Buying a Business in France: The Foreign Buyer's Full Guide

Buying a business in France: what changes when the asset is a fonds de commerce

Buying a business in France usually does not mean buying a company. In most deals over a shop, a restaurant, a hotel or a workshop, what you buy is the business as an asset (fonds de commerce): the clientele, the lease, the name, the equipment and the licences a trader has assembled to serve customers. That purchase is governed by its own regime, set out in Articles L 141-2 to L 141-22 of the Commercial Code, and it works differently from an English or American asset purchase on almost every point that matters: the town hall may have a right to buy the business before you do, the price you pay is blocked for months after signing, the seller's creditors can attach it, and for up to 90 days you can be jointly liable for the seller's taxes (CGI Art. 1684).

This guide takes the steps in order, what you are buying, the pre-contracts, the town-hall check, the deed, the payment rules and the taxes, so you know what each one is for before you commit.

What you buy when buying a business in France

The business is the set of assets a trader has organised to attract and serve a clientele. The list varies from deal to deal; what does not vary is the core requirement: for the sale to qualify as a sale of a business at all, the essential elements, above all the clientele, must be transferred. Unless the deed says otherwise, the elements included by default are the shop sign, the trade name, the right to the lease, the clientele and the passing trade (C. com. Art. L 141-5). Everything else should be listed expressly, and in practice the deed itemises what is sold because the price must in principle be broken down between the elements:

• Goods and equipment - the stock, the fittings, the tools of the trade.
• The right to the commercial lease - usually the most valuable element; the walls stay with the landlord.
• Licences and authorisations - an operating licence or approval where the activity requires one.
• Intellectual property - the name, the sign, and any industrial-property rights attached to the business.

Two exclusions surprise foreign buyers. Unless the contract provides otherwise, the seller's receivables and the seller's debts are excluded from the sale. You do not inherit unpaid invoices, and you do not take over what the seller owes: a debt only passes to you if the creditor concerned agrees (C. civ. Art. 1327), and the seller is only released for the future if the creditor expressly consents - otherwise seller and buyer answer for the transferred debt together unless agreed otherwise. If you want particular contracts, receivables or liabilities inside the deal, the deed must say so, and the counterparties may need to be notified or to consent: an assigned receivable only binds the debtor once notified or acknowledged (C. civ. Art. 1324).

Buying the business or buying the company: two ways of buying a business in France

If the target is operated through a company, you face a structural choice: buy the business from the company (an asset deal), or buy the shares of the company that owns it (a share deal). French law keeps the two strictly apart: the sale of all, or a majority, of the shares in a company is not a sale of the business sitting on that company's balance sheet. The company remains the owner of its business; only the shareholders change.

Which route is right depends on the target's history, the lease, the licences, the tax position of each side and what the seller will accept. The rest of this guide deals with the asset route - the standard structure for owner-operated businesses in France.

Before you sign: negotiations when buying a business in France

Negotiations are free in principle: there is no obligation to negotiate, to keep negotiating, or to conclude, and either side may walk away until the contract is formed (C. civ. Art. 1112). That freedom comes with three guardrails that apply automatically, whether or not you sign any preliminary document.

Good faith, disclosure, confidentiality

Good faith binds both parties in opening, conducting and breaking off negotiations (C. civ. Arts. 1104 and 1112), and it is a public-order rule - the parties cannot contract out of it. What is sanctioned is never the walking away, but the circumstances around it. Conduct the courts treat as bad faith includes:

• opening or continuing talks with no intention of concluding;
• feeding the other side inaccurate or partial information;
• an abnormal delay in answering proposals or counter-proposals;
• letting the other side believe the deal is done when it is not;
• using confidential information from the talks for other ends.

Disclosure: the party who knows information of decisive importance for the other side's consent must disclose it where the other side legitimately ignores it or relies on its counterparty (C. civ. Art. 1112-1); the duty binds seller and buyer alike and cannot be limited or excluded by contract - though it does not extend to an estimate of the value of the business. Breach engages liability, and where it vitiates consent, the contract can be annulled. Confidentiality: whoever uses or discloses confidential information obtained in the talks is liable even without an agreement (C. civ. Art. 1112-2) - but since the statute does not define what is confidential, say so in writing: a clause identifying the protected information turns an argument into a contractual claim.

The pre-contracts, in the right order

A preference agreement (pacte de préférence) obliges the owner to offer the business to the beneficiary first. A sale agreement (promesse de vente) locks the deal before completion - and a bilateral sale agreement, where both sides commit on the asset and the price, is treated as the sale itself, including for tax: registration duty falls due on it. The standard way to commit while protecting yourself is the conditional sale: signed subject to conditions precedent (conditions suspensives), the buyer obtaining financing, the required licences, the landlord's position, with the transfer, and the tax, deferred until the conditions are fulfilled.

Which way of buying a business in France fits your deal?

Pick the situation closest to yours - the check shows how the deal usually runs, and the point of law not to overlook.

