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TALKING SHOP - SETTING UP A BUSINESS IN FRANCE


Talking Shop

Every year thousands of foreigners are tempted to set up a business in France, often thinking that they can prolong their holidays here. Unfortunately, what were dreams often turn into nightmares and the number of foreigners who have succeeded in business is remarkably low.

Even for the French, setting up a business is renowned to be incredibly tough. Compared to the U.K. and the U.S. there is an enormous amount of complicated paperwork, not just to set up the company, but also to run it afterwards. The only solution is to "waste" money on lawyers and accountants in the hope that they do a good job, or do the best you can yourself. Be warned, the French authorities have no sympathy for people starting out in business and if you do things wrong, you can get into serious trouble. The notion of making mistakes, but doing so in "good faith" isn't recognized here: if you do something incorrectly, however innocently, you won't be let off the hook.

Apart from the natural drawbacks of cultural and language differences, foreigners have an enormous disadvantage when it comes to the limited extent of their contacts: French business thrives on personal contacts. "Most deals are done as a result of friendship rather than the quality or price of a product" says the commercial director of a French company. Unfortunately, foreigners are unlikely to have networks here, so unless you have the means to recruit someone with hundreds of pals in high up places you may find it very difficult to expand the scope of your business beyond the Anglophone community.

Something else to bear in mind is that successful businessmen in France are regarded by the public with a mixture of awe, jealousy and suspicion. This might explain why France is so short of people raring to create their own companies and so full of people dying to get careers in the civil service. Unfortunately it also means that as an employer you're never right. Employees who are sacked are always right, as is the "fisc" (or tax office). If your company eventually fails, you may well end up being responsible for the liabilities, even though the structure of the company appeared to offer "limited liability." In spite of all this, LIVING IN FRANCE unearthed a few survivors.

SAN FRANCISCO BOOK COMPANY
Phil Wood, co-owner and manager of the San Francisco Book Company, came to Paris three years ago. His belongings consisted, among other things, of two thousand books he wanted to sell. A year and a half later, the San Francisco Book Company first opened its doors to the public.
"Basically there are always going to be problems. My first problem was that I couldn't be a gérant (director) of a French company, because I am not a citizen of an EU member-country. To be a gérant I had to either find someone who was a EU citizen to be my représentant légal or get a carte de commercant étranger which would automatically entitle me to a carte de séjour. I was in a Catch 22 situation; to be a legal resident, I had to have a carte de commerce, which in turn required that I be the gérant of a company that existed. In order to register a company, it must have a gérant! It was crazy. On the whole, people kept telling me it was impossible to do what I wanted to do. In the States when you start up a business, people congratulate you. But as an American friend of mine who lives here is fond of saying: "In France 'No' is not the end of the conversation, it's the beginning."

While trying to tackle the French system, Wood took classes at the Sorbonne and the Chambre de Commerce and happened to meet a man who helped him with his papers.

"I think it's extremely important to know French people, to have French friends who can help you to approach the system with the right attitude."

"Basically, I just kept on going, although at the time people said I would never succeed. In terms of running a business here in France, I'm not at all bitter. Quite the contrary. It is all about understanding the system, trying to cooperate with the authorities and filling out the forms correctly. In France paperwork is much more important than in the U.S., and that's something we Americans have a hard time understanding. We just want to get the thing done, whatever it is. However, I've come to accept that ultimately there's something to be said for the French way of doing things."

ABBEY BOOKS
10 years ago on July 1st 1989, Brian Spence opened Paris' first English/French-Canadian combined bookstore, the Abbey Bookshop.

"It took me about a year to find the location. I started thinking of a store in 1987, and did regular trips to Paris in 1988. Most of the time, I was offered nice locations which were over priced, or poorly located stores which were cheap. The best location I found, the real-estate agent ended up taking himself!"

"Then, one day I was walking in the area where I now have my bookstore, and it occurred to me that all I really had to do was to find an area that I liked and start knocking on doors. Eventually I found a place and I slipped a card beneath the door. The next day I had an answer and within two weeks I had negotiated the lease and moved in."

Brian already spoke French when he came, but advises people who don't to get a good lawyer. "In Toronto, Canada I only sold second hand books, here in Paris I sell new books as well. The biggest differences between the French and the Canadian systems are that business life is much more controlled and regulated here. Here you absolutely have to have an accountant, whereas in Canada I only used an accountant once a year. On the other hand the administration nowadays are taking a more cooperative attitude as opposed to the confrontational one it had ten years ago. Things are changing."

UNE FEMME A PART
Tina Winfield worked in marketing in the States, a useful skill when it came to starting up her mail-order company, Une Femme A Part, in Paris. Comparing the American market with the French, Winfield finds the French one easier in some ways.

"First of all it's smaller and therefore it's easier to get attention. In the beginning we got an enormous reception from the press. On the other hand the difficulty here, is that people are not very keen on trying new products. However when the French do decide to buy, they tend to be loyal."

