How to Start a Startup in France?

If you are aiming for financial freedom, you have likely had brilliant ideas for an international startup. France can be the perfect place to bring these ideas to life. This country offers excellent opportunities for entrepreneurs, from access to advanced infrastructure and skilled professionals to government support programs.

On the one hand, France is known for its competitive economy; on the other, it has a complex tax system. To ensure that your startup not only survives but thrives, it is crucial to minimize tax burdens, manage finances effectively, and build a solid international growth strategy right from the start.

A well-structured business organization can help you avoid financial losses, provide management flexibility, and simplify scaling. Your startup should not only be a successful project but also a tool on your path to financial independence. So, how do you embark on this journey?

Auto-entrepreneur: The Perfect Start

One of the most popular forms to start a business in France is the auto-entrepreneur (self-employed entrepreneur). This status is ideal for those who are in the product development stage and making their first sales.

Advantages of the Auto-entrepreneur Model:

• Simplified bookkeeping: no need for complex accounting systems. A simple record of income and expenses suffices.
• VAT exemption: as long as income thresholds are respected, entrepreneurs are exempt from VAT, allowing them to issue invoices without VAT.
• Income-based taxation: taxes and social contributions are calculated as a percentage of actual income received.

Limitations of the Auto-entrepreneur Model:

• Income thresholds: in 2024, the annual revenue cap is €77,700 for services and €188,700 for trading goods.
• No VAT reimbursement: exemption from VAT means you cannot reclaim VAT on purchased goods and services.
• Social contributions: rates can change. Starting July 1, 2024, the rate for services will be 23.1%, increasing to 26.1% by 2026.

This model is perfect for testing a business idea while minimizing bureaucratic overhead. However, once your revenue exceeds the thresholds, it is time to consider a new legal entity.

Choosing Between SAS and SARL

For business growth in France, two legal forms are popular: SAS (société par actions simplifié — simplified joint-stock company) and SARL (société à responsabilité limitée — limited liability company). If the company is created with a single founder, these forms are respectively transformed into SASU (société par actions simplifié unipersonnelle) and EURL (entreprise unipersonnelle à responsabilité limitée).

Advantages of SAS and SARL:

• No minimum capital requirement: registration requires just €1 in symbolic capital.
• Limited liability: participants' liability is limited to their contributions.

Taxation Specifics:

Since January 1, 2018, a flat tax (Flat Tax) on capital income, including dividends, applies in France. The tax rate is 30%, comprising income tax (12.8%) and social contributions (17.2%). However, there are differences between SAS and SARL:

• In SAS, dividends are subject only to the flat tax.
• In SARL, for majority managers (owning more than 50% of the capital), dividends exceeding 10% of the capital, reserves, and current accounts are additionally subject to social contributions at approximately 45%.

Which One to Choose?

If you plan to attract investments, add co-founders, or offer employee stock options, SAS is the optimal choice. If your business is geared toward family management or small-scale operations, SARL might be more suitable.

A detailed financial analysis of SARL and SAS companies to evaluate their efficiency under different profit distribution scenarios can be instrumental in making a decision. For personalized advice on choosing the right legal structure and developing a growth strategy, you can consult with Julien Legaro for free.