Creating a Subsidiary in France: SAS, SARL or Branch?

Who this is for:

This article is written for US and international groups (EU or non-EU) planning to establish or restructure their French legal presence for the first time. It covers the choice between three structures: the SAS (Société par Actions Simplifiée), the SARL (Société à Responsabilité Limitée), and a branch (succursale).

⚠ Disclaimer

This article is provided for general informational purposes only. French company law and corporate taxation change regularly: legislative amendments, regulations, or updates to international tax treaties published after the date of writing may render some information obsolete. Nothing in this article constitutes personalised legal or tax advice. We recommend consulting a qualified professional (attorney, CPA, or corporate counsel) before making a decision about which structure to adopt.

Choosing the right legal structure for expanding to France is a critical decision for any international group. It affects governance flexibility, legal risk exposure, tax efficiency, and administrative burden. For a US group, the choice typically narrows to three options: establish an SAS (Société par Actions Simplifiée), a SARL (Société à Responsabilité Limitée), or set up a branch (succursale) of the parent company.

Each structure serves different purposes and comes with distinct tax, legal, and operational implications. This guide details the legal characteristics, tax treatment, and practical considerations of each option to help you make an informed choice.

1. Overview of the Three Structures

France offers three principal frameworks for establishing a commercial or industrial operation. Two of them — the SAS and the SARL — are separate French legal entities, distinct from their shareholder(s). The third — a branch — is not a separate legal entity; it is an extension of the foreign parent company itself.

Here is a detailed comparison:

Criterion	SAS	SARL	Branch
Minimum capital	€1 (fully flexible)	€1 (fully flexible)	N/A (no separate capital)
Liability protection	Yes (limited liability)	Yes (limited liability)	No (parent directly exposed)
Governance flexibility	Very high (bespoke bylaws)	Rigid (mandatory rules)	Follows parent structure
Transfer of shares/units	Free (unless restricted in bylaws)	Restricted (partner approval)	N/A (branch not transferable)
Director social security status	President = assimilated employee (no TNS)	Manager = TNS if majority owner	N/A (branch structure)
Best used for	Foreign subsidiaries, flexibility	SMEs, families, IR election option	Market testing, expected losses
Main drawback	Slightly more complex setup	TNS = high social charges	No liability shield

2. The SAS — The Preferred Choice for International Groups

The SAS (Société par Actions Simplifiée — Simplified Joint Stock Company) has become the structure of choice for foreign subsidiaries in France. Created in 1994, it offers unparalleled governance flexibility while providing limited liability protection.

Key Features

• No mandatory minimum capital: contrary to popular misconception, there is no legally mandated minimum — technically only €1 is required. In practice, the share capital amount is freely determined in the bylaws and tailored to the business model and financing needs.
• Single, flexible governing body: an SAS is obligatorily run by a President (Président or PDG — President-Director General). Unlike a SA (traditional public company), there is no obligation to have a board of directors or supervisory board. The President can be an individual or a legal entity (e.g., the parent company or a holding company).
• Complete bylaws flexibility: founders draft the bylaws freely, including terms for the President’s compensation, shareholder meeting powers, share transfer rules, and dispute resolution mechanisms.
• Unlimited shareholders: no maximum number. Shareholders can be individuals or corporations. Shares are freely transferable unless expressly restricted in the bylaws.
• Standard corporate taxation: subject by default to corporate income tax (IS) at 25% (or 15% on the first €42,500 of profit for qualifying SMEs). An SAS can technically elect to be taxed as a pass-through entity (IR regime), but this is extremely rare for subsidiaries.

Post-Incorporation Obligations

• Annual accounts: the annual accounts must be approved by the shareholders within six months after year-end and subsequently filed with the Commercial Court Registry (greffe du tribunal de commerce) within the applicable statutory deadline. A statutory auditor (Commissaire aux Comptes) must be appointed if the company exceeds the applicable legal thresholds or meets other statutory criteria.
• Annual shareholders’ meeting: shareholders must be convened annually to approve accounts.
• Beneficial ownership register: if any individual owns directly or indirectly more than 25% of the capital, registration with the RCS (Trade and Companies Register) is required.
• Payroll and DSN (Digital Social Declaration): required if the SAS has employees in France.

