A Comprehensive Guide to Choosing SAS or SARL for Your Business in France

1. Constitution and Legal Formalities

Both the SAS and SARL structures have requirements for minimum capital, although French law does not impose a high minimum threshold.

• SAS Constitution: The SAS can be established with a minimum capital of €1, although partners usually contribute a higher amount to provide the business with sufficient resources. The structure of the SAS allows for one or multiple shareholders. Moreover, SASU (Société par Actions Simplifiée Unipersonnelle) is an option for single-shareholder companies. Drafting the statutes for an SAS involves significant freedom in determining management roles, voting rights, and decision-making processes. This flexibility is advantageous for larger ventures or companies anticipating rapid expansion.
• SARL Constitution: Similar to the SAS, the SARL also requires only €1 minimum capital, but in practice, partners contribute according to the company’s needs. In SARLs, there must be between two and 100 partners, making it suitable for small to medium-sized enterprises. While SARLs can include family members, there is also an option for EURL (Entreprise Unipersonnelle à Responsabilité Limitée) for single-shareholder companies. SARL statutes follow a more rigid framework, with fewer options to customize the management structure, which is why SARLs often appeal to traditional businesses or family-run companies.

Legal Formalities : For both SAS and SARL, registration involves submitting documents to the Centre de Formalités des Entreprises (CFE) and publishing a notice of formation in a legal gazette. The registration process for an SAS tends to be more straightforward for companies planning to raise capital or include a board of directors.

2. Management and Social Status of Managers

Management and social security obligations are crucial differences between SAS and SARL structures, especially for small businesses or family-owned companies.

• SAS Management: In an SAS, the chairman, or président, is considered an employee for social security purposes, regardless of their shareholding status. Whether they own a majority or minority of the shares or are the sole shareholder, the chairman is under the employee social security regime, meaning dividends are not subject to social contributions. This arrangement is particularly advantageous for those aiming to receive a portion of income through dividends rather than a salary. However, social charges for the president and other salaried managers are typically high, averaging around 80% of net compensation, which covers both employee and employer contributions.
• SARL Management: The management status in an SARL depends on share ownership, which significantly affects social security obligations:
  • Majority Manager: If a manager owns more than 50% of the shares (including shares owned by close family members), they fall under the Travailleurs Non-Salariés (TNS) system. This status involves lower social charges, averaging around 45% of net income, with minimum fixed-rate contributions required even if they do not receive a salary. Dividends paid to majority managers are partially subject to social charges.
  • Minority Manager: Managers holding less than 50% of shares are categorized as employees, falling under the general employee social security system. Dividends they receive are not subject to social contributions.

Example : If a majority manager in SARL owns 60% of shares (e.g., 40% individually and 20% owned by a spouse), their social security contributions will be calculated at 45% of net income, with minimum contributions applying. For an SAS chairman, the social contributions would total approximately 80% of their salary, but dividends remain exempt.

3. Taxation and Dividend Treatment

Tax considerations for SAS and SARL are another key factor for companies. Both structures are subject to corporate tax rates, but dividend handling differs based on the structure.

• Corporate Tax: Both SAS and SARL pay corporate tax (Impôt sur les Sociétés – IS), currently set at a rate of 25% as of recent years, with a reduced rate for smaller profits. Corporate tax applies to company profits after deductible expenses, including manager salaries.
• Dividend Treatment:
  • SARL: Dividends for majority managers in SARL are subject to social contributions for the amount that exceeds 10% of share capital. Minority managers are exempt from these charges.
  • SAS: Dividends in SAS are exempt from social contributions for all shareholders, regardless of ownership percentage. However, they are subject to a 30% flat tax (Prélèvement Forfaitaire Unique – PFU).

Tax Efficiency: For owners in SAS who prefer receiving income through dividends, the exemption from social charges on dividends can provide a significant tax benefit, particularly when compared to SARL majority managers.

4. Compliance and Statutory Audits

The need for a statutory auditor and compliance checks varies based on company size and revenue.

• SAS: An SAS is required to appoint a statutory auditor if it surpasses two of the following thresholds: €8 million in turnover, a €4 million balance sheet, or more than 50 employees. Additionally, an SAS with a legal entity shareholder is mandated to have a statutory auditor.
• SARL: Similarly, SARLs must appoint a statutory auditor upon exceeding the same thresholds. However, family-owned or smaller SARLs often avoid these thresholds, making them an ideal choice for companies aiming to minimize audit obligations.

Compliance : For businesses anticipating growth, selecting an SAS with the intent to meet higher compliance standards can ease future audits, especially if the company plans to attract external investors.

5. Share Transfers and Exit Strategies

For businesses considering future restructuring, partnerships, or exit plans, the transferability of shares is a major concern.

• SARL Shares: Share transfers in an SARL are formalized through notarial documentation or a private deed. Transfers to third parties require partner approval and are subject to a 3% registration fee, after a €23,000 deduction. This procedure ensures controlled ownership but can slow down share transfers, especially if family members or internal partners are involved.
• SAS Shares: The SAS structure is known for its flexibility in share transfers. Transfers are recorded as simple transactions between accounts, subject only to a 0.1% registration fee. Additionally, partner approval is optional, and shareholders can establish approval procedures in the statutes if deemed necessary.

Flexibility : If flexibility in ownership is a priority, the SAS is advantageous, particularly for companies looking to attract new investors or partners without complicated procedures.