Choosing a business structure in France

Overview of the main business structures in France

Choosing a legal structure is one of the first decisions you make when starting a business in France, and it shapes your accounting, tax and social obligations for years. The main options fall into two broad families: sole proprietorships and companies. Sole proprietorships include the micro-entreprise (a simplified regime rather than a distinct legal form) and the entreprise individuelle (EI). Companies include the EURL (a single-member SARL), the SARL (a limited liability company with several partners), and the SAS or SASU (a joint-stock company that can have one or several shareholders).

Each structure differs in how profits are taxed, how the manager is covered socially, how much liability the owner carries, and how heavy the bookkeeping is. A freelance graphic designer with modest turnover has very different needs from a growing retail business planning to hire staff or bring in investors. The right choice balances administrative simplicity today against flexibility for tomorrow. Since 2022, the EI benefits from a separation between personal and professional assets, which has reduced the appeal of the older EIRL, now closed to new registrations. Understanding these categories before you register saves costly restructuring later.

Micro-entreprise: simplified accounting and tax rules

The micro-entreprise is the lightest regime in France and a popular entry point for sole traders. It is not a separate legal form but a simplified tax and social scheme applied to an entreprise individuelle. Its defining feature is a turnover ceiling: broadly, around 188,700 euros for sales of goods and lodging, and around 77,700 euros for services and liberal professions. Cross these thresholds for two consecutive years and you move to the standard regime.

Accounting is minimal. You keep a chronological record of receipts and, for trading activities, a register of purchases. There is no balance sheet, no annual accounts, and no VAT to charge as long as you stay under the VAT franchise thresholds. You declare turnover monthly or quarterly and pay social contributions as a percentage of that turnover. Tax is calculated after a flat allowance for expenses, or you can opt for the versement libératoire, paying income tax as a small percentage of turnover.

The trade-off is that you cannot deduct real expenses. If you buy expensive equipment or subcontract heavily, the flat allowance may not reflect your true costs, and another structure could be cheaper. For consultants with low overheads, however, the micro-entreprise remains hard to beat for simplicity.

EI and EURL: obligations for sole traders and single-member companies

When turnover grows beyond micro thresholds, or when you want to deduct real expenses, the entreprise individuelle under the standard regime (régime réel) becomes relevant. Here you keep proper accounts: a journal, a general ledger, an annual balance sheet and income statement. You deduct actual business expenses and are taxed on real profit. The 2022 reform means your personal assets are, in principle, protected, with only assets used for the business exposed to professional creditors.

The EURL is a single-member SARL. It creates a distinct legal entity with its own share capital, which many owners find reassuring for credibility with banks and clients. By default, an EURL held by an individual is taxed under income tax, with profits reported in the owner's personal return, but you can opt for corporate tax (impôt sur les sociétés). The manager who is also the sole partner is treated as a self-employed worker for social contributions.

Both structures require more rigorous bookkeeping than the micro-entreprise and, for the EURL, filing annual accounts with the commercial court registry. The upside is that you can build up the business as a separate entity and choose the tax regime that suits your profit level.

SARL and SAS: accounting duties and corporate tax treatment

The SARL and SAS are the workhorse company forms for businesses with partners, employees or growth ambitions. Both give shareholders limited liability up to their contributions and both require full commercial accounting: double-entry bookkeeping, an annual balance sheet, income statement and notes, plus filing of accounts each year. Above certain size thresholds, a statutory auditor (commissaire aux comptes) becomes mandatory.

The SARL is more rigidly framed by law, which can be comforting for a family business or a partnership seeking predictable rules. The SAS offers far greater freedom in drafting the statutes: how decisions are made, how shares transfer, and how governance works are largely defined by the shareholders. This flexibility makes the SAS the favoured vehicle for startups and companies planning to raise capital.

A key difference lies in the social treatment of the director. The majority manager of a SARL is a self-employed worker (TNS) with lower contributions but lighter protection, while the president of a SAS is treated as an assimilated employee, paying higher contributions but gaining better coverage. By default both are subject to corporate tax, though smaller SARLs and SAS can opt temporarily for income tax under strict conditions.

