Using an EURL as a French Subsidiary for a Foreign Group

For a foreign group opening in France, the EURL - a SARL with a single shareholder - is often the cleanest way to hold a wholly-owned French subsidiary. It lets the parent own 100% of a real French company, with its own legal personality and limited liability, without having to find a second shareholder or a local nominee. The parent keeps total control, ring-fences its risk, can install one of its own executives as manager, and - because the member is a company - the subsidiary is taxed in France as a company from day one. This guide explains why the EURL suits a foreign group, how the parent holds and runs it, the tax and financing points that matter within a group, how to set it up, and how a universal transmission lets the parent absorb or exit the subsidiary cleanly at the end.

The use of the EURL by legal persons is, in practice, a deliberate choice rather than an accident: a group reaches for it precisely because it wants a French entity it controls absolutely, with the parent's liability contained and management in the hands of a person the group trusts. The points that follow are the ones that most often decide whether a group is well served by the EURL - and the ones where getting the structure right at the outset saves an expensive reorganisation later.

Why the EURL suits a foreign group

The EURL exists precisely to let a single owner run a real company, and a legal person - including a foreign parent company - can be that single owner. For a group, this delivers a rare and valuable combination: total control of the subsidiary, since there is no other shareholder to consult or accommodate; limited liability for the parent, whose exposure is in principle capped at what it contributes; and the ability to entrust management to one of the group's own executives, keeping the French operation under direct control.

This is a genuine advantage over structures that need a second shareholder. A classic SARL requires at least two members, which for a group means finding - and trusting - a nominee to hold a token stake, with all the governance friction and risk that brings. The EURL removes that entirely: the parent holds every share, exercises the powers a shareholders' meeting would hold, and records its decisions in a register. There is nothing to share and no one to align with.

The trade-off is that a company-owned EURL comes with obligations that suit a subsidiary anyway: it is taxed as a company, it must keep proper accounts and a register of decisions, and its winding-up passes everything up to the parent. For a group used to running subsidiaries, none of this is a burden - it is the normal discipline of a controlled entity, wrapped in a light, flexible one-member form. The EURL gives a foreign group a French company that is simple to own and simple to control.

The foreign parent as sole member

The sole member of an EURL can be a natural person or a legal person, and nothing stops that legal person being a foreign company. The parent holds 100% of the shares and, in that capacity, takes every decision reserved to the members. A group can even stack the structure - an EURL may itself be the sole member of another EURL - which allows a French sub-holding to sit under a foreign parent where the group's structure calls for it.

One structural restriction matters for groups: the rules on reciprocal shareholdings. Where the EURL's sole member is a share company (an SA or an SAS, and their equivalents), the EURL cannot hold shares issued by that parent. This is rarely a problem for an ordinary operating subsidiary, but it needs checking whenever the French entity is meant to hold securities in the group - the cross-holding could be prohibited depending on the parent's form.

The practical consequence of the parent being a company rather than an individual runs through everything that follows: the subsidiary is taxed as a company, the group can finance it and be financed by it within limits an individual owner could not use, and its dissolution passes its whole patrimony up to the parent. In other words, the "corporate member" status is not a detail - it defines how the French subsidiary is taxed, funded and unwound. Getting the parent's form and the holding structure right at the outset avoids reorganising later.

A French-taxed subsidiary: compulsory company tax

Tax is where the corporate-member point bites hardest, and for a group it usually bites in the right direction. An EURL whose single member is an individual is taxed by default as a partnership, in the owner's hands. But an EURL whose single member is a legal person subject to income tax or company tax is compulsorily subject to company tax - there is no partnership option. The French subsidiary is therefore a company taxpayer in France from the outset, which is normally exactly what a group wants from a French operating entity.

A related point follows: the parent cannot use the "translucent" (tax-transparent) regime that attaches to partnerships. The subsidiary's profits are taxed at its own level under the company-tax rules, and flows up to the parent are dividends, taxed under the applicable rules (and, across borders, under the relevant treaty and group regimes). This is the ordinary picture for a subsidiary and gives the group a clean, self-contained French taxpayer rather than a transparent vehicle whose results flow straight onto the parent's return.

Because the tax footing is fixed by the corporate-member status, there is no election to make and no three-month option to diarise - unlike the individual-owner case. What does need attention is the cross-border tax planning around the subsidiary: the treatment of dividends, interest and any management charges between the French EURL and the foreign parent, and the transfer-pricing discipline that applies to dealings within a group. The company-tax status is automatic; making it efficient across the group is where advice earns its place.

