SAS vs. SARL: Choosing the Right Legal Structure for Your Business in France

1. Social Status of Managers

The social status of the company‘s managers is a significant differentiator between SAS and SARL. This status determines how the managers are classified in terms of social security, which influences their contributions and benefits.

• SARL Management: In an SARL, if the manager owns more than 50% of the company, they are considered a “majority manager.” Majority managers fall under the Non-Salaried Workers (TNS) regime and are subject to specific social security contributions, typically around 45% of their remuneration. Moreover, even if they receive no salary, they must pay minimum flat-rate contributions, around €1,200 annually. Conversely, minority managers (those owning less than 50%) are considered employees, receiving a salary and having no obligation to pay social security charges on dividends received.
• SAS Management: In an SAS, the distinction between majority and minority shareholders doesn’t affect the social status of the manager. Whether the manager is a minority or majority shareholder, they are classified as an employee. As such, their social security contributions are calculated based on their salary, which usually includes both employee and employer contributions, averaging around 80% of the net salary. Dividends, however, remain exempt from social security charges.

2. Taxation

Both SARL and SAS are typically subject to corporate income tax (CIT), but there are options to be taxed under personal income tax under certain conditions.

• SARL Taxation: Profits in an SARL are generally subject to corporate tax. However, if the company meets specific criteria (such as being a family-owned business), it can opt for personal income tax treatment. This option offers flexibility but is not always advantageous, depending on the income levels and tax rates applicable to the partners.
• SAS Taxation: SAS also generally falls under corporate tax. Notably, a newly established SAS can opt for personal income tax, but only within the first five years of its creation. After this period, it defaults to corporate tax, making this structure less flexible in the long term for those looking to manage tax based on personal income levels.

3. Liability and Number of Partners

Both SAS and SARL offer limited liability, meaning shareholders are only liable up to the amount of their contributions. However, the number of partners and the complexity of management can influence the decision.

• SARL: Suitable for small to medium-sized businesses, SARL can have between 1 to 100 partners. The management structure is more rigid, making it ideal for businesses where control needs to be tightly held, often by family members or close associates. The shareholders’ liability is limited to their contributions, making it a secure option.
• SAS: Offering greater flexibility, SAS can have unlimited partners, making it suitable for larger businesses or those planning to attract investment. The management structure allows for a President and other possible governing bodies (e.g., General Manager), providing more flexibility in operations and decision-making. The liability of shareholders is similarly limited to their contributions.

4. Management Flexibility

The flexibility in management structure is another critical difference between SARL and SAS.

• SARL: In SARL, management is typically handled by one or more managers appointed by the partners. The powers and responsibilities are defined strictly by law, which can limit the flexibility in decision-making processes. This structure is advantageous for maintaining control but can be restrictive for businesses looking to expand or adapt quickly.
• SAS: SAS offers more management flexibility. The President, who can be supported by a General Manager or other officers, oversees the company. The roles and responsibilities can be tailored within the company’s articles of association, allowing for a more adaptable management approach. This flexibility is appealing for startups and growing businesses looking to adjust management roles as they expand.

5. Share Transfers and Shareholding

The ease of transferring shares can be a crucial factor, especially for companies considering future changes in ownership or attracting new investors.

• SARL: The transfer of SARL shares is more regulated, often requiring approval from other shareholders, especially if the buyer is a third party. The process typically involves a registration fee of 3% after a deduction of €23,000, proportional to each partner’s ownership.
• SAS: SAS offers more straightforward share transfer procedures. Transfers can be done with a simple account-to-account transfer and are subject to a lower registration fee of 0.1%. This flexibility makes SAS more attractive to investors and suitable for businesses that plan to raise capital through new share issuances.