France remains one of Europe’s largest economies and an attractive gateway to the EU market for entrepreneurs from the United States and the United Kingdom. Its strategic location, skilled workforce and strong infrastructure make it a compelling destination for expansion. At the same time, the French legal and regulatory framework differs in several important ways from common law systems. Understanding these differences at an early stage is essential to structuring operations efficiently and avoiding costly compliance issues.
Below are ten key legal considerations to take into account before expanding your business into France.
1. Choice of Legal Structure
Selecting the appropriate corporate form is a foundational decision. Common options include the SAS (Société par Actions Simplifiée), SARL (Société à Responsabilité Limitée), or operating through a branch of a foreign company. Each structure has distinct implications for liability, governance flexibility, taxation and social security obligations. For many foreign entrepreneurs, the SAS is attractive due to its contractual freedom and ease of governance, but it is not always the optimal choice.
2. Corporate Governance and Directors’ Duties
French company law imposes specific duties and potential liabilities on directors and officers. These include obligations relating to management decisions, financial distress and compliance with statutory requirements. Unlike in common law jurisdictions, directors’ liability can be both civil and criminal, and enforcement is taken seriously.
3. Employment Law and Workforce Regulations
French employment law is highly protective of employees and largely codified. Key areas include mandatory employment contracts, working time regulations, minimum wage, employee representation and termination procedures. Dismissals, in particular, require strict adherence to procedural and substantive rules, regardless of the size of the workforce.
4. Social Security and Payroll Contributions
Employers in France must register with the French social security system and comply with complex payroll contribution rules. Employer contributions are significantly higher than in the US or UK and cover health insurance, pensions, unemployment and other benefits. These costs must be factored into any financial projections.
5. Corporate Taxation and Permanent Establishment Risks
France applies corporate income tax to profits attributable to activities carried out on its territory. Foreign businesses may trigger a permanent establishment even without a formal subsidiary, depending on their level of local activity. Proper tax structuring is essential to avoid unexpected tax exposure and double taxation issues.
6. VAT Registration and Indirect Taxes
Value Added Tax (VAT) is a central component of the French tax system. Businesses supplying goods or services in France may need to register for VAT, file periodic returns and comply with invoicing requirements. Errors in VAT compliance can result in penalties and cash flow issues.
7. Commercial Contracts and Applicable Law
Commercial agreements in France are subject to specific statutory rules, including those on unfair contractual terms, termination of established commercial relationships and mandatory notice periods. Even where contracts are governed by foreign law, certain French mandatory provisions may still apply.
8. Data Protection and GDPR Compliance
France strictly enforces the General Data Protection Regulation (GDPR) through its national authority, the CNIL. Businesses handling personal data of customers, employees or partners in France must implement appropriate compliance measures, including data processing agreements, privacy notices and, in some cases, appointing a data protection officer.
9. Intellectual Property Protection
Trademarks, patents and designs should be reviewed and, where necessary, registered at the French or EU level. IP rights are territorial, and relying solely on US or UK registrations can leave valuable assets unprotected when entering the French market.
10. Regulatory and Sector-Specific Requirements
Certain sectors—such as finance, technology, healthcare, transport and food services—are subject to additional licensing and regulatory oversight in France. These requirements can affect timelines, operational models and compliance costs, making early regulatory analysis critical.
What Is the Most Common Legal Pitfall When Expanding into France?
The most frequent issue is underestimating the impact of French employment and social security law on the overall cost and flexibility of doing business, which is why a thorough legal and structural assessment before hiring staff or commencing operations is often the decisive factor in a successful expansion.