With one of the highest populations in the EU, a thriving local economy, and diverse culture, France can be a great location for global expansion, which is why many companies choose to set up a France subsidiary.
When expanding into France, the first thing companies should understand is the cultural landscape. For example, France encourages acts of individuality allowing for both freedom of opinion and separate work and personal lives. As great as the individual expression is for the community, the business environment in France is very strict. In particular, there are rigid barriers and hierarchical systems in which France’s business world operates.
By understanding these nuances and other restrictions, companies can better plan for a successful global expansion into France.
Risks Associated with a France Subsidiary
Establishing a legal presence in any market can be a long and expensive process. While this creates full commitment in-country and can help a company gain trust from the local market, it does come with its own associated risks and downsides.
Disadvantages of establishing a subsidiary:
- An entity is subject to all legal, accounting, and tax obligations that apply to a French company
- Significant commitment through time and cost
- Difficult to exit the country
Establishing a subsidiary in France can take an average of three to four months to set up and cost an average $15,000-$20,000. This does not even cover maintenance fees and taxes, which can add up to more than $100,000 per year. Additionally, if a company does not find success in a new market, the teardown cost and time can both be expected to increase by a factor of three compared to set-up.
Alternative to a France Subsidiary
Believe it or not, a company doesn’t have to establish a French subsidiary to attain a legal presence in-country. Many companies choose to utilize independent contractors as an alternative to creating a full subsidiary. However, this option comes with its own associated risks.
Companies that are looking to achieve a cost-effective, compliant international expansion can benefit from an agile approach. A prime example of an agile, flexible market entry option for global expansion is Velocity Global’s turnkey solution, Foreign Subsidiary as a Service, or FSaaS™. Companies that use FSaaS to establish a legal presence also benefit from:
- Lower Costs: FSaaS can significantly reduce the costs by up to 60% compared to creating a subsidiary
- Quick Market Entry: FSaaS is proven to get companies into new markets up to 90% faster than establishing a subsidiary
- Maintain Flexibility: If a company needs to exit a market, FSaaS makes it easy to do so quickly and compliantly
- Risk Mitigation: FSaaS simplifies compliance management when employing foreign employees
Companies that use FSaaS instead of establishing a subsidiary in France work with Velocity Global to manage employer liabilities associated with international employees. This solution manages every aspect of employment compliance and allows employers to focus on the success of their business.
Take an agile approach to your international expansion into France. Contact Velocity Global and discover how our FSaaS™ solution can save your company time and money during your global expansion.