Comparing tax regimes: income tax vs. corporate tax

The choice between income tax (impôt sur le revenu, IR) and corporate tax (impôt sur les sociétés, IS) is central and sometimes independent of the legal form. Under IR, profits are added directly to your personal income and taxed at the progressive scale, whether or not you withdraw the money. This is simple and can be advantageous when profits are modest or when you have other losses to offset.

Under IS, the company is taxed on its profits at a reduced rate on the first tranche and a standard rate above it. You then decide how much salary or dividends to draw, and you are personally taxed only on those withdrawals. This separation lets you leave profits in the company to reinvest, and it can smooth your personal tax bill. Dividends, however, carry their own tax and social treatment.

There is no universally cheaper option. A business generating high profits that the owner does not need to spend personally often benefits from IS, because retained earnings are taxed once at the company level. A business whose owner needs all the profit to live on may find IR simpler and no more expensive. Running the numbers on realistic profit and drawing scenarios, ideally with an accountant, is essential before committing.

Bookkeeping and reporting requirements by structure

The bookkeeping burden rises steadily as you move from micro-entreprise toward companies. Under the micro regime you only track receipts and purchases and file simple turnover declarations. Under the régime réel for an EI you must maintain full accounts and produce annual financial statements, but you do not always publish them.

Companies such as the EURL, SARL and SAS must keep double-entry accounts, prepare annual accounts and, in most cases, file them with the registry, where they may be publicly available. They must also manage VAT returns according to their regime, declare and pay corporate tax where applicable, and handle payroll declarations if they employ staff. Deadlines matter: late filings trigger penalties, and disorganised records make tax season stressful.

Whatever your structure, keeping invoices, bank statements and receipts in order throughout the year is the single most valuable habit. The heavier your accounting obligations, the more it makes sense to work with a chartered accountant or use structured bookkeeping tools rather than a spreadsheet you update once a year.

How to choose the right structure for your situation

Start with your expected turnover and profit. If you are testing an idea or freelancing with low costs and modest income, the micro-entreprise offers the fastest, cheapest start, and you can always upgrade later. If your expenses are significant, the régime réel of an EI lets you deduct them and pay tax on real profit.

Next, consider risk and credibility. If your activity carries financial risk or you want a clear separation between business and personal spheres, a company such as an EURL, SARL or SAS provides a distinct legal entity. If you plan to bring in partners or investors, the SAS offers the most flexibility, while a SARL suits a stable partnership wanting a predictable legal framework.

Then weigh your social protection preferences: self-employed status is cheaper but lighter, while assimilated-employee status costs more and covers more. Finally, project your profits over a few years to test whether IR or IS serves you better. Because the decision affects tax, social charges and administration together, it is worth discussing your specific case with an accountant before registering, and reviewing the structure periodically as your business evolves.

Example

Quick comparison of the main French business structures

FAQ

Can I switch from a micro-entreprise to a company later? Yes. Many owners start as a micro-entreprise and move to an EURL, SARL or SAS when turnover grows or when they need to deduct real expenses or bring in partners. The switch involves closing the sole proprietorship's registration and creating the new entity, so it is worth planning the timing and consulting an accountant to handle the transition cleanly.

Is a SARL or a SAS better for a small business? It depends on your priorities. A SARL follows a fairly rigid legal framework that suits a stable partnership wanting predictable rules and a self-employed social status for the manager. A SAS offers flexible statutes and assimilated-employee status for the president, which many startups and growth-focused businesses prefer. There is no single best answer for every small business.

Do I have to charge VAT under a micro-entreprise? Not while your turnover stays under the VAT franchise thresholds. Below them you invoice without VAT and cannot reclaim VAT on purchases. Once you exceed the thresholds, you must register for VAT, charge it on invoices and file VAT returns, so it is important to monitor your turnover throughout the year.

How do I decide between income tax and corporate tax? Compare realistic scenarios of your profit and how much you plan to withdraw personally. Income tax is often simpler when profits are modest and you need all of them to live on, while corporate tax can be advantageous when you want to retain earnings in the company to reinvest. Running the figures with an accountant before deciding is strongly recommended.

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