Guide to setting up a business in France

Setting up a business in France might not be as hard as you think, as long as you do your research first. Our guide sets out the basic things you need to know

Written by Kate McNally

Starting your own business is not for the faint-hearted; starting one in a foreign country requires even greater courage; starting one in France, renowned for its reams of administrative red tape, could be considered the reserve of the foolhardy.

But don’t despair: a 2013 study by international accountancy firm Ernst & Young suggested we should not be guided by the perception (or misperception) that France is against business creation. the report calculated that business taxes and labour costs are around average among European countries, while figures from INSEE (l’Institut National de la Statistique et des Études Économiques) indicate that small businesses, known as PMEs (‘petites et moyennes entreprises’), account for 97% of French companies.

It could be that the ‘France is pro-business’ rallying cry from the freshly installed French Prime Minister Manuel Valls, on a visit to the UK in autumn 2014, has substance. Besides, many expats have successfully set up businesses in France through the years, so, clearly, it is possible. All you need are hard work, determination and a little help from your French friends thrown into the mix.

BEFORE YOU START

As well as the usual preparatory work, such as business plans and feasibility studies, it is imperative to check that you have, or can get, any necessary qualifications and licences related to your chosen line of work.

Don’t simply assume that your UK diplomas or work experience prove your capability. You may well be required to pass an equivalent French exam or do further study to validate your work experience, or to obtain a mandatory French qualification. France is very qualification-centric, which can be frustrating, but the upside is that the state provides significant funding for ongoing training.

Secondly, check out all the potential avenues for financial aid from regional and local authorities, as well as any specific sector funding; sustainable-development-related activities in rural areas, for example, are often subsidised to help business owners.

Depending on your type of business and where you choose to set up shop, you may be eligible for an interest-free loan, business creation subsidies, or free office accommodation, for example. similarly, you may be eligible for certain tax breaks or you might be exonerated from local business taxes or social taxes during the start-up period.

A number of organisations can help your research, including the APCE (Agence pour la Création d’Entreprise), your local chamber of commerce, and the local communauté oragglomération des communes.

GETTING REGISTERED

Before you can pick up tools and get going, you must register your business with the relevant body in order to receive a SIRET or SIREN number; essentially a business identity number, which is issued by INSEE. This number must appear by law on all your invoices; hence you need it before you can send out any bills.

The easiest way to register is to go to the CFE (Centre de Formalités des Entreprises) in person, particularly if you would like advice about the best legal statute for your business. Or you can register direct online at www.guichet-entreprises.fr, but only do this if you are fully confident of your choices and your French! When you register, you will be asked for proof of any requisite qualifications, licences and accreditations.

The French business sector is essentially divided into four categories: commercial sales, tradesmen and artisans, freelance professions and agricultural workers. Depending on your business, you will be affiliated to the relevant social welfare fund that will collect your social contributions (charges sociales). the CFE, as well as professional bodies such as the chambre de commerce et d’industrie and the chambre de métiers, can assist with all the relevant paperwork.

A word of warning: there are several rogue entities that contact newly registered businesses claiming compulsory registration payments. they look plausible, and it is easy to get confused with what you do and don’t have to do, but if in any doubt, ask the CFE.

WHICH LEGAL STATUTE?

This is where it gets tricky. You need to take care because if you make the wrong choice you could lose out financially, and if you don’t take the correct measures to protect your personal estate, then in a worst case scenario, you could end up losing everything if your new business fails with heavy debts. If you are setting up as a sole trader or freelancer, you will register as an entreprise individuelle. Within this category, there used to be the popular auto-entrepreneur option, which benefitted from simplified administration and accounting processes, as well as reduced social taxes for the first three years. As of January 2015, however, the auto-entrepreneur statute will fuse with the micro-entreprise option, which is also under the entreprise individuelle regime. Despite some initial consternation in certain quarters, when you look more closely, this makes sense as there was very little difference between the two, and the main advantages such as the pay-as-you-earn principle and tax reductions are maintained. It now simply means that, as a micro-entreprise, the solo entrepreneur must:

1. register the business and provide proof of qualifications (previously not necessary)

2. pay business tax from the second year of trading

3. must attend a 5-day business start-up training course (cost around €180)

4. certain building traders must reference 10-year warranty insurance (assurance décennale) on all estimates and invoices

5. register trading activities with the CCI or chambre de métiers.

You can opt for the EI(entreprise individuelle), or depending on your circumstances, it may be preferable to choose the EIRL (entreprise individuelle à responsabilité limitée), which allows you to protect your personal estate from any financial liability.

If, on the other hand, you have an associate and/or employees, there are various company and partnership statutes to choose from, offering different structures and various levels of personal liability protection – see the table above for further information.

ARE YOU COVERED?

Once you have chosen the appropriate statute for your business, and have registered it with the necessary body, it is time to think about insurance and pensions.

Check if your type of business requires any obligatory insurance, such as health and safety cover, and check if you are covered for unemployment benefit, and full pension, under your chosen regime. If not, it would be a good idea to seek private cover. as a minimum, you should get personal liability insurance, known as assurance responsabilité civile. again, there are numerous specialist business insurers who can offer advice.

TESTING THE WATER

The auto-entrepreneur option used to be popular for those building up a small business from scratch and particularly for anyone wanting to dip a toe in the market with minimum risk and minimum upheaval. It provided a way to start slowly, alongside a regular job for example, until it became clear a business could survive, or not.

This is still possible under the micro-entreprise regime, but it’s less straightforward. An alternative way of starting out on your own with less risk and less time caught up in administrative tasks, is to consider signing up with either a co-operative or a company offering portage salarial. There are differences in how the two operate and the percentage of revenues they take, but basically these organisations handle all the legal, financial and fiscal side of things for you, enabling you to concentrate on getting your business off the ground. They also offer you similar status to that of an employee, providing greater protection in terms of unemployment benefit, sickness and pension rights.

Choosing this way forward can be more reassuring at the outset, especially given the complexity of the French business system.

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