A French Limited Liability Company (Sàrl) offers foreigners a limited liability company with one shareholder who can be a foreigner and the sole director for greater control. Foreigners can own 100% of the shares in a Sàrl.
The French words are “Société à Responsabilité Limitée (Sàrl)”. This translates to a “Limited Responsibility Society”.
Background
France is located in Western Europe and is officially known as the “French Republic. Its political system is described as a “unitary semi‑presidential republic” with an elected two house legislature, a prime minister and a president.
French Limited Liability Company (Sàrl) Benefits
A French Limited Liability Company (Sàrl) offers the following benefits:
• Foreigners may own all Shares: Foreigners are permitted to own all of the shares.
• Limited Liability: Shareholders liability limited to their contributions towards the share capital.
• Low Capital: The minimum paid up share capital is only 1 Euro.
• One Shareholder: Only one shareholder is required.
• EU Membership: France is a member of the European Union (EU) allowing more opportunities to do business with other member countries.
Name
A Sàrl may not take a company name already used by another legal entity in France. Name checks for availability can be conducted with the Register of the Commercial Courts and the Institut National de la Propriété Industrielle prior to applying for a new company.
Company names can be in any language.
Limited Liability
A Sarl shareholder is only liable for the value of the share capital which he or she subscribed.
Incorporation
Non-EU residents must apply for government approval if they wish to form a French Sarl. This requires obtaining an Extract of Criminal Records from the home country which must be translated into French by a certified translator. However, this does not apply towards foreign shareholders who do not reside in France.
All documents are filed with the Register of the Commercial Courts. Upon approval, a Certificate of Incorporation (Kbis) will be issued. This certificate is necessary in order to open a company bank account.
Once incorporated, every company must register with the tax office in order to receive a Value Added Tax (VAT) number.
Shareholders
Only one person is required as a shareholder to form a Sàrl. A maximum of 50 shareholders is permitted. Shareholders can be of any nationality and residing anywhere. Natural persons and corporations can become shareholders.
The names of every shareholder is filed with the Public Register.
After receiving the Certificate of Incorporation, the percentage of shares held by each shareholder can be decided.
A Sàrl is a private, closed company where the transfer of shares only occurs between the shareholders or with third parties only after unanimous approval by the shareholders.
Directors
Only one person can be appointed as the director to manage the Sàrl. No restrictions exist regarding nationality or residence. Directors can be natural persons or legal entities. The sole shareholder can be the only director providing better control of the Sàrl.
Directors are not considered employees, but rather as an officer of the company. This is an important distinction because a director is an “administrator” while “employees” have contracts with the company providing strong protections under the French Employment Law. This mean that a director may be dismissed with no notice or compensation. However, a loophole in the law exists allowing for a director to contract with the company for a role outside of the director such as a “sales manager” or “financial manager” where an employment relationship can exist affording the director the rights of an employee.
The names of the directors are filed with the Public Register.
Gérant
The legal representative of a Sàrl is called the “Gérant” who must be appointed. This is a different position than a director. A Gérant does not have to reside in France. However, if he or she is not a resident of the EU or of an OECD member country, the Gérant must either possess a merchant’s license or a “carte de commerçant” (a foreign trader’s commercial card). A French consulate in that person’s country of residence can supply the carte which is then sent to the civil administration regional office (“prefecture”) where the Sarl is registered. Any bankruptcies or criminal convictions will disqualify that person from becoming a Gérant.
Only one Gérant is required to be appointed.
Share Capital
The required minimum paid up share capital is 1 Euro. Otherwise, the Sàrl must set a fixed share capital with a number which is easily divisible.
The share capital must be held wither with a bank, a notary, in a Caisse de Dêpot (storage deposit box) while the company is being formed.
Registered Agent and Registered Address
Every Sàrl must appoint a local registered agent who can supply his or her office address as the Sarl’s registered office address where all official correspondence will be received.
The local registered agent will prepare a letter for the Register of Commercial Courts verifying the registered office address.
If an alternative office address is obtained, the lease agreement signed by the property’s owner must be filed with the Register.
Annual General Meeting
While French companies must conduct an annual general meeting of its shareholders, an exception exists for companies with fewer than 25 shareholders who are not required to hold a meeting.
Accounting
Sàrl’s must file annual returns including a registry of its officers and accounts. While not typical, an audit may be requested.
Taxes
A law was enacted in 2016 gradually lowering the corporate tax rate in France starting in 2017. The standard rate has been 33.33% which will be gradually lowered every year to 28% by 2020.
A French Chartered Accountant must be appointed to prepare the Annual Accounts and the tax returns including the VAT.
Time for Formation
Expect the entire process to take up to one or two weeks. Trading or commercial activities cannot begin until a company bank account is opened and the share capital is paid in full.
Shelf Companies
Shelf companies may be purchased in France for faster formation.
Conclusion
A French Limited Liability Company (Sàrl) has the following benefits: foreigners can own all of the shares, limited liability, one shareholder, low share capital, and EU membership.