Incorporation Timeline

SAS formation in France follows a standardized process since the unified filing window (guichet unique) became mandatory on January 1, 2023:

1. Draft the bylaws (statuts constitutifs) — typically 1–2 weeks with legal counsel.
2. Capital contribution: deposit the share capital amount into a blocked bank account in the name of the SAS-in-formation; obtain a bank deposit certificate (attestation de dépôt de fonds).
3. Publish a notice of incorporation in a Journal d’Annonces Légales (JAL); the BODACC publication is then carried out automatically — turnaround: a few days.
4. File the complete dossier with formalites.entreprises.gouv.fr (the INPI unified portal) — upload bylaws, deposit certificate, President’s ID, publication notice, and Form M0 (registration declaration).
5. Receive the KBIS (business registration extract) from the commercial court — the official document proving legal existence and RCS registration. Typical delay: between one and three weeks, depending on the registry and the completeness of the application.

In total, allow between one and three weeks from submission of a complete file to receipt of the KBIS, depending on the registry and the completeness of the application.

3. The SARL — Limited Use for Foreign Subsidiaries

The SARL (Société à Responsabilité Limitée — Limited Liability Company) is broadly comparable to a UK Ltd or a German GmbH. While it shares some characteristics with a US LLC, there is no exact equivalent because US LLCs have a unique legal and tax treatment. It provides liability protection but with more rigid governance than an SAS.

Key Features

• Share capital: legal minimum €1; no maximum. Capital is divided into units (parts sociales, not shares).
• Maximum 100 partners: a SARL may not have more than 100 partners (associés) — per Code de commerce Article L223-1. If this cap is exceeded, the SARL must convert to a SA or SAS.
• Management: run by one or more managers (gérants). If multiple, they are joint managers (co-gérants).
• Unit transfer restrictions: unlike SAS shares, SARL units cannot be transferred without explicit approval from a majority (50%+) or unanimous (depending on bylaws) of the other partners. This restriction makes SARL units less liquid.
• Manager social security status — critical issue: if the manager is also a majority-owning partner, they are classified as a self-employed worker (TNS — travailleur non-salarié). This means they contribute to the self-employed social security system (SSI) with social contributions that depend on the individual’s status and remuneration. If the manager is a minority or non-owning manager, they are treated as an employee with standard contributions.
• Standard taxation: IS 25% by default. Family SARL variant: a special SARL where units are majority-owned by family members; can elect to be taxed as a pass-through (IR) — useful in some family contexts but rarely used for foreign subsidiaries.
• Less governance flexibility than SAS: bylaws follow mandatory statutory rules; decision-making authority and operating procedures are more rigid.

Why Less Popular for Foreign Subsidiaries

For a foreign subsidiary — especially from a US group — the SARL has two major drawbacks:

• Inflexibility: the SARL does not permit the same governance customization as an SAS. If the group wants a board structure or a different leadership model, the SAS is more suited.
• TNS manager problem: if the manager is an expatriate or group executive and holds a majority stake, the TNS social security status incurs very high social contributions — a significant cost barrier for large international groups. The SAS avoids this problem because the President is treated as an assimilated employee.

Occasional exception: a SARL might be relevant for a family-owned SME seeking IR election (pass-through taxation) — but this tax advantage is marginal for international groups.

4. The Branch — No Liability Shield

A branch (succursale) is the legal extension of the foreign parent company into France. It is not a separate legal entity; it is a secondary establishment of the parent itself.

