1. What are the primary legal statuses out there when starting a company? 2. Starting a business: 5 crucial steps to follow when creating a corporation

Summary

Everything you need to know about starting a business in France

7 mins

March 21, 2022

By Panama Harris

You have to define the scope of your project, set up the type of service you’ll offer, build a business plan, suss out the right kind of help to support your business...and that of course doesn’t include actually creating your company.

As a matter of fact, your company must define its legal status (whether it’s as a sole proprietorship or as a multi-member company) before it can legally operate.

The processes involved in setting up your business can be long and arduous. Between registering, writing out the Articles of Association and depositing your share capital, it can quickly start to feel like things are getting out of hand.

You want to set up your company, but don’t know where to start? You’re in the right place. We’ll go over all the steps and formalities - simply and without all the jargon - in this complete guide.

1. What are the primary legal statuses out there when starting a company?

Individual enterprises (Entreprise Individuelle)

An individual enterprise is a legal structure for those who intend to conduct their business on their own.

If you’re looking to have associates, this is not the option for you. You would need to choose a legal status intended for multi-partner entities, like an SAS or SARL, for example (don’t worry, we’ll explain what those are further down).

In practice, there are three types of individual companies:

The classic individual enterprise (entreprise individuelle ****or EI);
The limited liability individual enterprise (entreprise individuelle à responsabilité limitée or EIRL);
The individual enterprise as a micro-enterprise regime, more commonly referred to as micro-entreprise (formerly auto-entreprise). Note that there are revenue thresholds for this status. Micro-enterprises also cannot make itemized deductions on their income tax return.

As an individual enterprise, you have unlimited responsibility for any potential liabilities. That means you’re personally responsible for any and all eventual debt your company accrues. If your business files for bankruptcy, whoever collects on the debt can claim your personal goods and property. Something to keep in mind when choosing your legal status.

One way to avoid this potential issue is to file as an EIRL. In this instance, you can file an allocation declaration to designate professional property that will belong solely to your company. In this instance, should your company fall into debt or declare bankruptcy, debt collectors can only seize the property outlined in your declaration. Your personal property is safe.

Sole proprietor company structures: EURL and SASU

Just like an individual enterprise, sole proprietor companies are legal structures meant for those who intend to run their business solo (but that doesn’t necessarily prevent them from hiring employees). Should you want to associate with someone, a multi-partner setup would be the better choice.

There are two forms of sole proprietor companies:

The Limited Liability Sole Proprietor Enterprise (Entreprise Unipersonnelle à Responsabilité Limitée or EURL);
The Simplified Single Shareholder Company (Société par Actions Simplifiée Unipersonnelle or SASU).

The EURL is SARL’s younger sibling. That is, EURL is a SARL with one single associate. In the same vein, a SASU is a SAS with one single associate.

For these business structures, the company is a corporate entity with its own property. Another way to see it is your personal property is separate from that of your company. This distinction comes into play in the event of bankruptcy, in which case you are only responsible for the amount of personal capital you invested in the company. So for example, if you invested €1,000 into the company’s capital, your share of the responsibility to pay back debt is capped at €1,000, even if your business’ debt goes well above that amount.

While these two company structures resemble one another, there are a couple key differences:

The SASU allows you greater freedom in how you set up operations
The EURL, on the other hand, allows the head of the company to make smaller contributions to social charges than would be the case with a SASU.

Multi-partner corporation: SARL and SAS

There are a number of multi-partner entities out there, like the anonymous business (société anonyme or SA), the general partnership (société en nom collectif or SNC), the limited partnership via stocks (société en commandites par action or SCA), or even cooperative companies (les sociétés sous forme de coopérative)...each with their own particularities. For the sake of this article, we’ll focus on the two most commonly found forms most entrepreneurs and small businesses go with, namely the Simplified Shareholder Company (Société par Actions Simplifiée or SAS) and the Limited Liability Company (Société à Responsabilité Limité or SARL).

These company structures suit those who seek to start a company with one or several other associates. Just as with the single-shareholder companies, the business’ associates also benefit from a limited liability, commensurate with the amount of their personally invested capital.

You understood right: there’s no legal status that outshines another. It really just boils down to your business plan and the nature of your project.

An entrepreneur who wants to work alone and set out as a freelancer with few administrative hoops to jump through may want to keep it simple and file as a micro-enterprise (formerly auto-enterprise);
A merchant who, while wanting to run their business alone, has many associated costs for their company, would do well to file as a corporation or an EIRL (just as a reminder, micro-entrepreneurs can’t deduct costs from their income tax statement);
A entrepreneur wanting to bring one or more associates into the fold will most likely have to opt for creating a multi-partner entity, like one of the corporations above.

Still not sure which legal structure fits your project best? You’re right not to take this decision lightly. Best to seek out the advice of a professional who will be best equipped to point you in the right direction for setting up your business.

2. Starting a business: 5 crucial steps to follow when creating a corporation

The process for creating a corporation is a bit more complicated than creating an individual company.

