Limited Liability Companies (LLC)
The first step in creating a company in France is choosing the corporate form that best suits your business activity and optimizes your taxes and social charges paid to the state. This requires a clear understanding of the inhere nuisances. Although Europe Incorporations will set up any legal entity structure of your choice, our primary focus here is on one of several forms of limited liability companies (LLCs).
Most non-resident entrepreneurs generally opt for a limited liability company (SARL /EURL, SAS /SASU, SA, etc.) because this legal form limits the partners’/founders’ liability to the proportion of their share capital invested. In an unlimited-risk legal structure (beneficial for some and applicable to many activities), the partners/founders commit their personal assets to cover the risks.
Key to the process in France is opening a bank account, depositing your share capital, and receiving your share capital certificate.
Share Capital
Whatever its form, the company has a share capital constituted by the partners/founders at its formation. At the same time, this share capital is a means of financing the company – a guarantee for third-party creditors and a key to distributing rights and powers within the company.
The share capital is also viewed (sometimes wrongly) as a kind of coat of arms, showing the company’s size, strength, or weakness in the marketplace. It is also a direct representation (except in certain very specific cases) of the relative importance of each partner.
The 1€ Myth
The minimum share capital required to start a company is a nominal symbolic amount of 1€. But don’t be fooled! No bank in France would ever open a business account with a 1€ share capital except under familiar circumstances. It is not worth their administrative time to open an account.
Yes, some founders may start a business with 1€ share capital, but they are generally well-known businesspersons with long-established reputations, brands, and relationships with their bankers.
Of significance, it is notoriously hard to open a bank account in France as a local. For non-resident foreigners, it is significantly more complicated. So having a minimum share capital of a few thousand euros improves your credibility (and ours as we manage the process) with the bank. It also enhances your credibility with customers as you enter the marketplace.
A company with a 1€ share capital announces that it cannot even buy insurance to guarantee delivery of customer orders and certainly cannot hire staff to ensure adequate customer service.
By a nominal and symbolic 1€ amount, France is announcing that you don’t have to be cash-rich to start a business, just idea-rich. In practice, an ordinary entrepreneur cannot start a business with 1€ share capital in France. As a non-resident, you certainly will not be able to do so.
Initial Share Capital Distribution
Traditionally, partners choose an equitable distribution of shares according to the number of partners/founders. For example, a 50/50 split if only two people create the company with equal contributions, therefore, only two partners.
However, each partner brings different (intangible) value propositions to the partnership, including knowledge, work ethic, leadership skills, brand, patents, etc. So while in-cash contributions may be 50/50, non-cash contributions may tilt proportional contributions in the direction of a dominant partner.
In other situations, the number of shares allocated may vary according to the partner’s position. The partner/founder who makes the decisions and assumes the company’s operation might be the majority shareholder through in-kind contributions.
Finally, partners/founders may apply different mechanisms to measure the degree of involvement and allocate shares according to business needs to adequately distribute the initial share capital.
These may include business capacity, fundraising, marketing, financial control, design, exploiting their reputations and brand image, and action in other areas. They then apply a coefficient to each category according to its importance, and a percentage of company shares is then allocated to each according to the weighted importance of each contribution.