The manager of the subsidiary

The EURL is run by a manager (gérant), who need not be a shareholder - so the parent can appoint one of its own executives, or a trusted local manager, to run the French subsidiary. The manager binds the company toward third parties on the ordinary terms and holds the powers the articles confer, which lets the group keep the French operation under a person it controls while leaving ownership entirely with the parent.

The irrevocability point that affects an individual owner-manager does not constrain a group. Because the manager here is a third party rather than the sole member, the parent - as sole member - can remove the manager, subject to the ordinary rule that a removal without just cause can give rise to damages. In practice the parent should tell the manager what is proposed and let them present their defence; poor management is a just cause. This gives the group a normal ability to change who runs the subsidiary, which a one-person EURL does not have.

The manager's remuneration is fixed by the appointing act, the articles, or a decision of the sole member, and can be approved after the event so long as the articles are respected. A manager who is a group executive may be remunerated by the parent under their existing arrangements, or by the subsidiary - a point to settle deliberately, because it affects both the subsidiary's accounts and the tax and social treatment of the individual. Deciding how the manager is appointed and paid is part of setting the subsidiary up correctly.

Financing the subsidiary within the group

Group financing is one area where the corporate-member EURL is markedly more flexible than an individual-owned one. An EURL cannot lend to, or guarantee the commitments of, an individual sole member (or the manager) - such contracts are void. But those prohibitions are limited to an individual member: where the sole member is a company, the law permits loans and guarantees in favour of the corporate member. Intra-group financing between the French EURL and its parent is therefore possible in ways closed to an individual owner.

That flexibility is not unlimited. Every decision of the subsidiary must be taken in the company's own interest, and a French company that impoverishes itself for the group against its own interest exposes its manager to the risk of misuse of company assets. So an upstream loan or guarantee from the subsidiary to the parent must be genuinely in the subsidiary's interest and properly documented - the permission to do it does not switch off the duty to act in the subsidiary's interest. Group treasury arrangements should be structured with that boundary in mind.

Downstream funding - the parent injecting capital or lending to the subsidiary - is straightforward, whether by capital contribution or by a shareholder loan through a current account, which can be remunerated within the limits on deductibility of interest. A group can therefore capitalise the French subsidiary thinly and fund it by loan, or capitalise it more heavily, in line with its wider tax and treasury planning. The EURL accommodates either approach; the art is choosing the mix that works across the group.

Setting up the French subsidiary

Incorporating the EURL follows the SARL pattern, adapted for a single corporate member. The subsidiary must have a registered office in France, which can be a leased premises or, subject to the rules, a domiciliation. Contributions may be in cash - at least a fifth paid up on subscription, the balance within five years - or in kind, with a contributions auditor able to be dispensed with where no in-kind contribution exceeds €30,000 and they do not together exceed half the capital. The parent, as contributor, remains responsible for the value attributed to in-kind contributions where no auditor acted.

The subsidiary acquires legal personality on registration at the trade and companies register, and acts done for it during the formation period can be taken over so that they count as the company's from the start - the parent should record that takeover in the register of decisions after registration. Because a group typically incorporates through advisers and signs across borders, the sequence of signing the statutes, depositing the capital, appointing the manager and filing for registration needs to be planned so the subsidiary is validly formed and the pre-registration acts are cleanly adopted.

From the outset, the parent exercises the powers of the members and must record each decision in a register of decisions; decisions not recorded, or taken in breach of the rules, can be annulled at the request of any interested party. For a group, this register is the backbone of proving that the French entity was run as a company in its own right - which in turn protects the limited liability the group set the structure up to obtain. Setting up the governance and record-keeping properly at the start is as important as the incorporation itself.

Running the subsidiary

Year to year, the parent - as sole member - must approve the accounts and allocate the result within six months of the year-end, applying commercial-accounting rules like any SARL. The manager draws up a management report unless the subsidiary is small enough to be exempt, and until the legal reserve reaches a tenth of the capital, the member must allocate to it. Where the sole member is not also the sole manager - the usual case for a group - the manager sends the accounts and reports to the member ahead of approval, and any auditor is served within the set timetable.

Agreements between the subsidiary and the parent or the manager that are not ordinary or not on normal terms go through the regulated-agreements control and are recorded in the register; ordinary agreements on normal terms need no formality. For a group, this is where intra-group services, licences and financing arrangements should be checked, so that dealings between the French subsidiary and the rest of the group are properly authorised and documented. Keeping those agreements clean is part of defending both the tax position and the separation of the entities.

