Choosing the Right Legal Structure

The legal structure you choose for your startup will impact everything from your personal liability to your ability to raise funds. France offers several options, each with distinct advantages and considerations. Let's explore the most relevant structures for technology startups.

SAS (Société par Actions Simplifiée) - The Startup Favorite

The SAS has become the gold standard for French startups, and for good reason. It offers maximum flexibility in organizing governance and shareholding structures, making it ideal for companies that plan to raise venture capital.

Advantages: - Flexible governance: You can customize management structures, voting rights, and decision-making processes - Easy equity distribution: Perfect for employee stock option plans (BSPCE) and complex cap tables - No minimum capital requirement: You can start with just €1 - Limited liability: Shareholders' liability is limited to their contributions - International investor-friendly: Familiar structure for foreign VCs

Considerations: - Higher administrative burden: More formal requirements for financial reporting - President requirement: Must have a President (can be a foreigner) - Social charges: The President is subject to social charges similar to employees

Best for: Startups planning to raise venture capital, companies with multiple founders, businesses that need flexible governance structures.

SARL (Société à Responsabilité Limitée) - The Traditional Choice

The SARL is France's most common business structure, similar to an LLC in the United States or a GmbH in Germany.

Advantages: - Simpler administration: Less complex than SAS for small teams - Lower social charges: Managing directors (gérants) who own less than 50% pay lower social charges - Well-understood: Every accountant and lawyer knows how to handle SARLs - Family-friendly: Specific provisions for family businesses

Considerations: - Less flexibility: Rigid rules about share transfers and governance - Venture capital challenges: VCs often prefer SAS structures - Limited stock options: More difficult to implement employee equity plans - Partner limits: Maximum 100 partners

Best for: Lifestyle businesses, consulting firms, companies not seeking venture capital, family businesses.

SAS vs SARL: A Practical Comparison

| Aspect | SAS | SARL | |--------|-----|------| | Minimum capital | €1 | €1 | | Number of shareholders | 1 to unlimited | 2 to 100 | | Governance flexibility | Very high | Limited | | VC compatibility | Excellent | Challenging | | Social charges for leaders | ~45% | ~25-45% depending on ownership | | Employee stock options | Easy (BSPCE) | Complex | | Annual requirements | More extensive | Simpler | | International perception | Modern, flexible | Traditional |

Other Structures Worth Knowing

Micro-entreprise (Auto-entrepreneur): A simplified structure for solo entrepreneurs with revenue under €188,700. Great for testing ideas or freelancing, but limited for growth.

SA (Société Anonyme): The French equivalent of a public limited company. Rarely used by startups due to high capital requirements (€37,000 minimum) and complex governance.

SCI (Société Civile Immobilière): Specifically for real estate holdings. Useful if your startup needs to own property.

European Company (SE): For startups with immediate pan-European ambitions, though rarely used in practice.