Starting a business in France is an adventure. Ever heard the horror stories of Italian bureaucracy? Well – France has it too! When you go through this adventure you will encounter stamp-fetishism, physical paper obsessions, snooty bank employees, and stamp-wielding government employees.
Company creation – the statuts
When you start a company in France, you must write what are called ‘Statuts’ – the basic laws of your company. For some company forms, like the SARL, these are standardized documents of 2-3 pages long. If you’re more adventurous and choose the SAS form, you are looking at at 40-50 pages of text.
What’s in them? Some sensible stuff – the equity structure (who owns how many percent of the company), the company address (more about that later), and some rules that are important in obscure cases – can a minority shareholder block a sale? Can shareholders re-invest when the company gets more funding? If you happen to be a high-potential startup, these things matter tremendously. If you’re the grocery shop on the corner, probably not so much. For startups, you are making some decisions that will impact your future. For the equity mix – that’s already a complicated and divisive subject. But some of the ‘small print’ will matter for future investors, and if you don’t do them right, they’ll force you to re-incorporate, a money-bleeding and time-wasting process that you should try to avoid.
So how does one obtain these statuts? There aren’t any magic answers here – there are some online, there are people you can pay to do it for you, like consultants (a friend of mine is one, contact me if you want to talk to him), or a lawyer. If you are a startup, the ONLY choices that makes any sense to you are either doing the standardized two page SARL (easy to find online), or pay a lawyer to customize one. But careful – don’t take any lawyer, take one that has worked with startups before. I would suggest you contact a successful startup here in Paris and ask them for the lawyer they used.
Choosing the address – choose wisely!
In France, each business has a ‘siege social’ – their official company address. This matters, because changing that address costs 200 euros in fees, plus a complete refile of your statuts.
You can use your home address – if you rent, you’ll have to inform your owner, but they cannot say no. If you’re a home owner, it’s never an issue. If you have office space or already know where you will get space, you can use that, but think about how long you will stay there. Startups often move offices a lot in their first years, so using the home address of one of the founders may make more sense, provided there is one with a stable home address. Choose the most stable option. Alternatives are companies that will rent you a mailbox, and will provide the proof-of-address paperwork for the company creation. They are called ‘domiliciation’ companies, and there are numerous ones in Paris. They charge up to 30 euros a month for the privilege of having a tiny mailbox, so again, not a perfect choice, but a stable one. Plus, you either have to go there frequently to pick up the mail, or you pay to have the mail forwarded.
The social capital – what money the founders put in
The social capital is part of the company creation – it’s what all the shareholders put in as the starting capital of the company. This must be done proportional to the equity mix (so if you have €10,000 social capital, the CEO that has 60% of the company must put in €6,000, etc). For this reason, the social capital is often kept low.
Step one: find a bank!
The first actual step in the creation process is to set up a special bank account that holds the social capital. For this, you must find a bank that is willing to take you as an enterprise client. Yes – you read it right, you must ask them nicely if they will take you as a client! This part of the process is extremely painful. French banks are the worst banks I've ever encountered. They are stuck in the sixties, where every transaction as done at the bank branch, and everyone knew each other by name. When you are a bank client in France, you will have an assigned branch, and a ‘conseiller’ – one of the branch's employees. What is this mythical creature? He’s the ONLY person that will process transactions for you in the entire bank system. It doesn't matter that every French bank has nationwide branches – no no, you must go to your own branch! But wait – why would I ever go to ANY branch, I have internet banking, right? Wrong! Yes – some of the basics are online now, but if you want to do a bank transfer, the Internet interface will only let you do small amounts, and only to pre-entered recipients. Who enters those recipients? You guessed it – your conseiller! On top of that, this loathsome creature must ‘approve’ your application to become a client of the bank. Why? Are they taking any risks? No – they will charge you 30-40 euros a month(!) for the basic banking services, will not give you a single euro of credit, and chain you to the horror that is the personal conseiller. For that, you have to beg them when you set up the company. The process is as follows: you call the bank, to make an appointment with a bank employee for the creation of a company. You show up, with three printed copies of your statuts, the founders’ passports, and proof-of-address for each, the social capital (cash or cheque), and a desire to be humiliated. They will then excruciatingly ask about your education, if you understand the basics of accounting, and any other question that they deem enjoyable enough to subject you to. If you go through this without killing the employee, you’re in, is my experience. Then, they take the social capital, create a blocked bank account that the money is deposited in, take one copy of the statuts, and stamp the other two copies, plus they print a letter stating you have the blocked bank account with the social capital. Congratulations, you have just passed step one!