The town hall check before buying a business in France

French municipalities may, by reasoned decision of the municipal council, create a safeguard perimeter for local shops and crafts. Inside that perimeter, sales of businesses are subject to a municipal right of pre-emption (C. urb. Arts. L 214-1 et seq.): the town hall can step in and buy the business in place of your buyer - and the perimeter can lawfully cover the whole territory of the commune. Only sales for value are caught: gifts, inheritances and legacies fall outside the right, as do sales of isolated elements with no clientele attached.

The mechanism runs through a prior declaration. Before the sale, the owner must file with the commune a declaration of intent to sell (déclaration d'intention d'aliéner, DIA) stating the price, the intended buyer's activity, the seller's headcount and the terms of the sale. Naming the prospective buyer is optional - but a named buyer gains a priority right to acquire the business if the commune pre-empts and then fails to re-transfer it within the legal period, so it is usually in your interest to be named. Once the DIA is filed, the commune has two months from receipt to exercise its right; silence for two months counts as renunciation, the commune can also waive expressly before the period expires, and a request for further information can extend the window by two months. Where the business is sold at auction, the declaration is made by the auctioneer, the court registry or the notary conducting the sale, at least thirty days before the date fixed for it.

Who can sign when buying a business in France

The sale of a business is, in principle, a commercial act for both sides - for the seller as an accessory to its trade, and for the buyer who acquires in order to operate. Both parties therefore need the capacity to perform commercial acts, and the buyer who intends to run the business personally needs the capacity to be a trader. A non-emancipated minor can neither be a trader nor perform isolated commercial acts, and cannot acquire a business even through a legal representative.

The situation to check early is marriage. Where the business forms part of the spouses' community property, neither spouse can sell it, nor collect the sale price, without the other (C. civ. Art. 1424). This co-management rule admits no exception, not even for the spouse who runs a separate profession. No particular formality is imposed, the spouse's consent can be given before or after the deed, but a deed signed by one spouse alone over a community-property business is exposed. On the buy side, verify the seller's matrimonial situation; on the sell side, get the spouse's written consent into the file.

The deed of sale when buying a business in France

Since 21 July 2019, French law no longer imposes mandatory disclosure clauses in the deed. Before that date, every private sale deed had to state a list of particulars - the previous sale of the business, the security interests registered against it, the turnover and results of the last three financial years - and omission allowed the buyer to seek annulment within a year. The statute that required this (former C. com. Art. L 141-1) was repealed by the simplification law 2019-744 of 19 July 2019, so a sale can now validly be concluded without those particulars - and even, strictly, without a written deed at all.

In practice you will always want a written deed, for three reasons the repeal did not touch: the publication formalities that start the creditor-protection process require one; the seller's security interest over the business for the unpaid price (privilège du vendeur) can only be preserved with one; and where the sale includes the commercial lease and the lease requires assignments to be notarised, that clause binds the sale of the business too - the deed must then be a notarial deed.

The buyer's protection has shifted ground rather than disappeared. Instead of a checklist of compulsory particulars, the buyer now relies on the seller's pre-contractual duty of disclosure and on fraud (dol): a seller who withholds requested information or deliberately conceals a material fact, pending litigation that threatens the operation, for example, exposes the sale to annulment and itself to damages. Operationally, due diligence and the representations in the deed now carry the weight the statutory particulars used to carry: the deed should record what was disclosed, turnover, results, the state of the lease, registered charges, employees, litigation, precisely because the law no longer forces the seller to volunteer it.

After signing: what the seller still owes you when buying a business in France

The deed is not the end of the seller's obligations. Three warranties of the general law of sale continue to protect the buyer of a business - and knowing their scope decides what you negotiate into the deed.

Delivery of what was promised

The seller must put the business at your disposal as sold - delivery is the transfer of the asset into the buyer's enjoyment and possession (C. civ. Art. 1604), distinct from the transfer of ownership, which as a rule occurred at the exchange of consents on the asset and the price. The seller must deliver every element identified in the contract and cannot substitute others without your agreement. Conformity is measured against the contractual specifications - and against representations in documents outside the contract, such as sale brochures, once they entered the contractual field. A seller who, unknown to the buyer, disposed elsewhere of something the sold business depended on has failed to deliver.

The warranty against eviction - including the seller's own competition

The seller owes the buyer peaceful possession of what was sold (C. civ. Art. 1625): even where the deed says nothing, the seller is bound by law to warrant the buyer against eviction from all or part of the business, and against undeclared charges on it (C. civ. Art. 1626). The warranty covers two directions. Against the seller's own acts - the seller cannot itself disturb the buyer's possession, and this personal-fact warranty cannot be contracted away. Against third parties - legal challenges to the existence, nature or extent of the buyer's rights whose origin predates the sale; this branch can be adjusted by contract (C. civ. Art. 1628), and it is lost where the buyer could have avoided the eviction or caused it. Where eviction is total, the buyer can no longer operate the business at all, the buyer of good faith recovers the price, the costs of the warranty claim and damages (C. civ. Arts. 1630 to 1633), with the business valued at the date of the eviction decision. Where a third party takes only an element, the lease, typically, the eviction is partial and the remedies adjust. The non-compete clause in the deed builds on this floor: it fixes in advance, by activity, place and time, what the seller may not do next door.

