Should my French company be an SARL?

SARL process

SARL explained

The SARL is the French name for the LLC, or Limited Liability Company. It’s a common type of company in France, and for good reason: not only does it limit the liability of associates, but it’s also the most versatile of the company types, being able to adapt to many situations.


  1. The associates in SARLs
  2. Financial commitment
  3. Liability
  4. How does the SARL function?
  5. The tax regime of the SARL
  6. The Social plan of the managers of SARL
  7. The tax regime of the managers of SARL
  8. Transferring an SARL
  9. Main advantages and disadvantages of the SARL

The associates in SARLs

An SARL can have anywhere from 2 to 100 associates. These can be either “natural persons” or “legal persons”. In other words, they can be either individuals or entities representing several different individuals.

Financial commitment

The associates are free to determine the volume of equity of the company depending on its size, activity, or financial requirements.
Be careful, however! If the volume of equity doesn’t make sense considering the requirements of the project, the personal responsibility of the manager and/or the founding partners may be incurred.

can be made either in cash or bank check, or in kind.
At least 1/5th of the contributions have to be paid when the company is created, and they must have been paid in full after 5 years.
Something to keep in mind: the partners are liable for the debts of the company up to their planned contributions. This stands even if they haven’t paid all of their contributions to the company by the time debts have to be collected.

An associate can also contribute by making his workforce available to the company, a so-called “contribution in Industry”). While this does not have any impact on the volume of equity of the company, it does allow the associate to vote in the general meeting, and entitles him to his share of the profits. And in that case, his share of the profits has to be at least equal to the profits of the partner with the smallest contribution (unless it is explicitly written otherwise in the company by-laws).

The volume of equity can be variable. In that case, the company by-laws must define a minimum and a maximum that the equity should always be between. The main advantage of this option is that, in the case of a decrease in equity, no official statement has to be made; the company certificate doesn’t have to be changed, etc.


  Simple associates
  • Liable up to the amount of their contributions.
  • Liable for their management mistakes.
  • Criminally and civilly liable.

How does the SARL works?

The company can be managed by one manager or more. They have to be “natural persons” (individuals), and they do not have to be nominated from among the associates. In the absence of statutory limitations, the managers have all powers to act in the name and on behalf of the company. Their appointment and powers are determined either in the by-laws or in a separate document.

The partners meet at least once a year at an Ordinary General Meeting or Board Meeting (OGM).
The approval of the annual accounts, as well as the ordinary decisions are made in general assemblies by simple majority (50% + 1 vote). The blocking minority is therefore 50%.

The shareholders may participate in general meetings using videoconferencing or telecommunication means in accordance with the terms set out in the articles of association. This option is however not possible in case of deliberation concerning the inventory, the annual accounts or the management report.

The decisions resulting in a modification of the by-laws are taken in Extraordinary General Meeting or Board Meeting (EGM).
In order for the meeting to be valid, the shareholders present or represented must hold at least 1/4 of the shares at the first meeting of the EGM (quorum). Otherwise, the second EGM must be held within a maximum period of 2 months and the partners present or represented must have at least 1/5 of the shares.
EGM decisions are made by a 2/3 majority of votes. The blocking minority is therefore 33% + 1 vote.

Exceptionally, decisions to approve the sale of shares (see paragraph on “transmission”) are taken by a majority of partners representing at least half of the shares, unless the by-laws demand a greater majority.

The tax regime of the SARL

The SARL is subject by law to the corporate tax.
The remuneration of the manager is tax-deductible.

It is still possible to opt for the income tax under certain conditions, however:

  •  The family SARL: If an SARL is only comprised of direct-relatives (siblings, spouses, etc.), it is possible to choose the income tax rather than the corporate tax. (SARLs with a liberal activity are excluded from this).
  •  SARLs, SAs or SASs less than 5 years old: This concerns companies that:
    • Are unlisted
    • Employ less than 50 employees
    • Have an annual turnover or balance sheet of less than € 10 million
    • have at least 50% of voting rights held by individuals
    • have at least 34% of voting rights held by the manager
    • have the agreement of all partners
      This is valid for 5 years, unless notice of termination is given.

The social plan of the managers of SARLs

It depends on whether the manager is a “Majority manager”, or a “Minority/Equalitarian manager”. A Majority manager is a manager that holds more than 50% of the capital of the company with his spouse (regardless of the matrimonial regime), his partner bound by a PACS, and his minor children.

Something to keep in mind: If there are several managers, each manager is considered as a Majority manager if the co-managers together hold more than half of the shares.

Majority manager

He is regarded as a Non-Salaried Worker.

If the company is subject to the Corporate tax, the share of dividends received by the manager or by his spouse, his partner bound by a PACS or his minor children for the fraction greater than 10% of the equity, is subject to social contributions, issuance premiums and amounts paid into current account.

The majority manager is unable to deduct professional expenses (up to 10%) from his remuneration to determine the basis of calculation of his social security contributions. However, the deduction of its real costs remains possible.

Minority/egalitarian manager

He is regarded as an Employee. As such, he benefits from the social security and the retirement scheme of employees, but not from unemployment insurance and labor law provisions.

The minority manager may possibly combine the duties of a manager with a contract of employment relating to separate technical functions, if it is possible to establish a relationship of subordination between him and the company.

The egalitarian manager cannot, for his part, have an employment contract for functions that are distinct from his social mandate.

The tax regime of SARL managers

Whatever their situation, regardless of whether they are minority/egalitarian or majority shareholders, the managers belong to the same tax regime as employees. Their earnings are therefore taxed in the income tax category (Wages and salaries).

Transferring an SARL

 Transfer of shares

Shares may only be sold to third parties outside the company with the consent of a majority of partners representing at least half of the shares, unless the by-laws demand a larger majority.

Shareholders remain free to transfer their shares to partners, spouses, ascendants or descendants as they please. However, it is possible for by-laws to demand the same majority conditions for family as for third parties. It is thus important to pay attention to this point when writing the company by-laws.

 tax system
  • Registration fees (at the expense of the buyer).
  • Capital gains tax (payable by the seller).

Main advantages and disadvantages of the SARL

  • Liability of the partners limited to their contributions.
  • Evolutionary structure facilitating partnerships.
  • Possibility for the manager to have the social plan of employees.
  • Expenses and formalism of constitution.
  • Operating formalism.

If you want to learn more about the SARL and how it fares against other company types, you should check out this table detailing the differences between each company type.

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