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France Routes to Market

So you've decided your destination and researched your market. Now it's time to decide how you will establish your business. What is the best, most viable option for your company, your products, and yourself. Which is the path of least resistance?

Here are your typical options:

Liaison Office / Representative Office

A Representative Office represents the interests of a foreign company overseas. It is generally not recognised as a legal entity, and is not used to further the operational aspirations of the parent. Instead, it is employed for overseas liaisons, promotion, technological exchange, market research and other non-profit generating activity.

In France, a liaison office can conduct only a small amount of very limited and non-commercial operations. This includes such things as prospecting, advertising, storage, and other preparatory or auxiliary operations.

Liaison offices are not recognised as permanent establishments, so therefore are not subject to income tax laws or VAT, but are, however, obliged by local and payroll taxation.

Limited Company

Société Responsabilité Limitée SARL - Limited Company

There must be at least two and not exceeding fifty shareholders, who can be individuals or companies either French or foreign. Again the share capital must be a minimum of 7500 Euros and this capital must be paid at the time of incorporation.

The liability is limited to each shareholders initial capital. A SARL is managed by one to two managers. If they are minority shareholders they are usually classed as salaried employees for tax and social security contributions.

Société Anonyme SA - Limited Company controlled by shares

A minimum of seven shareholders are required to start this type of business. Each shareholder must invest a minimum share capital of 37 000 Euros or 225 000 Euros is required if the business has made a public offering. The shares must be fully subscribed.

Entreprise Unipersonnelle Responsabilité Limitée EURL - Private Limited Company under sole ownership

This type of business enables an individual entrepreneur to have limited liability. The initial business outlay can be no less than 7 500 Euros capital. The liability is limited to the initial capital. There are more legal requirements and accounting for this type of business.

Micro-entreprise - smallest type of business

This type of company is restricted to companies that have a small turnover and are therefore not subject to VAT (TVA). A micro enterprise is reserved for traders and artisans who are usually self-employed.

Trs petite entreprise (TPE) - Very Small Business

This type of companies employs less than 10 salaried staff and the annual turnover is less than 2 million Euros per year.

Petite entreprise (PE) - Small Business

Employs between 10 and 49 salaried staff and the annual turnover is less than 10 million Euros per year.

Moyenne entreprise (ME) - Medium-Sized Business

Employs between 50 and 249 salaried staff and the annual turnover is less than 50 million Euros per year.

Grande entreprise - Large business

Employs 250 plus salaried staff and the annual turnover is less than 50 million Euros per year.

Groupe d'entreprises - Group of Companies

The terminology Small to Medium size Enterprise - SME (PME) is used in France and has the same definition.

Joint Venture

A collaboration of resources and knowledge between two existing businesses to achieve a common goal. The advantages of a joint venture are: local company can provide market knowledge, skills, resources, distribution channels, brands name, access to established customers. Other benefits are less investment and the potential to learn.

Disadvantages include: weakening of control; greater risk than exporting / licensing; difficult to manage; conflict of interest.

Franchising

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages, although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License: A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License: A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

Patent License: The allowance of another party to use your patented product, design or process.

Trademark License: Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

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