Hidden defects

The seller also warrants the absence of hidden defects in the business sold. The consumer-law conformity warranty does not apply to sales of businesses - the ground here is the general hidden-defects warranty of the law of sale, and the deed's representations are what give it teeth in practice. Together with pre-contractual disclosure and fraud, these warranties are the buyer's post-closing arsenal: which one you invoke depends on what went wrong, and on what the deed recorded.

Paying the price: why the money is blocked after buying a business in France

Here is the part no foreign buyer expects: you should not hand the price to the seller at signing - even if the price is payable in full. The law makes the sale price unavailable for a period after the sale so that the seller's creditors can assert their rights against it, and a buyer who pays early pays at its own risk: payment made before the opposition period expires, or despite oppositions, cannot be set against the creditors, who can in effect make the buyer pay twice.

The process runs on publication. The sale must be published within fifteen days; any creditor of the seller, whether or not the debt is yet due, then has ten days from publication in the official bulletin (BODACC) to lodge an opposition (C. com. Art. L 141-14). An opposition is a conservatory measure: it gives the opposing creditor no priority and no lien, but it prolongs the unavailability of the price and freezes the seller's claim - the seller can no longer assign it, set it off, or agree a price reduction that would bind the opposing creditors. The seller is not without remedies: an opposition lodged without title and without cause can be lifted by summary order of the president of the commercial court (C. com. Art. L 141-16), and where the oppositions total less than the price, the seller can be authorised to receive the surplus against consignment of a sufficient sum (C. com. Art. L 141-15).

In practice the price is paid to a third-party stakeholder - an escrow agent (séquestre) with whom the parties elect domicile. The stakeholder must distribute the price within 105 days of the deed, extended by 60 days where the seller has not filed its post-sale tax returns; failing distribution, either party can apply to the president of the commercial court (C. com. Art. L 143-21). One more reason not to release early: for up to 90 days, the buyer can be held jointly liable, up to the amount of the price, for the seller's taxes on the business (CGI Art. 1684) - keeping the price in escrow through that window is the buyer's practical shield. In a French business purchase, signing day and the day the seller receives the funds are months apart, by design.

Calculate the registration duty on buying a business in France

Enter the agreed price - the calculator applies the scale of CGI Art. 719 and shows what the buyer pays on top of the price.

Taxes when buying a business in France

The buyer's headline tax is the registration duty computed above: due as soon as the price exceeds €23,000 (CGI Art. 719), owed by the buyer unless the contract puts it on the seller, at 3 % on the fraction between €23,000 and €200,000 and 5 % above. Two categories escape the duty altogether: purchases for resale by VAT-registered professionals meeting the statutory conditions, and acquisitions by local authorities. Note the scope: a "successor agreement", any agreement for value allowing a person to step into a predecessor's profession or position, is taxed like a business sale even without a transfer of clientele (CGI Art. 720). Timing follows the contract: the duty becomes payable when the sale is perfect, agreement on the parties, the asset and the price, so a bilateral sale agreement is taxed as a sale, while a conditional sale defers the duty until the condition is fulfilled.

Two duty points are easy to miss. Vis-à-vis the tax office, the parties to the deed are jointly liable for payment of the duty - the clause allocating it binds only buyer and seller between themselves. And where the deed is notarised, it must be registered within fifteen days.

On VAT, sales of businesses fall in principle within its scope but benefit from the statutory relief for transfers of a totality of assets (CGI Art. 257 bis) - in the standard whole-business sale, no VAT is charged on the price.

The seller's filing calendar - and why the buyer should care

The seller's post-sale obligations run on the publication of the sale, which must occur within fifteen days:

• Notification of the sale to the administration within 45 days of publication (CGI Art. 201) - 30 days for VAT purposes, the VAT filing counting for both;
• Immediate return of profits and gains within 60 days of publication - in practice up to 75 days from the sale;
• Late or missing filings expose the seller to assessment of the tax base of the administration's own motion and to penalties.

These deadlines matter to the buyer twice over. The escrow distribution period is extended by 60 days if the seller has not filed. And the buyer's joint liability for the seller's income or company tax on the year's profits, capped at the price, lasts 90 days from the seller's results return (CGI Art. 1684), reduced to 30 days where three conditions are all met:

• the sale was notified to the administration within the 45-day deadline;
• the seller filed its results return within the 60-day deadline;
• the seller was current with its filing and payment obligations at the end of the month before the sale.

The practical consequence writes itself into the deed: the escrow holds the price through the joint-liability window, and a seller who files on time shortens the window - and gets paid sooner.

Is your price release schedule safe?

Two answers show what stands between the deed and the seller actually receiving the money.

Frequently Asked Questions

This article is for general information only and states French law as published in the sources available at the date shown above. It does not constitute legal or tax advice. A business purchase sits at the crossroads of contract law, commercial law and tax; the right structure depends on the target, the lease and the parties' positions. Always seek qualified legal advice before signing a letter of intent, a sale agreement or a deed of sale.