Your American, British or German company has just won its first serious French contract, or your sales pipeline in France finally justifies a local presence, and your board asks the question every foreign group asks sooner or later: should we simply register a French branch of the existing company, or should we create a brand-new French subsidiary? The answer shapes everything that follows. A branch (succursale) is quick and cheap to open but leaves the foreign parent fully exposed to French creditors, French employment claims and French tax reassessments. A subsidiary, usually an SAS (société par actions simplifiée) or an SARL (société à responsabilité limitée), costs more to set up and run, but it is a separate legal person: in principle only its own assets answer for its debts. This guide walks through the choice the way a French business lawyer examines it, then through the three traps that catch foreign parents once the vehicle exists: corporate tax and VAT, hiring and managing staff, and going to court. Every key rule is quoted from the statute or the court decision that states it, with the official link beside it, so your team can check the source before acting. The practical companion to this guide is our step-by-step overview of setting up a company in France as a foreign founder, covering the bank account, the Kbis extract, VAT and the first hire, available at Setting Up a Company in France as a Foreign Founder.
I. Should your foreign company open a French branch or create a French subsidiary?
The branch and the subsidiary answer two different business situations. The branch suits a testing phase, a single contract, or representative activity with little local risk. The subsidiary suits lasting operations, local hiring at scale, contracts with French public bodies or large accounts that ask for a French balance sheet, and any activity where you want the parent shielded. The sections below give you the legal mechanics of each, so the choice is made on rules rather than on brochures.
A. Opening a branch (succursale) in France: fast entry, but the parent stays fully liable
A succursale is not a company. It is a secondary establishment of your foreign company on French soil, with no legal personality of its own. Contracts signed by the branch bind the parent directly, debts of the branch are debts of the parent, and a French creditor who cannot recover from the branch can pursue the parent’s assets, including assets located outside France subject to the enforcement rules of the country concerned. French courts treat service and proceedings pragmatically here: a foreign company that operates through a French establishment can generally be sued in France for disputes connected with that establishment’s activity, so the branch does not keep disputes at home. The trade-off is therefore simple to state. You save the cost and time of incorporating and capitalising a company, and closing a branch is normally simpler than liquidating a subsidiary, but you accept unlimited exposure of the parent to everything the branch does in France, including employment and tax liabilities.
Registration is nonetheless a real formality, handled through the single online window (guichet unique) for business formalities described on the official English-language portal at Company Formalities Window (Online Service), with the creation overview at I create – Service Public Entreprendre. The branch must be entered on the Registre national des entreprises (RNE), the national business register that replaced the old separate registers. The statute states the scope plainly: Article L123-36 of the Commercial Code provides that “Il est tenu un registre national des entreprises, auquel s’immatriculent les entreprises exerçant sur le territoire français une activité de nature commerciale, artisanale, agricole ou indépendante.” Foreign operations are expressly included, since the same article covers “Les entreprises étrangères sans établissement stable en France”. In practice the file includes proof of the parent company’s existence abroad with a certified translation, the parent’s articles or equivalent, the decision to open the French branch, the French business address, and the appointment of a permanent representative (représentant permanent) in France.
Two points deserve attention before you file. First, premises. Article L123-11 of the Commercial Code requires that “Toute personne morale demandant son immatriculation au registre du commerce et des sociétés doit justifier de la jouissance du ou des locaux où elle installe, seule ou avec d’autres, le siège de l’entreprise, ou, lorsque celui-ci est situé à l’étranger, l’agence, la succursale ou la représentation établie sur le territoire français.” A branch therefore needs a real, documented French address from day one: a lease, a sublease, or a compliant domiciliation contract. Second, the representative. The person empowered to act for the branch in France commits the parent with every signature, so the powers recorded at the register, the bank mandate, and the internal delegation from the parent’s board must match exactly. Mismatches between who the register shows and who actually signs are a classic source of disputes with banks and suppliers.
Choose the branch when the French footprint will stay light: market testing, one framework agreement, after-sales presence, or a liaison office that will never itself sign risky contracts or employ dozens of people. Move to a subsidiary as soon as the branch starts signing leases in its own rhythm, hiring, borrowing, or litigating, because at that point you are running a company while carrying the parent’s unlimited liability for it.