Key Features

• No separate legal entity: the branch has no independent legal personality. The parent company (e.g., a US corporation) remains directly responsible for all legal and tax obligations.
• No liability shield: the parent is directly liable for ALL debts and obligations of the branch — employee liabilities, commercial debts, environmental liabilities, lawsuits. There is no asset separation between the group’s overall property and the branch.
• No separate share capital: no capital contribution is required for the branch. Resources flow from the parent company.
• Mandatory RCS registration: although not a separate legal entity, the branch must be registered with the French RCS (Trade and Companies Register). This registration is important: a registered branch will often constitute a Permanent Establishment (PE) for tax purposes, although the two concepts are not legally identical. Conversely, a PE may exist even without a registered branch.
• Taxation: branch profits are subject to French corporate income tax (IS) at the standard 25% rate (or 15% for qualifying SMEs) on the French-source profit portion only. HOWEVER, a specific provision of the France–US tax treaty (Article 10(6)) imposes a branch profits tax of 5% on after-tax profits remitted by the branch to the parent, UNLESS a treaty exemption or reduction applies.
• PE consideration: branch registration is generally treated as creating a PE, although the two concepts are not legally identical. Note: a PE can arise even WITHOUT formal branch registration if substantial activities are conducted in France (agents, logistics, customer support).

When to Use a Branch

• Short-term market testing: if the group is unsure about committing to France long-term, a branch can be a temporary structure — easier to wind down than dissolving a separate company.
• Expected losses: if the group anticipates early operating losses, depending on the tax rules applicable in the parent’s jurisdiction (particularly in the United States), branch losses may in certain circumstances be available to offset taxable income. With a subsidiary (SAS/SARL), losses are “trapped” in the subsidiary and benefit the parent only upon dissolution or sale.
• COUNTEREXAMPLE: for any plan to establish a long-term presence, a branch is unsuitable. The lack of liability protection is a major risk.

Major Disadvantages

• Unlimited parent exposure: the parent company guarantees indirectly ALL branch liabilities. In case of major disputes (non-payment, employment incidents, accidents, product liability), the entire group’s assets can be at risk.
• Subsidiary preferred: for durable operations, a subsidiary (SAS or SARL) provides much stronger legal risk insulation.

5. Comparative Tax Analysis

Corporate Income Tax (IS) Rates

France applies a 25% corporate income tax rate for fiscal years beginning on or after January 1, 2022 (per the 2022 Finance Act). However, a reduced rate applies:

• Reduced rate: 15% on the first €42,500 of annual profit if the entity meets SME criteria: revenue < €10 M, capital held ≥75% by individuals. For a foreign subsidiary wholly owned by a US group, the reduced rate typically does NOT apply — the standard 25% rate applies.

Dividend Withholding to Foreign Shareholder

A critical point: how are dividends paid by a French SAS/SARL subsidiary to the US parent company taxed?

• Default domestic withholding: under French domestic law (Articles 119 bis and 187 CGI), dividends paid to a non-resident foreign company are subject to a 25% withholding tax (the standard IS rate since 2022). However, the France–US tax treaty of 1994 (Article 10) substantially reduces this rate:
• The France–US tax treaty provides for reduced withholding tax rates (including 5%, 15%, and in certain circumstances 0%), subject to ownership thresholds and other treaty conditions.
• EU Parent-Subsidiary Directive: 0% withholding is possible for EU-resident parent companies meeting holding conditions — not applicable to US groups.

Numerical example: a French SAS earns €100 profit, pays €25 IS, leaving €75 net profit. If it distributes the €75 to a 100%-owning US parent (≥80% threshold), a 5% withholding applies = €3.75 withheld. The parent receives €71.25 net.

Branch Profits Tax (Treaty Article 10(6))

For a branch structure, an additional 5% tax applies under the France–US treaty (Article 10(6)) on after-tax profits remitted to the US parent. This is on top of the 25% IS already levied on the branch profit. Example: a branch earns €100, pays €25 IS (€75 remaining). When €75 is remitted, a 5% branch profits tax = €3.75 is withheld. Net to parent: €71.25 — similar to the dividend withholding on a SAS, but the mechanics differ (a true branch profits tax vs. dividend withholding).