Here are the five key steps to keep in mind:

Step 1: Compose your Articles of Association

Your Articles of Association are very important for the running of your company, as they set out how the company functions, as well as how the associates relate to one another.

It is every bit a formal document, set out as a series of articles. And in order for it to carry legal weight, it has to include some vital legal mentions, such as:

the full legal names of the associates;
the legal structure of the company, its purpose, its legal address, as well as its legal name;
the lifespan of the company (with the understanding that it cannot extend further than 99 years at a time);
the amount of share capital invested;
a breakdown of equity shares by associate;
the legal name of the company director, an outline of their authority within the company, their remuneration and the duration of their position’s term.

You have to work your way through these articles with a keen eye. Try to include every last pertinent detail. That can be easier said than done, because you have to anticipate future needs and dynamics that can involve the company down the line. And as an entrepreneur, you may not have the legal knowhow to catch everything. It may be in your interest to hire a professional (e.g. a lawyer or a CPA) to help you draft the Articles of Association, or at least look it over. And - as a bonus - they can help you with all the rest of your business creation paperwork.

Step 2: Deposit your share capital

When you create your company, your associates have to contribute to the share capital. It’s a legal formality that’s required of every business.

This contribution can come in three different forms:

a monetary contribution (a sum of money, for example);
a non-cash contribution (an asset like a car, for example);
an industry contribution (like a professional skill or expertise).

For EURLs, SASUs, SARLs and SASs, the minimum investment starts at €1.

Of the three types listed above, monetary contributions are the only ones rightfully considered to be a deposit of capital. The entire sum of share capital needs to be deposited into a bank account dedicated exclusively to the company. And you must perform this transaction with an authorized institution, such as:

a bank or a payment institution like Qonto;
a notary;
the Deposit and Consignment Office (Caisse des dépôts et consignations or CDC).

These contributions are meant to help finance your initial investments for your business.

Step 3: Publish a notice in the Legal Announcements Journal (JAL)

Here we have yet another mandatory requirement: the constitution notice. Once you’ll have finished drafting your Articles of Association and deposited your share capital, you have to publish a constitution notice in the Legal Announcements Journal (Journal d’Annonces Légales or JAL).

This notice serves to notify the greater community of your company’s creation.

Be sure to publish your notice in your company’s department’s journal. You can find a comprehensive list of departmental journals on the official legal announcements website.

Step 4: Establish your company’s legal address

While you’re at it, you should also register your company’s legal address as you submit your constitution notice. Every company needs to have a legal address that corresponds to the headquarters’ location.

In this instance, you have a few choices:

your professional premises;
one of your associates’ personal addresses;
signing up for a tertiary domiciliation service. This option allows you to set up a legal address anywhere in France, with some services even offering additional services that can prove quite useful (i.e. mail digitization and forwarding). This option can be helpful if you don’t actually have an official place of work, or if you don’t want to share your personal information with third parties (as a reminder, your company’s legal address is publicly accessible and can be easily found on the internet).

Step 5: Send your registration file to the appropriate Business Formalities Center (CFE)

The last step in your business creation journey involves sending your company creation paperwork along to the relevant Business Formalities Center (Centre des formalités des entreprises or CFE).

💡 Note: you can send your file by post or online on the Guichet Entreprises website for all types of businesses or at CFE Metiers for artisanal companies with fewer than 11 employees.

Take care when putting together your company creation file, and be sure to include all the necessary forms, such as:

the Cerfa form for your applicable legal status (such as the cerfa 11680*09 for EURL and SARL and the cerfa 13959*08 for SASU and SAS);
a copy of the company director’s ID;
proof of the company’s legal address;
a sworn statement asserting the director has no criminal convictions;
proof of your notice’s publication in the JAL and a copy of the certificate of deposit of the company’s share capital.

Be sure to include all these documents in your file, or else you run the risk of having your request being rejected by the CFE.

Once your request is validated, the CFE will pass your file on to the appropriate courts, who will then finalize your company’s registration.

You should then receive a KBIS number, as well as your SIRET and SIREN numbers within 15 days by mail.

Important: Your CFE depends on the nature of your company’s work. If you have a commercial business, you need to send your file to the Industrial Chamber of Commerce (Chambre de commerce de l'industrie). For artisanal work, you need to send your documents to the Trade Chamber of Commerce (Chambre des métiers et de l’artisanat or CMA). For liberal activity, it’s the URSSAF.

____________________________

From conception to final registration, setting up your business isn’t exactly a walk in the park. But by now you should have a better ideas of the steps you need to take to effectively launch your business.

Are you an entrepreneur looking to start a business? Deposit your capital online in a flash with Qonto and receive a digital certificate in under 72 hours.

Try Qonto for 30 days.

For free. No obligations.

Open a business account

ABOUT THE AUTHOR

Panama Harris

Panama is a Copywriter at Qonto with over 15 years' previous experience working as a freelancer around the world. Her mission is to take the mystery out of entrepreneurship and make it more accessible.