B. Creating a French subsidiary (SAS or SARL): a separate legal person that shields the parent
A subsidiary (filiale) is a French company in its own right, owned in whole or in part by the foreign parent. The decisive legal fact is personality. Article L210-6 of the Commercial Code states that “Les sociétés commerciales jouissent de la personnalité morale à dater de leur immatriculation au registre du commerce et des sociétés.” From registration, the subsidiary owns its assets, owes its debts, employs its staff, files its own tax returns, and appears on its own Kbis extract, which is the official certificate issued by the greffe, the registry of the commercial court, proving the company’s registered identity. The parent’s risk is in principle limited to the capital it contributed, which is why groups that plan to hire, borrow, or sign significant contracts in France overwhelmingly choose the subsidiary route. Announcements about the company’s life, such as formations, transfers of registered office or liquidations, are published in the BODACC (Bulletin officiel des annonces civiles et commerciales), the official gazette, so counterparties can verify what they are dealing with.
Most foreign parents choose the SAS. Article L227-1 of the Commercial Code provides that “Une société par actions simplifiée peut être instituée par une ou plusieurs personnes qui ne supportent les pertes qu’à concurrence de leur apport.” The SAS with a single shareholder is called an SASU. Its attraction is contractual freedom: the articles (statuts) organise governance almost freely, share transfers can be controlled through approval and pre-emption clauses, and different classes of shares with different voting or financial rights are possible. The company is represented toward third parties by a president (président), who may be a natural person or a legal entity, including the foreign parent itself. Article L227-6 of the Commercial Code states that “La société est représentée à l’égard des tiers par un président désigné dans les conditions prévues par les statuts.” and that “Le président est investi des pouvoirs les plus étendus pour agir en toute circonstance au nom de la société dans la limite de l’objet social.” Acts beyond the corporate purpose still bind the company unless it proves the third party knew or could not have been unaware of the excess, which is why the corporate purpose clause in the articles should be drafted wide enough to cover the real business from the start.
The SARL suits smaller, closed ventures, often with individual shareholders rather than groups. Article L223-1 of the Commercial Code provides that “La société à responsabilité limitée est instituée par une ou plusieurs personnes qui ne supportent les pertes qu’à concurrence de leurs apports.” The single-member version is the EURL. Governance is more statutory and therefore more predictable: management by one or more gérants, regulated agreements with shareholders subject to a control procedure, and share transfers to third parties requiring approval. That rigidity is protective where the French vehicle has minority shareholders alongside the foreign parent, because the statute, not only the contract, polices conflicts of interest.
Minority protection deserves a concrete illustration, because foreign parents often hold 100 percent at first and bring in a French partner later. In a SARL, agreements between the company and its manager or shareholders, known as regulated agreements (conventions réglementées), must be disclosed and approved, and concealment has real procedural consequences. In a widely followed ruling, the Commercial Chamber of the Court of Cassation, decision of 30 May 2018, appeal no. 16-21.022, available at Cour de cassation, 30 May 2018, no. 16-21.022, censured an appeal court that had declared a minority shareholder’s action time-barred without examining concealment. The Court held, under Article L223-23 of the Commercial Code: “Qu’en se déterminant ainsi, sans rechercher, comme elle y était invitée, si le fait que la gérante, dans le rapport de gestion sur les opérations de l’exercice clos le 31 décembre 2008 en vue de l’assemblée générale du 30 juin 2009, ait indiqué aux associés qu’il n’avait pas été conclu de conventions réglementées, n’établissait pas la dissimulation invoquée, laquelle aurait été de nature à reporter le point de départ de la prescription, la cour d’appel a privé sa décision de base légale”. The outcome was total: “CASSE ET ANNULE, en toutes ses dispositions, l’arrêt rendu le 24 mars 2016, entre les parties, par la cour d’appel de Lyon”. For a foreign parent, the lesson runs both ways. If you are the majority, disclose regulated agreements properly and keep the paper trail, because concealment reopens limitation periods. If you are the minority alongside a French operator, missing disclosures in the management report are the first documents your lawyer will request.
Choose the subsidiary when France is a lasting market: local contracts of any size, recruitment, a French bank line, or credibility with French customers who check the Kbis before signing. Choose the SAS for flexibility and group structuring, and the SARL for a small closed circle where statutory protection matters more than tailoring. Either way, the parent’s liability shield holds only while the subsidiary is run as a real company, with its own accounts, its own decisions recorded in minutes, and market-terms dealings with the parent, because French courts can look through artificial arrangements.
II. How do you run the French vehicle from abroad without triggering tax, staff or court trouble?
Registration is the easy part. The expensive mistakes happen afterwards, when the parent treats the French branch or subsidiary as a mere cost centre and discovers that French tax, employment and procedural rules applied in full from the first euro of local activity. The two sections below cover money first, then people and disputes, with the Paris and Ile-de-France specifics grouped where they matter most.
