it allows a very large amount of share capital to be built up in order to finance expensive investments.
SARL advantage: limited liability
The main advantage of the SARL status is the limited liability of the partners. They are free to determine the amount of share capital and therefore the contributions they wish to make when setting up the limited liability company and are only liable for the amount of their contributions. For that matter, these companies are especially adapted for partners who wish to protect their personal capital.
SNC
No minimum amount is required for the initial capital, which can be a major advantage. On the other hand, the shares of the capital can only be transferred after having obtained the agreement of all the partners, which makes any change in the composition of the capital complex.
EURL advantage: protecting your personal capital
The EURL allows you to secure your personal assets. By creating such a company, your liability is in principle limited to the amount of your contributions. Your professional creditors cannot therefore sue you personally unless you have committed management errors. If you are not guilty of mismanagement in your capacity as manager and you have not given any personal guarantees in connection with your project, your personal assets are safe in the event of difficulties in the company.
Related posts on the SimTrade blog
▶ Louis DETALLE A quick presentation of the Private Equity field…
▶ Louis DETALLE A quick presentation of the M&A field…
Useful resources
URSSAF Registration of a company in France
Insee Information for the registration of a company in France
About the author
The article was written in November 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).