“Setting up your company”: the phrase comes up among future managers, on online forms as well as at the accountant’s. The word seems obvious, yet in France it covers a precise legal notion, with concrete consequences for what you sign, what you risk and how you pay tax.
This guide starts from the definition of the société set out in the Civil Code, explains what legal personality changes, distinguishes the company from the business, then reviews the types of companies found in France, with the rules published by Légifrance, Service Public and Insee.
Key points at a glance:
- Under Article 1832 of the Civil Code, a company arises from a contract between two or more persons who pool property or their work to share a profit or benefit from a saving; the law also allows it, in certain cases, to be created by one person.
- Once registered, it becomes a legal person, with its own name, registered office and assets.
- A company is one of the legal forms a business can take: the sole proprietorship (entreprise individuelle) is another.
- Companies are classed as civil or commercial, as partnership-type or capital companies, and some, such as the EURL and the SASU, have only one partner.
Société: legal definition
What is a company, in legal terms? Article 1832 of the Civil Code gives the definition: “A company is formed by two or more persons who agree by contract to commit property or their work to a common undertaking in order to share the profit or benefit from the savings that may result.” The same article adds that it may be formed by a single person in the cases provided by law, and that the partners undertake to contribute to losses.
This definition of a company therefore rests on three ideas: a contract, resources pooled together and a shared result, good or bad. Insee, which tracks businesses for public statistics, stresses another aspect: a company is “an entity with legal personality”, created “for a market purpose”.
The elements of the company contract
The definition set out in the Civil Code is found in every act of incorporation. Contributions, first: money (cash contribution), assets such as equipment or a business (contribution in kind), or know-how and work (contribution in industry). The sharing of results, next, profits and losses alike. The articles of association, finally, drawn up in writing, which under Article 1835 set the contributions, the form, the purpose, the name, the registered office, the share capital, the duration and the operating rules.
The duration, first: Article 1838 of the Civil Code caps it at 99 years, a duration written into the articles. The purpose (objet), next: it describes the company’s activity and serves as a reference for third parties and partners alike. Drafted too narrowly, it forces a change to the articles as soon as the activity evolves, hence the value of thinking it through at setup.
A legal person distinct from its partners
A legal person (personne morale), by definition, is a subject of law that is not a human being: it can sign contracts, own property, employ staff or go to court in its own name. In principle, a company acquires this status on the date of its registration, as provided by Article 1842 of the Civil Code and, for commercial companies, Article L210-6 of the Commercial Code.
In practice, the company’s assets are kept apart from those of its partners: a supplier’s invoice is addressed to the company, the profit belongs to it before any distribution, and the bank or payment account is opened in its name. Until registration, the company is only in formation and cannot yet act for itself.
A legal person always acts through its managers. In an SARL, the manager (gérant) represents the company towards third parties; in an SAS, the law requires a president who represents it towards third parties, and the articles can entrust part of the management to a managing director. Contracts are therefore signed by these people, but in the name and on behalf of the company.
Difference between a business and a company
The two words are often used interchangeably, wrongly. To understand the difference between a business and a company, start from the activity: the business (entreprise) is the economic activity itself, whatever its form, whereas the company (société) is one possible legal framework for carrying it out. A company and a business are therefore not the same thing: a craftsman working alone as a sole proprietor runs a business without having set up a company.
According to Service Public, the sole proprietorship does not create another legal personality. Its assets are nevertheless split automatically into business assets and personal assets, which already limits the entrepreneur’s risk. The company goes further: it holds its assets in its own right, can welcome new partners and can be passed on through the transfer of shares.
| Criterion | Sole proprietorship (EI) | Company |
|---|---|---|
| Legal person | No, the activity is carried out in the entrepreneur’s name | Yes, from registration |
| Number of people | One entrepreneur | Two or more partners, only one for the EURL or the SASU |
| Articles of association | None | Written articles required |
| Share capital | None | Set in the articles, depending on the form |
| Assets | The entrepreneur’s business assets | The company’s own assets |
Key takeaway: an SARL or an SAS runs a business, but not every business is a company. What separates them is legal personality and the contract between partners.
The different types of companies
The different types of companies fall along three dividing lines: the nature of the activity, the weight given to people or to capital, and the number of partners. Each family groups several legal forms.
Civil company and commercial company
For a commercial company, the definition lies in the Commercial Code: its Article L210-1 sets the commercial character of a company by its form or by its purpose. The general partnership (société en nom collectif, SNC), the limited partnership (société en commandite simple, SCS), the SARL and companies with shares, including the SAS and the public limited company (SA), are commercial by their form, whatever their activity.
For the civil company (société civile), the definition works by exclusion: Article 1845 of the Civil Code puts in this category all companies to which the law does not give another character. It is found, among others, in real estate, with the société civile immobilière (SCI), and in the liberal professions.
Regulated liberal professions also have dedicated forms. Service Public cites the société civile professionnelle (SCP), as well as the sociétés d’exercice libéral, available as SELARL, SELAS, SELAFA and SELCA, which follow the workings of an SARL, an SAS, an SA or an SCA while being reserved for the practice of a liberal profession.