A. Paying French tax and VAT correctly: corporate tax, permanent establishment and registration
Any company operating in France on a commercial basis enters the scope of French corporate tax (impôt sur les sociétés, IS). Article 206 of the General Tax Code provides that the listed companies “sont passibles de l’impôt sur les sociétés, quel que soit leur objet”, which covers the SAS and the SARL as a matter of course. The standard rate is 25 percent, with filings and instalments managed online through the official tax portal at impots.gouv.fr, and our detailed walkthrough for foreign owners covering the 25 percent rate, instalments, the local business levy and how to challenge assessments from abroad is at French Corporate Tax for Foreign Owners. A branch is taxed on the profits attributable to its French activity, while a subsidiary is taxed on its own profits as a French resident company. Either way, keeping separate, France-based accounting from the first transaction is not optional tidiness; it is the evidential base of every future discussion with the administration.
The decisive tax concept for foreign groups is territoriality. Article 209 of the General Tax Code taxes profits determined “en tenant compte uniquement des bénéfices réalisés dans les entreprises exploitées en France”, in other words only profits made through operations run in France, plus certain listed items and profits assigned to France by a double-tax treaty. The treaty layer matters enormously: France’s network of conventions against double taxation allocates taxing rights between the parent’s home state and France, typically around the notion of a permanent establishment (établissement stable). A branch will usually constitute one. More uncomfortably, even without any branch or subsidiary, sustained French activity, a dependent agent concluding contracts in France, a construction site beyond the treaty threshold, or a fixed place of business can create a taxable presence. Groups that invoice French customers from abroad while a team on the ground does the real commercial work should have the establishment analysis done before the first tax year closes, not after the audit notice arrives.
The audit risk is not theoretical, and foreign EU companies are not shielded by establishment freedom when they skip French accounting duties. In a ruling that every foreign group with French operations should know, the Commercial Chamber of the Court of Cassation, decision of 15 February 2023, appeal no. 21-13.288, concerning a Luxembourg company suspected of operating in France, available at Cour de cassation, 15 February 2023, no. 21-13.288, upheld search-and-seizure authorisations. The Court approved the reasoning that “le premier président, qui n’avait pas à caractériser l’élément intentionnel de l’omission de passation des écritures comptables, a pu déduire l’existence de présomptions d’agissements entrant dans le champ d’application de l’article L. 16 B à l’encontre de la société Orefa.” On the European argument, it added that the dawn-raid procedure was compatible with EU law, holding that it “n’entraînait pas la violation des principes de liberté d’établissement et de non-discrimination des sociétés au sein de l’Union”. In plain terms, operating in France without keeping the required French accounting records exposes the company to dawn-raid style measures under Article L16 B of the Tax Procedure Book, and invoking EU freedom of establishment does not block them. Keep complete French books for the branch or subsidiary, retain them on French territory as required, and reconcile them with the group’s consolidated accounts.
Value added tax (taxe sur la valeur ajoutée, TVA) follows its own logic and catches many newcomers. Article 256 of the General Tax Code states that “Sont soumises à la taxe sur la valeur ajoutée les livraisons de biens et les prestations de services effectuées à titre onéreux par un assujetti agissant en tant que tel.” A French branch or subsidiary that makes taxable supplies needs a French VAT number, charges French VAT, files French returns, and reclaims input VAT through those returns. A foreign company with no French establishment that sells into France may instead need French VAT registration with, depending on its home country and the transactions, a tax representative (représentant fiscal), or may report through the EU One-Stop Shop for eligible distance sales of goods and cross-border services. The full registration map, including the representative mechanism and how to fix penalties from abroad, is set out in our companion guide at French VAT Registration for Foreign Companies. The practical sequence for a new French vehicle is fixed: register for VAT early, configure invoicing with the correct French mentions before the first invoice goes out, and calendar the returns, because late registration plus uncharged VAT is the combination that turns a profitable first year into a loss.