Une Femme A Part sells lingerie, and before setting up businesses, Winfield spent a year researching the market, making sure that the products were in line with French preferences. "Business was good from the beginning-careful preparation gives results." One mistake they made, however, was failing to check up on the company from whom they bought their software.

"We spent 300 000F on computers that weren't worth anything like that much. My advice to everyone is never spend money on anything until you're sure of what you're getting. Minimising office expenses as well as staying close to the customers is always what's most important."

TUMBLEWEED
"I came here in 1977, and opened Tumbleweed in 1989", a store which specialises in unique handicrafts by American and British artists. "By then I knew the language, so that wasn't a problem. There were, of course, others."

Lynn Rovida took a three-month course in how to start a business, something she regards as having been crucial when it came to realising her dream. "In the beginning my problem was that I had almost no capital or experience. But I refused to give up." Rovida's first store was tiny and situated on a narrow street in the Bastille area. where people rarely passed. It was difficult in the beginning, but by and by she established a faithful clientèle, whose loyalty helped her stay in business. She did, however, have to be flexible. "In the summers, in order to survive, I had to take all my stuff and go down to the open markets in Provence."

After a couple of years, business was better, and in 1993 Rovida moved Tumbleweed to a bigger place 120 m2, on a more lively street. Her clientèle followed. In 1998 Rovida took on her first part time employee, which was a big step for her. "It's a business that I created and nurtured, and I feel strongly for it, as if it were my child."

TEA AND TATTERED PAGES
"I came here from the US about ten years ago with the intention of opening a bookshop, and one of my friends asked me: 'Why don't you do a tearoom as well?' And I did."

Kristi Anderson, owner of Tea and Tattered Pages didn't have any difficulties when it came to acquiring her carte de séjour, she married a Frenchman. For all the legal work she used a lawyer as well as an accountant. If she had the chance to do it all again, she would head straight for a course at the Chambre de Commerce, something she recommends to anybody wanting to set up a business. The location, of extreme importance according to Anderson, she found through an ad in De Particulier à Particulier available from newspaper kiosks. Then she put an ad in a local Anglophone magazine asking for second-hand books.

"Today, I think one of my biggest problems is that the store is too small. I want one that is at least 140 m2, but it's almost impossible to find a place that big here in Paris. I would also like to expand on the food business, to have the possibility to sit more than seventeen people." Because Tea and Tattered does not sell alcoholic beverages, there's no need for a license. Altogether there are no difficulties in having a combined bookstore tea-room.

"The key thing to pay attention to in France is the personnel. I had a part-time employee for a long time and had no idea that the authorities will give you a deduction when it comes to social security for part-time help. At the Chambre de Commerce, they have files about this, in French as well as in English. These things are really worth finding out about.

Asking French people for advice is something that Anderson avoided. "What you end up with is a whole lot of different suggestions. Of course it was difficult in the beginning since I didn't speak much French, but I kept on doing things my way and it worked out."

Today, Kristi Anderson acts as a consultant for people who want help with their businesses. She has helped to set up bookstores in France as well as in Russia and Spain.

Legal Advice
Stephanie Simonard, a legal expert from Cabinet Simonard, which specialises in advising people on setting up a business recommends that people head for the CCIP Chambre de Commerce et D'Industrie de Paris, to get help, information and a business permit (carte de commercant étranger), as well as information on how to register the company at the Registre de Commerce. All the information at the CCIP is free. She recommends using a lawyer at one of the Chambers of Commerce, to get help with the resident permit (carte de séjour), which is difficult for non EU members in France.

"What one should pay attention to here in France", says Simonard, "is if that you are an American citizen you're quite likely to be subject to double taxation, you'll be obliged to pay taxes in the States because of your citizenship, as well as here in France because of your business. The U.S. embassy has a list of lawyers and accountants that will help with avoiding double taxation. Furthermore, there are agreements between France and the States like the Social Security Totalisation Agreement, which avoids double taxation at the social security level, but not many people are aware of that."

Importing a Company
A way of getting around heavy taxation for American expatriates is to form a company in the States and then send people to France as employees, This enables the business owner and perhaps some employees to stay in the American social charges system for five years. American expatriates who are already self-employed, have the right to settle in France and work for two years without having to pay French social charges.

If you are an expatriate citizen of a European country, it's worth considering setting up your company in your home country and creating a subsidiary, or an établissement stable, here. This is relatively simple and much less costly than setting up a company in France. For example, you can buy a shelf company (ready-formed) in the UK within 24 hours for under °Ë300. Because it's so simple, you can do the paperwork yourself which cuts out on legal fees. In France the creation of an equivalent company takes about a month and will cost you about °Ë1,050 in legal fees. Moreover, the minimum capital required to start a company here is °Ë7500, which is blocked during the month it takes to form the company.

If you do decide to set up your company in another European country, you must have a real office outside France, where a substantial part of your business and business decisions must be carried out. It is important to take expert advice. If you don't set it up correctly, your company outside France can eventually be assessed for tax, as a French company, and at some time in the future, you might end up with a very large tax bill. Remember that in France, it's not what you do, but how you do it that counts.

For a complete list of addresses consult The Yellow pages & Classified ads.



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