Partnership-type and capital companies
Second dividing line: what matters most, the identity of the partners or the amount they contribute. In an SNC, shares (parts sociales) only change hands with everyone’s agreement and each answers for the debts with their own assets; in an SA or an SAS, shares change hands more freely and liability stops at the contributions. The société de personnes thus favours trust, the capital company the mobility of shares.
Single-partner companies
The Civil Code reserves the single-partner company for the cases provided by law. The two common forms are the EURL, the single-member version of the SARL, and the SASU, the single-member version of the SAS. They give a founder working alone a distinct legal person and liability limited to their contributions. The single partner can be an individual or a legal person, for example another company.
| Form | Partners | Capital | Partners’ liability |
|---|---|---|---|
| SARL | 2 to 100 | No minimum | Limited to contributions |
| EURL | 1 | No minimum | Limited to contributions |
| SAS | 2 or more | Set freely, €1 minimum | Limited to contributions |
| SASU | 1 | Set freely, €1 minimum | Limited to contributions |
| SA (unlisted) | 2 or more | €37,000 minimum | Limited to contributions |
| SNC | 2 or more | Set freely, €1 minimum | Unlimited, joint and several |
| SCI | 2 or more | Set freely, €1 minimum | Unlimited, in proportion to shares |
Legal form of a company: the criteria
Choosing the legal form of a company means weighing a few criteria, which count differently depending on the project. The manager’s social security scheme and the way profits are taxed also come into play; here are the questions that first steer the choice of a form.
Setting up a company in 4 steps
Whatever the form chosen, the setup follows the same thread, from the project to registration.
Who joins, who contributes what, who manages: these answers determine the form. A founder working alone can choose the EURL or the SASU.
The articles include the items of Article 1835 of the Civil Code: contributions, form, purpose, name, registered office, capital, duration and operating rules.
Each partner provides what they promised: the money is deposited before registration, and assets contributed in kind are described in the articles.
The application is filed online, on the business formalities portal (guichet des formalités des entreprises). Registration gives the company its legal personality: it can then open its business account and invoice.
In short: a company is a contract that has become a legal person. Its form decides the number of partners, the capital, each partner’s liability and how flexible management is.
Vivid, a business account in the company’s name
As soon as it is registered, the company needs an account in its name to collect its sales and pay its expenses. Vivid, an electronic money institution, offers a business account to companies registered in France: the EURL, SARL, SAS, SASU, SA, SNC, SCS, SCA, SCP and SEL are in the list of legal forms of the sign-up form.
You apply once the company is registered, with its registration number. The company’s flows thus stay apart from its partners’ personal accounts, which makes bookkeeping simpler.
Vivid at a glance: from the EURL to the SA, a company registered in France can apply online for a Vivid business account with unlimited French IBANs, starting from the Free Start plan at €0/month.
A business account for your company
Your company is registered: apply online for a Vivid business account with a French IBAN and start on the Free Start plan, with no monthly fee.
Frequently asked questions
What is the definition of a company (société)?
It is a contract by which two or more persons pool property or their work to share a profit or benefit from a saving, under Article 1832 of the Civil Code. Once registered, the company becomes a legal person distinct from its partners, with its own assets and its own commitments.
What is a company compared with a business?
The business is the economic activity; the company is one of the legal forms that allow it to be carried out. A sole proprietor runs a business without a company, whereas an SARL or an SAS is both a business and a company. The sole proprietor does, however, benefit from an automatic separation between business and personal assets.
Can a company have only one partner?
Yes, in the cases provided by law. The EURL, like the SASU, has only one partner: a founder working alone has a structure of its own and liability limited to their contributions.
When does a company become a legal person?
On the date of its registration, under Article 1842 of the Civil Code and Article L210-6 of the Commercial Code. Before that date, the company is in formation and does not yet have legal personality. Once registered, it signs its contracts and opens its accounts in its own name.
What is the difference between a civil and a commercial company?
A company is commercial by its form (SNC, SCS, SARL, SAS, SA) or by its purpose, under Article L210-1 of the Commercial Code. The others are in principle civil, such as the SCI or the SCP (société civile professionnelle). The SEL, for its part, takes a commercial form for a liberal purpose.
Is capital needed to set up a company?
It depends on the form. The SARL has no minimum capital, the SAS and the SNC start from €1 according to Service Public, while the unlisted SA requires at least €37,000. The amount chosen is stated in the articles.
Which documents found a company?
The articles of association, drawn up in writing. They state each partner’s contributions, the form, the purpose, the name, the registered office, the capital, the duration and the operating rules of the company, as required by Article 1835 of the Civil Code.
This article is provided for general information and does not constitute legal, tax or social security advice. The definitions and rules cited come from Légifrance, Service Public and Insee; the form of a company is ideally chosen with a chartered accountant or a lawyer. Payment services are provided by Vivid Money S.A., an electronic money institution authorised by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, whose branch in France is supervised by the Autorité de contrôle prudentiel et de résolution (ACPR).