B. Hiring, managing and going to court from abroad: contracts, the de facto manager trap and French jurisdiction
French employment law applies to work performed in France, whatever the nationality of the employer or the language of the group. The first hire must be declared before they start. Article L1221-10 of the Labour Code provides that “L’embauche d’un salarié ne peut intervenir qu’après déclaration nominative accomplie par l’employeur auprès des organismes de protection sociale désignés à cet effet.” This prior declaration (DPAE, déclaration préalable à l’embauche) is filed with URSSAF (Unions de recouvrement des cotisations de sécurité sociale et d’allocations familiales), the network that collects social contributions, and a foreign company can employ in France through its branch or subsidiary, or even without any French establishment by registering directly as a foreign employer, a route explained in our guide at Hiring in France Without a Subsidiary. Payslips, contribution payments and the official contribution portal at urssaf.fr then run monthly, and the cost structure must be budgeted honestly: employer charges add roughly forty percent or more on top of gross salary depending on the level and the applicable collective agreement (convention collective).
Contract drafting needs the same care as the declaration. Open-ended contracts (CDI, contrat à durée indéterminée) are the default, and fixed-term contracts (CDD, contrat de travail à durée déterminée) are strictly fenced. Article L1242-2 of the Labour Code allows them only where “un contrat de travail à durée déterminée ne peut être conclu que pour l’exécution d’une tâche précise et temporaire, et seulement dans les cas suivants”, followed by an exhaustive list such as replacing an absent employee. A foreign group that hires its first French salesperson on a rolling fixed-term contract to avoid commitment usually achieves the opposite: reclassification as a permanent contract with back pay exposure. Dismissal follows the same pattern of strict procedure, with severance floors, notice, and the labour courts (conseils de prud’hommes) as the natural forum. Our analysis of dismissing a first French employee from abroad, including severance and labour-court strategy, is at Dismissing Your First French Employee.
The subtlest staffing risk for foreign parents is not the employee at all, but the executive sent from headquarters who starts running the French vehicle without any formal appointment. French law recognises the dirigeant de fait, the de facto manager: whoever actually directs the company, signs, hires, negotiates with the bank and gives orders can incur manager liability even without holding the title of president, general manager or gérant. The Court of Cassation confirmed the procedural side of this doctrine in a decision directly useful to groups: the Commercial Chamber, decision of 30 March 2022, appeal no. 20-11.776, available at Cour de cassation, 30 March 2022, no. 20-11.776, recalled “à bon droit que les tribunaux de commerce sont compétents pour connaître des actions en responsabilité engagées par des sociétés commerciales contre leurs dirigeants de fait”. The appeal court did not have to prove the de facto role at the jurisdiction stage, because that question belongs to the merits, and the Court therefore “REJETTE le pourvoi”. For a foreign parent, the message is operational. Appoint the French vehicle’s officers formally, record delegations in writing, and make sure the executive from headquarters who flies in monthly acts within a documented mandate. Otherwise the group discovers at the worst moment, when the subsidiary fails or the branch is sued, that its own manager answers personally before the commercial court as a de facto director.
On jurisdiction and enforcement, assume France keeps the dispute. Employment disputes go to the labour courts of the place of work, commercial disputes involving the branch or subsidiary to the commercial court of their district, and in Paris that means the specialised Paris courts with their English-language international chambers for suitable cross-border cases. For Paris and Ile-de-France operations specifically, three local facts help planning. First, the competent commercial court is Paris, and filings, hearings and enforcement steps can be handled by a Paris lawyer under powers of attorney without the parent flying in for every step. Second, labour administration runs through the Ile-de-France regional directorate, and contribution collection through the Ile-de-France URSSAF office, so registration and inspection correspondence concentrates in the region. Third, office leases in Paris almost always mean commercial leases with the protective 3-6-9 year status (bail commercial, statut des baux commerciaux), which affects how the branch or subsidiary takes premises; our guide to signing, renewing and exiting those leases is at French Commercial Leases for Foreign Companies. None of this requires relocating management to Paris; it requires a Paris-based counsel and accountant who receive, calendar and answer every official letter.
Conclusion
Open a branch when you need speed and reversibility for a light French presence, and accept that the parent answers for everything. Create an SAS or SARL subsidiary when France becomes a real market with staff, contracts and assets to protect, and run it as a genuine company with its own books, minutes and disclosures. Whichever vehicle you choose, register tax and VAT before trading, declare every hire before day one, appoint officers formally instead of letting headquarters govern informally, and keep French accounting complete enough to survive a tax visit. Groups that outgrow the branch can contribute or transfer the business to a newly formed subsidiary later, but the transfer itself needs a valuation, a contract, staff consultation where required, and fresh registrations, so it is cheaper to choose correctly at the start. Taken in that order, choice of vehicle, tax registration, employment compliance and documented governance, entering France from abroad becomes a controlled project rather than a sequence of surprises, and your French partners will read the Kbis, the accounts and the contracts as the signature of a serious counterparty.
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