When a foreign company establishes a presence in France, the first structural decision is whether to register a branch (succursale) or incorporate a subsidiary (SAS or SARL).
In a majority of cases, the branch is presented as simpler and more economical. This is a common strategic error. The choice is a risk allocation decision that persists for the operational life of the entity.
The Liability Architecture: Why a Branch Is Not a Firewall
A branch has no separate legal personality. It is an extension of the foreign parent. Every contract signed by the branch is a contract of the parent. Every judicial proceeding initiated in France is enforceable against the parent’s assets globally.
Legal Exposure Note: Under EU Regulation 1215/2012, a judgment against a French branch is enforceable across the Union without further proceedings. The branch structure provides zero firewall between French commercial risk and the parent company’s balance sheet.
Structural Comparison Matrix
Dividend Routing and Tax Efficiency
A subsidiary enables profit repatriation strategies that a branch cannot replicate. Under the EU Parent-Subsidiary Directive or bilateral tax treaties, withholding tax on dividends can often be reduced to 0% or 5%, compared to the direct attribution model of a branch.
Intellectual Property Risks
IP developed through a branch vests directly in the parent. In a commercial failure or insolvency, this IP can be treated as a French asset subject to local proceedings. A subsidiary structure eliminates this uncertainty by separating ownership through intercompany licensing.