Starting a France company is one track many international business owners take on their path to global expansion. With more than 64 million people living in the country, there is potential to get your product or service in front of eager consumers. Plus, expanding your business into France allows your company to tap into a new, talented work pool. France has a relatively stable economy with roughly 1.2% GDP. It also favors capitalism, which is a welcome similarity for many businesses expanding into the country.
If you’re considering a move overseas, we’ve pulled together some ways to start a France company.
Establishing a France Company: Permanent Subsidiary
Before taking the plunge into a full-blown subsidiary, many companies establish a representative office in France. The office is an establishment located in France that is still directly connected to the parent company, so it’s not a stand-alone entity.
A representative office allows business people to observe the local market in France and explore opportunities for the foreign parent company without having a trading purpose. Enterprises in this position cannot conduct commercial operations or contract with other companies for or on behalf of the parent company. Given its restrictions, representatives offices have minimal registration requirements and are exempt from French accounting and tax requirements.
Establishing a representative office is one of the options companies may use before creating a full subsidiary in-country. Businesses may also opt for one of the lean processes we will explain below.
When a company does decide to establish a subsidiary, it’s a long and expensive process. In France, a subsidiary is a separate legal entity from the foreign parent company.
Benefits of a subsidiary include:
- Full commitment in-country, which gains trust from the local market.
- Foreign parent company still has control of the subsidiary.
- Parent company benefits from limited liability protection and is not held liable for subsidiary’s debts.
Disadvantages of establishing a subsidiary:
- 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.
Given the risk associated with establishing a foreign subsidiary, we suggest companies opt for other methods for global expansion. These methods include options such as Foreign Subsidiary as a Service (FSaaS), which we explore soon.
Going Lean in Global Expansion
If your company isn’t ready to establish a full presence in France, you could use independent contractors to test your product or service in-country. Like a subsidiary, there are risks involved when using contractors overseas.
In France, there are no legal provisions for employees and independent contractors. The lack of regulation makes it difficult for employers to protect themselves when working with these types of workers.
The only criteria established by the French Supreme Court regarding the employment contract states that a contract exists when a person undertakes to work in the name and under the supervision of another in return for remuneration.
An employment contract includes three factors:
- Exchange for Remuneration
- A Superior-Subordinate Relationship Between Parties
If these exist, especially the final element, a worker can argue that they are an employee.
When working with independent contractors, employers must remove any superior-subordinate relationship and allow the worker to operate autonomously. Any other type of relationship can be argued, and will surely prevail, in French labor courts.
Another important risk associated with independent contractors overseas is the lack of intellectual property protection. When you operate internationally, your company’s IP is not protected by your domestic agreements. Due to this restriction and international laws, it’s difficult for companies to protect valuable information overseas, especially when working with contractors.
If you do choose to work with international contractors, consider setting up a legal presence with assistance from an international consultant using one of the agile approaches listed below.
Agile Approaches to Creating a France Company
Companies are the most cost-effective and become fully-functional overseas the fastest when they use an agile approach to international expansion.
Foreign Subsidiary as a Service (FSaaS)
FSaaS cuts the time it takes to enter a foreign market by 95% compared to establishing a full subsidiary in France.
Companies that use FSaaS to establish a legal presence also benefit from:
- Lower costs. FSaaS can be up to 60% cheaper than creating a subsidiary.
- Risk mitigation when employing foreign employees.
- Get out of the market quickly, if needed. You’re not stuck with a permanent subsidiary if your business isn’t performing as planned.
International PEO (Professional Employer Organization)
Companies that use International PEO to create a France company work with a third-party that acts as their employer of record. The EOR is responsible for maintaining employer liabilities associated with these employees. These companies can also help you stay compliant while working with independent contractors, allowing you to avoid those risks we mentioned earlier.
An International PEO takes care of international employees’:
- Payroll and Tax Withholdings
- Payroll and Tax Reporting
- Workers Compensation
- Health Insurance
- Benefits Packages
- Termination Requirements
International PEO removes the risks of compliance issues that come with operating in a new country like France. Outsourcing responsibilities associated with employment is a smart move for international businesses that want to focus on strategy and expanding their business in a new market.
To learn more about these flexible global expansion options, give us a call. Our team specializes in helping businesses start up operations in foreign markets, like France. It’s best to get personalized advice before making a full commitment in a new country. Talk to you soon!