The discipline that matters most for a group is keeping the subsidiary genuinely separate. The limited liability the EURL offers holds only where the parent does not confuse its patrimony with the subsidiary's - decisions must be taken in the subsidiary's interest, its accounts kept properly, and its assets not treated as the group's own. Where that separation is respected, the parent's exposure stays capped; where it is blurred, a creditor may seek to reach the parent through a confusion of patrimonies. Running the subsidiary as a real company is what preserves the protection.

Absorbing or exiting the subsidiary

When a group wants to end or absorb a French EURL, the mechanism is distinctive and highly effective. A dissolution decided by a legal-person sole member triggers a universal transmission of the subsidiary's patrimony to the parent, without any liquidation, once the creditors' objection period has run. The parent receives the subsidiary's assets and liabilities directly, and the EURL ceases to exist. Used deliberately, this allows a simplified merger of the subsidiary into the parent and access to the favourable merger regime.

There is a serious caveat. On a universal transmission, the parent takes the liabilities as well as the assets, and its liability is no longer limited to its contribution - the subsidiary's creditors can claim against the parent directly. Where the subsidiary's liabilities exceed its assets, that is plainly damaging, and a group can avoid the effect by transferring a few shares before the dissolution so the company is no longer one-member and the universal-transmission rule does not apply. Creditors have thirty days from publication to object, and a court then rejects the objection or orders repayment or guarantees.

Two further points matter on an exit. Guarantees given before the dissolution survive it - a guarantor of a pre-dissolution debt stays bound even if the debt was not yet due - and contracts concluded intuitu personae (in consideration of the company's identity) end at the dissolution unless the counterparty agrees to continue, though the receivables and debts already arisen pass up. Planning the wind-down or absorption around these rules - the universal transmission, the objection period, the surviving guarantees - is what turns the end of a subsidiary into a clean, controlled step rather than a source of unexpected liability.

EURL or SAS: choosing the subsidiary vehicle

The EURL is not the only wholly-owned vehicle - the single-shareholder share company, the SASU, is its main rival for a French subsidiary. Both give a parent 100% ownership and limited liability. The EURL's appeal is its simplicity, the certainty of a long-established, heavily litigated form, and its light one-member machinery. The SASU offers more statutory freedom in structuring governance and rights, which some groups prefer for a subsidiary they intend to grow, bring in investors, or list.

Two practical differences often decide it. On a future share transfer, an EURL's shares attract registration duty of 3% (after an allowance), while a SASU's shares attract a flat lower rate - a factor if the group expects to sell or bring in a co-shareholder. And an EURL can, if needed, convert to a SASU, so the choice is not irreversible. For a straightforward, wholly-owned operating subsidiary that the group will control directly, the EURL is frequently the simpler and cheaper choice; where flexibility of governance or a future equity story matters more, the SASU may win.

There is no universally right answer - it turns on the group's plans for the French entity, its appetite for governance flexibility, and the likely exit. What matters is choosing deliberately at the outset, with the tax, the financing and the exit mechanics all in view, rather than defaulting to whichever form is most familiar. The EURL is a strong default for a controlled subsidiary; the point is to confirm it fits your group and your plans for France before incorporating, rather than reaching for it out of habit.

Other ways groups use the EURL

Beyond a plain operating subsidiary, the EURL is used by groups for specific legal or financial operations where a dedicated, wholly-controlled vehicle is useful. Because the parent holds everything and can appoint its own manager, the EURL offers great flexibility, complete control of decision-making, and a possible limitation of the parent's liability - a combination that suits ring-fencing a particular activity, isolating a project or an asset, or housing a discrete line of business within the group.

The stacking possibility widens this further. An EURL can be the sole member of another EURL, so a group can build a short chain of wholly-owned French entities where its structure calls for a sub-holding beneath the foreign parent. Each layer keeps the same one-member simplicity - one owner, decisions in a register, company tax - while allowing the group to separate activities or risks between entities. The form scales down to a single ring-fenced purpose as easily as it serves a full operating company.

What all these uses share is the reason a group reaches for the EURL in the first place: it is a real, separate French company that one shareholder controls absolutely. Whether the goal is to trade, to hold, to isolate a risk or to carry out a one-off operation, the same features - total control, limited liability, company tax, clean universal transmission on exit - make it a dependable, well-understood building block in a group's French structure.

Frequently asked questions about the EURL as a French subsidiary

This article states general principles of French law as at its date of publication and is provided for information only. It does not constitute legal or tax advice and creates no lawyer-client relationship. Rates, thresholds and cross-border rules evolve; verify the current position before acting, and take advice on your group's specific situation.