Step two – more stamps, this time from the tax office
Now, based on your company address, there’s a corporate tax office that you will be assigned to. In Paris, there are about 40 – two per arrondissement. This is job creation at its finest – the employees each have a fixed number of companies assigned to them, and deal with the paperwork (corporate taxes, quarterly VAT payments, payroll taxes, etc) mostly manually. On the one hand, you can call them and get a sensible answer if you have any questions, on the other hand, your tax euros are being spent here quite lavishly – one big computer system can replace those 40 offices effortlessly.
The transaction here is easy – they will keep one copy of your statuts, stamp your copy, give you a letter stating that you jumped this hoop, and off you go!
Step three – the real deal
Now we’re all set for the real deal – creating the actual company. For this, in Paris, you go to the beautiful historical building called the ‘Ancien Bourse’ (one of two, former stock exchange building), next to Les Halles. Now, you have a choice – you can deal with the raw machinery of the bureaucrats yourself (at your own peril), or you can pay someone €200 to ‘accelerate your application’. They basically check all your paperwork, correct any issues, and submit it for you. This stamp of approval saves two weeks of waiting, and I would say is well worth the money. These friendly people are called ‘Chambre de Commerce’, and you make an appointment in advance. You give them your paperwork - doubly stamped statuts, founder passports, proof-of-addresses, bank letter, cheque for the fee, and they will scrutinize it and either accept, or ask for more documentation. When that’s done, you are DONE! All you do now is sit back and wait for the paperwork to process – 3-5 days if it’s not too busy. You will get lots of letters now, so make sure your mailing address has the company name on the mailbox and the door, or the mailman will get mighty confused.
Post-creation cleanup tasks
Now that you are started, there are a few other things you may want to get out of the way immediately. If your bank didn’t already do it, make sure you have a bank card plus checkbook. Also, get the internet banking set up, this usually requires a lot of nagging – your conseiller likes to see you in person, so will subtly sabotage your online banking. Part of the paperwork you got is a stack of blue papers called ‘Kbis’ – this is the proof of existence of your company, and you need recent ones for a bunch of stuff. One thing that will happen is that some companies will send you registered letters. Because they will be addressed to the company, the post office will refuse to deliver them unless a company owner is pre-registered(!) at that particular post office. This, of course, can only be done with a recent Kbis – so now that you have them fresh off the press, locate the post office that delivers mail for the company address, go there with your passport and the Kbis, and register as a company owner. This will also get you a nice ‘Pro’ card for La Poste, allowing you to use the (faster) Pro desk! It’s amazing how useless bureaucratic milestones suddenly feel like an accomplishment.
Also, if you’re doing business internationally, you may want to get a company stamp created. In countries more backward than France, the holy stamp still reigns supreme. In France, you can get any stamp you want created at your local Office Depot for €30, making the whole concept useless. But some clients, suppliers, and customs authorities still require it! Office Depot doesn’t care about your Kbis, but bring it anyway, because you will need your company number (‘RCS’) on the stamp, and it’s on the Kbis. Also put your VAT number (‘numero TVA’) and the company name and address on the stamp – you’ll please big French corporations with it on your invoices.
Final step – find an accountant
Accountants in France are problematic too. They are monopolistic overchargers. I’ve been lucky once, but she went off and did something more fun with her life (I don't blame her). Since then I’ve gone through a series of hotheaded overpromising underdeliverers. I finally ended up with a Dutch accountant, who is patient and diligent, and is efficient (he files electronically!). Find one that won’t overcharge, and you probably are better off with a small office, not a big one, and one located close by– you’ll probably have to go there 2-3 times a year to deal with paperwork.
Even though the bureaucratic process of starting a company in France is painful, humiliating, and an utter waste of time, the good news is that once you've gone through it, it all gets a lot easier. Creation is a one-time process, so it's ok if it's not optimized. The daily grind of doing business in France is more important - the bank, your accountant, your tax office, those are the people you work with all the time. Make sure you have partners that work for you - if you have a bad bank or accountant, don't hesitate to dump them immediately.