Temporary and Permanent Settling Solutions

Temporary Solutions

Representatives Conducting Non-commercial Operations and Local Offices

A foreign company may recruit or second an employee in France to represent it through a local office and conduct non-commercial operations (advertising, information provision, storage, or any other operation of a preparatory or auxiliary nature).

In that case, the company pays him wages, plus emplooyer's and social security contributions. The employee also pays contributions to the relevant URSSAF (Union de Recouvrement des cotisations de Sécurité Sociale et d'Allocations Familiales) office where he has been registered (see administrative formalities ).

Whenever the company has its own facilities and/or employs at least two individuals in France, it shall be represented by the local office registered at the Registre du Commerce et des Sociétés.

The local office is not a stable institution with respect to tax law. It is subject neither to corporate tax nor to VAT (see Taxes ). However, it is subjected to certain local taxes and other taxes based on salaries.

If the employee is seconded by the company in France, he must have the documents required for expatriate operations in France (see Expatriates ).

The Commercial Representative

If the employee is entitled to conduct commercial operations, the company must declare its operations through registration at the Registre du Commerce et des Sociétés (RCS) and its business operations in France are subjected to French tax laws (see branch office ). Foreign employees conducting commercial operations must have a business permit for non-EU nationals who do not have resident permit.

The employee may be a sales representative (VRP status) working for several companies. His commercial operations shall be taxed in France.

The Sales Representative

The foreign company may also use the services of a sales representative, i.e. a natural person or company it pays under the provisions of an agency agreement.

Permanent Solutions

Conducting industrial or commercial operations on French territory from permanent main or secondary facilities involves setting up a branch or subsidiary.

The Branch: a Simple Solution

A branch is easier to set up than a subsidiary. It is headed by a legal representative and operates like an agency that reports to the headquarters without any specific formalism in terms of decision-making. It may conduct all the operations of an industrial or commercial company.

A stable entity with respect to tax law, the branch is subjected to corporate tax and VAT. In case of financial hardships, the foreign company is indefinitely and jointly responsible for paying its debts.

Its status is far less favorable than that of a subsidiary (public aids, tax exemptions, intra-group operations taxation, etc.).

The Subsidiary: the New Company Governed by French Law

It is generally preferable to set up a subsidiary, which is a new company governed by French law. The terms and conditions for setting it up vary according to the legal form chosen.

The preliminary steps in setting up a subsidiary are basically the following:

Searching for facilities and ensuring the domiciliation of the company's headquarters through a domiciliation agreement, a commercial lease, or the purchasing of real estate (see business real estate ).

Appointing the company's representatives,

Setting up the capital stock,

Opening a bank account in France, where to place the new company's capital,

Having a commissaire aux apports assess contributions in kind,

Drawing up the articles of incorporation and signing them in front of a notary if the company owns real estate,

Registering the articles of incorporation with the tax center of the headquarters location,

Obtaining a long-term visa and a business permit for non-EU managers, if applicable,

Advertising the creation through a notice in a legal gazette.

The company becomes a legal entity from the time it is registered at the corporate register (Registre du Commerce et des Sociétés). The founders are personally responsible for their commitments during the constitution phase, and the company is to recover said commitments retroactively once it has been set up.

Support from a specialist legal advisor is recommended when setting up a subsidiary.

Simple Administrative Formalities for Business Setting up a New Business

All the formalities required for setting up a new business are conducted through one single point of contact, i.e. the CFE (Centre de Formalités des Entreprises), in charge of delivering the documents to the administrative bodies concerned:

The Commercial Court Clerk's Office is in charge of registering the company at the Commerce et des Sociétés
INSEE allocates the APE code that corresponds to the company's line of business, as well as SIREN (company identification number) and SIRET (plant identification number) numbers, required for recruiting staff
The INPI (Institut National de la Propriété Intellectuelle) checks that the corporate identity is not already used in France,

The tax authorities and the Social Security.

The documents attached to the registration application must be translated into French. They are to be filed by a person authorized in writing by the company.

The time frame for registering the company at the Registre du Commerce et des Sociétés (RCS) is approximately 2 weeks. Administrative inception formalities cost approximately 60 euros (as of April 1,2002), plus the cost for advertising in the legal gazette (approximately 200 euros).

The CFE is to be notified of any change made to the company or business termination, which must also be advertised in a legal gazette.

Settling in France may involve other administrative formalities such as name and brand registration with the INPI or domain name registration.

All formalities relative to the hiring of staff are to be handled with URSSAF and not the CFE.

URSSAF Registration of the Company's Single Representative

To register, the company representative should use ? MO ? and ? MO' ? (forms memorandum ) forms and provide a copy of his employment contract. Then URSSAF allocates a SIRET number and notifies the social administrative bodies concerned.

French Office Registration

Foreign companies willing to register a French office at the Registre du Commerce et des Sociétés must provide the following documents: ? MO ? and ? MO' ? (forms memorandum ) forms, the relevant authority's decision approving of the creation and appointing the French office representative, the representative's supporting documents (passports, police record, etc.), the foreign company's articles of incorporation, supporting documents proving that the company has facilities in France (lease agreement, domiciliation agreement, title deed.)

