Well, after years of resisting, and much good advice to the contrary, we have become a SARL. A SARL is a fully fledged French limited liability company with shares, proper accounts, and – so we are told – enormous associated expense and bureaucratic effort.
I can hardly wait.
I won’t trouble you with the reasons why we have embarked on this dangerous path, suffice to say our accountant thinks it is the best option given our ‘circumstances’.
The actual act of creating a SARL was straightforward – a couple of meetings with the accountant, the opeining of a bank account in the company name (seems to be obligatory), and a sprinkling of cheques (about 250 euros in total) to various organisations that like to stamp forms. The 250 euros doesn’t include the accountant charges (about 1600 euros).
Thrown in for the price of creating a company we also get mentioned in an official newspaper, that exists solely for boring legal notices and is clearly a journal that no-one in the world would dream of actually buying.
If we decide to be employees of the company, rather than just shareholders, we have to pay ourselves at least the minimum wage – the minimum wage in France is called the SMIC, and is a litle under 9 euros per hour. We also have to pay an additional 45% in ‘social contributions’ on behalf of the company for pensions, health etc, and about 25% on behalf of us as ‘employees’.
Hence 7.5 euros in our pocket costs about 15 euros in total. And that’s before tax has entered into the equation.
You won’t be surprised to know this discourages small companies from employing many people. As employees we also will have great employment protection rights – so we won’t be able to sack ourselves without paying ourselves enormous compensation. Well that could work out in our favour, perhaps?
Hence we hope to stick to dividends rather than salaries. The theory is that with a SARL you pay unavoidable ‘minimum’ social contributions of about 1300 euros a year (to cover health, pensions etc), but not the very high level charged on salaries. The catch? You aren’t being paid! Dividends can only be paid several months after the year end – so we can take no money from the company (apart from legitimate expenses) for about 15 months.
Hence you do need to have an alternative income, or money in the bank, so that you can feed your family during this time.
It is a curious arrangement that we can have a company with no employees in France, but can’t pay less than the SMIC if we do have employees. How do they think a company is operating with no employees I wonder. I would have thought it is obvious that it means people are working and not receiving SMIC, but apparently not.
Anyway despite the dire warnings of poverty to come I think it’s quite exciting. And when the bills for tax, social charges, and associated expenses all become too much we can try and sell a couple of shares to raise more money.
Any takers?
Oh the joys of French bureaucracy. I am in the same boat although I think I will be employing my husband on the SMIC and for the minimum amount of hours per week just so that we will have some benefits later on if it all goes belly up. Which is what his last company did – all his employees got fantastically well looked after and he, who had provided employment for 5 people for 12 years, got zilch.
Sounds familiar – I think we will be doing the same, although I’m not sure yet which of us will have the honour of being employed.
Just curious, but what were you before becoming a SARL?
We were a micro-bic before becoming a SARL.
The micro-bic is easy to setup and to administer, and has generous allowances…but don’t let these deceive you, it still might not be the best choice.
If you have a gite based business, there is a pretty high chance a micro-business is the best route (assuming your income will be less than 76000 euros per year) but for other types of business it is much less clear, and a SARL paying dividends (rather than salaries, at least in part) can be the best option.
I’m trying to create a SARL – who did you go through to do it?
We went through a local accountant (expert-comptable) here in SW France who came recommended and sorted it all out for us. Seemed painless.
Incidentally our accountants website http://www.acomaudit.com/ contains some useful general information and tools (French only).
how do yiu wind up a sarl can you sell company to english company?
Martin, I’m sure this is possible if your business is actually moving to England but the implications of how you do it will be complicated and potentially expensive to get wrong, since they will involve all kinds of capital gains, business taxes, potential losses, new business grants etc. I think unless the amounts are very small you should speak to an accountant that knows both the UK and French systems (I think Blevins Franks perhaps can answer this type of question)