Subsidiary vs. Branch Tax Comparison

• SAS with ≥80% parent ownership: 25% IS + 5% dividend withholding = effective 28.75% (simplified).
• Branch: 25% IS + 5% branch profits tax = effective 28.75% (very similar).
• Conclusion: tax impact is broadly equivalent. The choice should be driven by liability risk, not tax rate.

Annual Compliance Filing

• Tax return (liasse fiscale — Form 2065): detailed income/expense filing; deadline ~3 months after fiscal year-end (e.g., March 31 for December 31 year-end).
• IS installment payments (acomptes): monthly or quarterly prepayments based on prior-year estimated liability.
• CFE (business property tax): local tax on asset values; rate 0.2%–2.5% depending on commune.

6. Post-Incorporation Obligations

• Annual account filing: the annual accounts, once approved by the shareholders within six months of year-end, are filed with the Commercial Court Registry within the applicable statutory deadline. Format: balance sheet, income statement, notes.
• Annual shareholders’ meeting: shareholders must be convened to approve accounts (mandatory even with a single shareholder).
• Beneficial ownership registry (RBE): any individual owning directly or indirectly >25% of capital must register with the RCS — anti-money-laundering requirement (EU Directive 5).
• DSN (monthly payroll declaration): if the subsidiary has French employees, a digital social declaration is filed monthly with URSSAF (social security authorities) for all staff.
• Tax filings & IS prepayments: annual tax return (liasse fiscale) and quarterly/monthly prepayment of corporate income tax.
• KBIS updates: any material change (new director, capital restructuring, etc.) must be reported to the RCS within 30 days.

7. Recommendations for US Groups

For most US groups planning a durable presence in France, the SAS is the recommended structure. Here’s why, and when to consider alternatives:

SAS: Default Recommendation

The SAS provides the best overall balance:

• Maximum governance flexibility (custom bylaws, compensation, decision-making).
• Liability shield (subsidiary separate from parent).
• No TNS (self-employed) issue — the President is an employee.
• Ease of future sale, merger, or restructuring.
• De facto standard for foreign subsidiaries in France.

Branch: Exception Cases Only

Consider a branch ONLY in these specific scenarios:

• Short-term market test: you’re uncertain about staying beyond 2–3 years.
• Anticipated losses: you want early losses to offset parent worldwide income.
• Minimal risk footprint: simple agent or customer support office with no major liability exposure.

Beyond these narrow cases, a subsidiary SAS is superior.

SARL: Rarely Recommended

The SARL is relevant only for family-owned SMEs with specific tax objectives (IR election). For an international group subsidiary, disadvantages outweigh benefits: TNS social security burden, governance rigidity, share transfer restrictions.

Critical Note: Permanent Establishment Risk

Often overlooked: a permanent establishment (PE) can arise BEFORE you formally incorporate a subsidiary or branch. Once an international company has substantive, ongoing activity in France, a PE is deemed to exist. Examples:

• A liaison office or continuous sales representation.
• A warehouse or retail location with permanent staff.
• Long-term contracts with a dependent agent acting in the company’s name.

If a PE is created but not formally declared, French tax authorities can later assert unregistered PE status and assess back taxes, IS, and penalties. It is critical to formalize your French structure as soon as substantive activity begins.

Conclusion

The choice between SAS, SARL, and branch depends on your long-term strategy, legal risk tolerance, and tax model. For 95% of international groups, the SAS is the right choice. It combines the flexibility you need, stable taxation (25% IS, reduced rates for SMEs), rapid incorporation (typically one to three weeks via the unified portal), and strong legal separation of risks.

Expand CPA assists US and international groups in structuring their French presence — from entity selection through annual account filing, international tax planning, and France–US tax compliance. To discuss your specific situation: expand-cpa.com/en/contact-us/.

Next step:

Planning to establish a subsidiary in France? Contact our team for a complimentary structuring review: expand-cpa.com/en/contact-us/.