The French office conducts no business activities. The foreign company's representative, therefore, requires no business permit . He may, nevertheless, require a long-stay visa and a residence permit.

Branch Office CFE Registration

The setting up of a branch by the relevant administrative bodies does not require any specific formalities. However, the manager must hold a business permit , if applicable.

The documents required for CFE registration include: the ? MO ? and ? MO' ? (forms memorandum ) forms, supporting documents proving the manager's identity, supporting documents proving the company's legal existence abroad, articles of incorporation, a document certifying the company's domiciliation in France.

The Same Approach for a Subsidiary

Once the preliminary formalities are completed, the company representatives must file an application for the registration of the new company at the CFE (Centre de Formalités des Entreprises) of the place of business.

As an indication, and subject to more comprehensive information from the CFE concerned, the documents should include:

Registration request forms ? MO ? and ? MO' ? (forms memorandum ),

2 original copies of the articles of incorporation, mentioning the managing partners' names and the names of the auditors, if applicable,

2 copies of the "commissaire aux apports" report (if contributions in kind are to be assessed),

A copy of the deed regarding the company's facilities ,

A copy of the legal gazette containing the company's inception notice,

An extract of the managers' birth certificate, identity card, or passport,

Supporting documents proving that the managers have blank police records,

If need be, a copy of the business card, the degree or certificate required for regulated occupations,

If need be, a copy of the managers' business permit and residence permit or permanent residence permit,

A certificate stating that the new company's funds have been deposited to a bank account,

A summary statement of the formalities fulfilled for the new company.

Delivery of a K-Bis extract by the clerk's office certifies that the company has been set up. 　

Legal Structure

The most suitable legal form varies according to the particular strategy involved.

Joint Stock Companies: the Most Common Form
They limit the financial liability to capital contributions. Joint stock companies can be easily transformed into other forms with limited tax effects.

Subsidiary: the most common legal forms

Other Forms

Other forms are relevant for specific projects. They include partnerships (SNC), non-trading companies, and groupings of economic interest (GIE). They are less common, as they provide for the investor's unlimited liability in case of financial hardships. However, due to their flexibility and tax transparency, they are very attractive forms for subsidiaries.

Partnerships

According to its mission, Invest in France Agency is interested with proposals of joint-ventures or cooperation in the industrial and services sectors.

Invest in France Agency can help you in finding national and regional supports for your projects.

Business Real-Estate

Several solutions are open for foreign companies settling in France. These may either be temporary or permanent, depending upon the company's requirements and settling strategy.

Temporary Domiciliation at the Manager's Personal Address

The headquarters of the newly-created business can be at the manager's personal address for 24 months maximum from the date of registration at the Registre du Commerce et des Sociétés. If the manager rents his home, the lessor's approval is required.

Domiciliation in a Business Center

When the business involves visits, which is generally the case with a first temporary local office or branch, the company may choose to operate from a business center. Specialist service providers offer domiciliation and other services (switchboard, secretarial services, etc.).

Relay Workshops

Companies may use relay workshops while building their new industrial facilities, in order to train new employees and/or kick off their industrial activities. Many local communities offer such services to companies settling on their territory.

Rental Time Adjusted to Investor Requirements
Short Term Lease
Leases of less than 24 months are suitable for temporary situations. A host of short-term lease agreements are available. They can be tailored to specific needs. Nevertheless, they involve some uncertainty as to the lessee's situation.

Commercial Lease

Industrial and commercial businesses generally enter into a so-called "commercial lease", the provisions of which are strictly regulated by law, with a view to protecting the lessee's rights:
　
the lease is entered into for 9 years, but it may be terminated every 3 years upon the lessee's initiative,

the lessee benefits from legal protection against non-renewal or dismissal: the lessor must pay dismissal indemnities based on the value of the goodwill or the lease right

periodic rent increases are controlled and capped.

Bail Professionnel

Non-commercial professions are subject to a slightly less protective system of so-called "professional leases". These are entered into for 6 years, without any possibility of termination, but with great contractual flexibility.

Several Solutions to Purchase Real Estate

Full Property: the Safe Solution

Foreign companies have the option to purchase commercial and industrial land and buildings from private or public sector owners. They can be assisted by realtors in finding the property they need. The legal safety of transactions is ensured by legal rules that apply to real estate transactions and through the intervention of notaries.

Public aides for the acquisition of buildings are available under certain conditions.

Acquisition through Leasing: a Common Solution

The acquisition of industrial or commercial buildings through property transfer upon the expiry of a lease contract is a very common arrangement.
Local communities may offer that service to companies, by putting them in touch with financial institutions. Investment aids in the form of discounts on lease rents are available under certain conditions.

The Construction of Industrial Buildings

Foreign investors have the option to build industrial or commercial facilities in France. Mayors deliver building permits. Public investment aids are available under certain conditions.

Special Administrative Formalities for Classified Facilities

For risk, pollution, and nuisance prevention purposes, certain industrial facilities are subject to administrative approval prior to commissioning.

Decisions relative to classified facilities are made by the Prefecture, based on an application sent in by the company concerned. The classified facilities guide details the procedure to follow and the documents required.

The prefect's order that authorizes operation sets the conditions to be complied with by the industrial operator.