Create a limited liability company in France: the SARL status
In France, the equivalent of a limited liability company is a Société à Responsabilité Limité (SARL) or Entreprise Unipersonelle à Responsabilité Limitée (EURL) if you start your company alone. This kind of limited liability company in France is very common and easy to create.
Here are the main characteristics of a limited liability company in France (SARL):
- The business partners can own one or more members’ shares depending on the capital they provide to the company
- The business partners are only liable to their contribution to the capital. This contribution can be in cash, in-kind, or industry.
- The company’s Article of association (statuts in french) describes the working principle and the relations between business partners. The writing of these articles of association is strictly circumscribed by law.
- The minimum share capital is 1€.
- It’s also possible (and beneficial most of the times) to create a limited liability company in France with variable capital (SARL à capital variable).
- The CEO is the managing director (gérant) of the limited liability company (SARL). It’s also possible to have associated managing directors (co-gérants).
- If the managing director has a majority share, he/she is considered a self-employed person (travailleur indépendant non salarié or TNS) and contributes to the self-employed social security (Sécurité sociale des indépendants).
- Similarly, if the associated managing directors all have majority shares, they will be considered self-employed persons (travailleurs indépendants non salariés or TNS) and contribute to the self-employed social security (Sécurité sociale des indépendants).
- If the managing directors have minority shares or no shares, they will be considered employees and contribute to the general regime of Social security (régime général de la Sécurité Sociale).
- Once your articles of association are properly written, you can register a limited liability company in France (SARL) pretty easily and it doesn’t take too much time. You’ll need some money for administrative formalities, so set aside roughly 250 to 300€.
- It is possible to create a limited liability company in France with only one person in it. In that case, french law calls it a one-man limited liability company (Entreprise Unipersonnelle à responsabilité limité or EURL) but the legal status and the rules still SARL‘s
Note that a limited liability company in France (SARL) can also be a cooperative society (Société coopérative or Scop).
Limited Liability Company in France : advantages of the SARL status
Below we listed for you the main advantages of the SARL status:
- Compared to sole proprietorships (Entreprises individuelles), an SARL will give you more credibility. It is also easier if you want to make your company grow because you can add or remove business partners.
- The contributions of non-employee managing directors represents 45% of managing remuneration (rémunération de gérance). Knowing that, it’s easy to adapt or anticipate the amount you will have to pay: it will depend on how much the managing director choose to pay himself. If you compare this system to the one applied to sole proprietorship (entreprise individuelle) that consists in calculating contributions from your annual profits, a SARL is much more convenient.
- The managing director can earn his salary at any time, informally and with no justification. There is no pay statement to produce, which will allow you to save some of your accounting fees.
Limited Liability Company in France : disadvantages of the SARL status
Here are the disadvantages of a limited liability company in France (SARL):
- As we said before, the articles of association are strictly circumscribed by the law. As a result, you can’t include any Associates’ Pact (pacte d’associé), for example, like you could if you create a simplified joint-stock company (Société par actions simplifiée or SAS).
- Even if you don’t pay yourself or any of the managing directors, there is a minimum of social security charges you’ll have to pay anyway: approximatively 1100€ a year.
- The 45% rate for social contributions also applies to dividend besides social samples of 17.2%. Then again, it makes a big difference compared to a simplified joint-stock company (Société par actions simplifiée or SAS).
- If you decide to transfer the shares of your limited liability company in France, the person taking over will have to pay 3% for registering fees versus 0.1% with a simplified joint-stock company (Société par actions simplifiée or SAS).
Now you need a business plan
These are the main informations you’ll need in order to decide if a limited liability company in France is the right status for your business.
As you can see, the choice depends on what you plan to do with your company and how quickly you’d like it to grow. The details can seem small at first but they can lead to big dead ends for your business.
So, to help you choose wisely, we crafted a free Excel business financial plan template. We tried to make it as easy to use as possible, but if you have improvement suggestions, tell us by commenting on this post.
We also have other articles about french companies :