Choosing the right legal structure

Do you represent an international company and are considering expanding into the French market?

France offers many fantastic economic opportunities, but it is essential to choose the legal structure that is most appropriate for your objectives.

There are three main options available: a liaison office, a branch, or a subsidiary. Each has specific legal, tax, and operational characteristics that you need to understand before setting up a long-term presence in France. 

Why choose a liaison office?

A liaison office, also known as a representative office, is a simple and flexible solution for testing the French market without conducting commercial activities in the country. It serves as a relay for the parent company and is mainly used for prospecting, communication, or representation purposes.

Key features:

• A liaison office does not have a separate legal status
• It cannot carry out commercial operations and cannot generate revenues in France
• It acts exclusively on behalf of the international company through a representative and any business generated is conducted through the international company

Main advantages:

• Ideal for initial contacts within a local market
• Allows business relationships to be established without creating a business entity in France
• Quick and easy to set up
• Please note: Although the liaison office is not taxable in itself, it may generate expenses in France that are taxable (property taxes through the rental of premises, social security contributions for payroll, etc.).

Why choose a subsidiary?

A subsidiary is the most structured form of establishment. It allows an international company to create a legally independent company under French law while retaining control of its capital.

Key features:

• Entity with its own legal status
• Assets are separate from those of the parent company
• Limited liability on the part of the parent company in the event of a dispute

Advantages:

• Separation of risks: the parent company is not liable for the subsidiary’s debts
• Eligible for French government support and tax advantages
• Better integration into the local economic fabric and enhanced credibility with French partners

Possible types of companies:

• SAS (simplified joint stock company): flexibility and tax advantages
• SARL/EURL (limited liability company): suitable for smaller project
• SA (company that can raise capital through public offerings): - recommended for large-scale projects, although more complex to manage
  - Civil companies or general partnerships: mainly used for asset management

Note: Setting up a subsidiary requires an initial investment and good organization, making it a solution particularly suited to SMEs/mid-cap companies that are already well established in their home market.

Applicable tax regimes:

• Subject to corporate tax and VAT in accordance with French tax law
• Option to use the parent-subsidiary regime (partial exemption on dividends)
• Group regime (tax consolidation) is possible under certain conditions

Why choose a branch office?

A branch office allows an international company to conduct business in France while maintaining a direct link with the parent company.

Key features:

• No independent legal status: assets and liabilities belong to the parent company
• Included on the French trade registry
• Can invoice, manage stock, and sell locally

Advantages:

• Simplified creation procedure
• Flexible structure for quickly starting a commercial activity
• Allows you to test the market and conduct economic activities while remaining linked to the parent company

Precautions:

• In the event of financial difficulties, the parent company is directly liable for the debts.
• The manager of the branch, if they are a foreign national from outside the EU/EEA/Switzerland, must hold a residence permit authorizing them to carry out a business activity
   

Applicable tax regimes:

• Taxation in France on profits made locally
• Application of the principle of territoriality and bilateral tax treaties

Learn more about setting up a legal structure in France 

Conclusion: What structure should you choose when setting up in France? 

Structure                       Commercial activity    Fully independent legal entity    Responsibility of the parent company    Local tax regime                                   Ideal for…
Liaison office                                    ❌                                       ❌                                                              ✅                                           ❌                                           Testing the market
Branch                                                ✅                                      ❌                                                              ✅                                            ✅                                          Quick business launch without setting up a company
Subsidiary                                          ✅                                      ✅                                                              ❌                                            ✅                                          Long-term business presence

Before making any decisions, it is advisable to seek the assistance of legal and tax experts in order to tailor the structure to your needs, your ambitions, and the French regulatory framework.