Obstacles to Starting a Business in France

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It is not a secret that starting a business in France is a challenge. There was an article on CNN Money about how talented young entrepreneurs are leaving France to open their doors in more business-friendly areas, such as Silicone Valley, CA. My husband even tried to convince me that we should move to the UK!

There are many theories to why entrepreneurs are leaving France, but my thoughts are it is a combination of high taxation, confusing business legal structures and cultural acceptance.

High Taxation

Taxation is not an easy topic to discuss in France. I cannot tell you how much businesses are taxed here or what the average tax rate is per legal structure. The amount of taxation depends not only on the legal structure, but also on the profession. For instance, we found out that my physical therapist pays 50% in social taxes while a copywriter pays 18%. Why should a copywriter pay less in social taxes when both people receive the same benefi?

To add to the mix, some business structures give business startups a reduced tax rate for the first 2 years and discounts if previously unemployed. So depending on the profession you choose and your personal situation, you may have to work longer and harder to afford your taxes.

Confusing Business Legal Structures

My husband started his company over a year ago under the auto-entrepreneur legal structure but is ready to expand, so he must change his business type. He began researching information about the different legal business structures in April and we are still confused on some technical details. He has met with at least 6 accountants, talked with 3 other accountants over the phone, met with 4 lawyers, plus went to les Impôts (France’s IRS) for clarification. He has also called les Impôts several times and spent countless hours researching online.

No matter who he talks to – accounts, lawyer or les Impôts – he gets different answers! Finally, someone at les Impôts told him to write his questions in a letter and that they will respond within 2 to 3 months. This way he can have the answers in writing in case in the future anyone questions why he is under a particular business type. Since everyone in les Impôts gives him a different answer, we are worried that one day he could be fined for conducting business in the wrong business type.

See why entrepreneurs can be frustrated in France? My husband has an MBA, read all the information provided by the government, consulted with all the right people over the past five months and still does not have the answer to which business statute he should select. His business does not fit neatly into one of the government’s categories. If he would have just called one person and listened to that person’s advice, then several years down the road we could receive a notice for owing thousands of euros worth of taxes or fines for having an inappropriate business legal structure.

If we lived in the USA, he could have just set up a sole-proprietorship for his business and not have to go through all this hassle. He could have applied for this tax ID online, received it instantly and then paid his business taxes at the same time as he paid his personal income taxes. You can imagine how much he loves it when I remind him of this!

Some headway has been made to help small entrepreneurs start their businesses, such as the creation of the Auto-Entrepreneur business statute. This is the one that my husband used to start his business. While it is very helpful and a start in the right direction for France, it has many limitations for entrepreneurs with big dreams. This statute caps entrepreneurs on their revenue, does not allow for deductions and does not permit them to hire employees.

(Learn more about the legal business structures in France).

Cultural Acceptance

There are two major cultural attitudes that prevent the entrepreneurial spirit from taking flight. The first is that people are often jealous or skeptical of success. Most people have salaried jobs and find it difficult to move up the ladder or achieve financial success. Raises and promotions are not nearly as common in France as in the USA. When someone succeeds in making it on his or her own, there is a certain level of jealousy or belief that the person did something illegal to reap such rewards.

This jealous attitude does little to help entrepreneurs when they hit obstacles or need encouragement. France is a country where failure is not accepted. If you start a business and do not succeed, you are considered an absolute failure and are advised to go find a regular job. It damages your reputation and is something you will be ashamed of for years to come.

This attitude may change now with the popularity of the auto-entrepreneur legal business structure. Now it is very easy for people to start a business and it is becoming more common. Since starting a small business under this structure does not require a considerable amount of time and money, people may be more easy going when it comes to failure. It also allows entrepreneurs to start their business discretely, so that it does not become prime-time news if they fail.

Image Credit: Elena Kharichkinaom on Fotolia.com

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