France is one of the world’s leading market economies and one of Europe’s powerhouses. Many foreign companies seek to expand their activities in France, and such a decision can be an interesting choice for businesses seeking to take their business internationally. Indeed, in addition to its dynamic economical ecosystem, its central geographical location also allows to use France as a springboard from which to tackle the rest of Europe.
The different solutions to expand in the French market
There are many ways for a foreign entrepreneur to enter the French market: without a physical presence in France, through the use of intermediaries, or, finally, by setting up a business in the country. The latter option, which implies setting up a branch or a subsidiary company as a vehicle to conduct commercial operations in France, is particularly interesting for entrepreneurs with more experience in the French market or whose business model has had the occasion to acquire some maturity.
The creation of a representative office
When it comes to establishing a presence in France, several options are available to the entrepreneur: They can choose to set up a representative office, which is the option that is usually chosen when the activities of the company do not yet generate significant income. Setting up a representative office is very easy, since there are no requirements to register it with the French commercial and companies’ registry. A representative office will usually carry out activities that are deemed preparatory or accessory to the company’s main activity. This can include collecting information about the French market, establishing preliminary contact with potential French customers, and conducting advertising and promotional activities. In consequence, a representative office often has a promotion and networking role in the targeted foreign country.
Creating a local entity
If the company is seeking to effectively trade using a local entity, it would have to constitute a branch, since the conduct of such activities would qualify the business as a permanent establishment. A representative office cannot be used to carry out any commercial activities, such as trading, and, therefore, it cannot execute commercial contracts in the name or on the behalf of the foreign company.
Setting up a branch in France, on the other hand, allows to carry out such commercial activities. Indeed, a branch is an autonomous establishment which can carry on trading and production activities and enter into commercial contracts in the name and on behalf of the foreign company. It is to be noted, nonetheless, that a branch does not have a separate legal identity from the foreign company, and should therefore be considered as an extension of the foreign company. Creating a branch involves some formalities, such as filing the Form MO (application for registration) with the Companies Formalities Center, or with the clerk of the Commercial Court within 15 days of opening the branch, and the foreign company will also have to appoint a representative to manage it. The foreign company will also have to communicate several documents, such as an original copy of the foreign company’s articles of association, a copy of its tax returns, etc.
Setting up a subsidiary
Another option that is available to entrepreneurs seeking to enter the French market it to incorporate a subsidiary in France. When doing so, it is important to choose the legal structure that is most appropriate to your business strategy. The most common legal entity structures in France are limited liability companies, in which the shareholders’ liability is limited to the amount of their contribution to the capital of the company. There are three main types of limited liability companies in France: the SA (“Société Anonyme”), the SAS (“Société par Actions Simplifiée”), and the SARL (“Société à Responsabilité Limitée”). It is important to understand that the main difference between a branch and a subsidiary company lies in the exposure to liability – a subsidiary has limited liability and is a separate legal entity, and the foreign company will thus not be held liable for the subsidiary’s obligations.
The requirements for setting up a branch are the same as those required for the registration of French companies. Both a branch and a corporation are registered by filing the necessary documents and paying the required fee at the commercial and companies registry (Registre du commerce et des sociétés). All the documents for incorporation may be submitted electronically through the website Guichet-entreprises.fr.
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