The first step to setting up a subsidiary in France is choosing the legal structure that best suits your needs. This is an important decision, as the structure you adopt will influence your management style, responsibilities, and even your tax obligations. Fortunately, you have several options, each with its own advantages and disadvantages. Let’s explore these options together so you can choose the one that best fits your business.
Branch or Subsidiary?
It’s important to distinguish between a branch and a subsidiary. A branch is a direct extension of the parent company and does not have its own legal identity. This means it is entirely dependent on the parent company, which is liable for all the debts and commitments of the branch. This structure can be appealing if you’re looking for simplified legal and administrative management.
On the other hand, a subsidiary is an independent legal entity, although it is controlled by the parent company. This means that liability is limited to the assets of the subsidiary, thus protecting the parent company in case of difficulties. Establishing a subsidiary can offer more flexibility and legal protection, but it also involves more administrative formalities.
If you choose a subsidiary, you will need to select a type of company structure.
Types of Company Structures
Limited Liability Company (SARL)
The SARL (Société à Responsabilité Limitée) is the most commonly used type of company, especially for small and medium-sized enterprises (SMEs), as it combines ease of management with security for shareholders. One of the main advantages of the SARL is the limited liability for shareholders, which is proportional to their capital contribution. In other words, if debts arise, each shareholder will only lose what they invested, thus protecting their personal assets.
The SARL is also highly flexible in terms of share capital: there is no minimum amount required, allowing businesses to start at their own pace. However, it’s worth noting that the management rules for the SARL are somewhat stricter than for other structures like the SAS, with more formal requirements for important decisions.
Simplified Joint-Stock Company (SAS)
If you are looking for maximum flexibility in managing your subsidiary, the SAS (Société par Actions Simplifiée) is probably the best option. It offers great freedom in drafting the articles of association, which is particularly advantageous for international companies with specific governance needs. For example, you can decide how decisions are made or define specific roles for each shareholder.
The SAS is particularly recommended for companies planning to raise funds in the future, as it facilitates the entry of new investors. Additionally, as with the SARL, the liability of shareholders is limited to their capital contributions, providing extra protection in case of financial difficulties.
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Hexagone Advisory’s Role in Choosing Your Legal Structure
The choice between an SARL, an SAS, or a branch depends on many factors: your growth objectives, the structure of your parent company, your financial needs, and even tax and accounting considerations. Hexagone Advisory is here to guide you through this crucial decision.
Our experts analyze your needs and recommend the best structure to optimize the management of your business in France. We take into account all legal, fiscal, and operational aspects to ensure your company is well-positioned for success in the French market.
With our expertise, you can approach this first step with confidence, knowing you’re making the most suitable choice for your growth and development goals.
