How to Transition from an EOR to Your Own Legal Entity in France

Your EOR got you into France fast. Now you have enough employees and revenue to justify your own legal entity. The transition is where companies stumble. Our guide to EOR vs setting up your own entity in France covered when each model makes sense and the risks of staying on an EOR too long. This article goes deeper on the mechanics of the switch itself. You will learn how to register a French entity, transfer employees under French labor law, and manage the overlap period so payroll never skips a beat. The process typically takes three to five months from first filing to final employee transfer. Getting the sequence wrong creates gaps in social security coverage and potential employee claims.

Planning the Entity Before Leaving the EOR

Choosing the Right Legal Form

Most foreign companies entering France choose between a Société par Actions Simplifiée (SAS) and a Société à Responsabilité Limitée (SARL). The SAS offers more flexibility in governance. It allows a single president rather than a formal board. The SARL caps shareholders at 100 and imposes stricter rules on share transfers.

For tech companies scaling a team of 5 to 30 employees, SAS is the dominant choice. A SaaS company from Copenhagen hiring its eighth engineer in Lyon would typically register as an SAS. The form allows stock option plans that a SARL cannot support as easily.

Building the Timeline Backward

Start from your target employee transfer date. Work backward through each dependency. Entity registration at the Guichet Unique (the centralized business formalities portal) takes two to four weeks after filing. Opening a French corporate bank account takes another two to six weeks. Bank account opening is the bottleneck most companies underestimate.

Social security registration with URSSAF follows entity creation. You cannot run payroll until URSSAF assigns your SIRET number. This registration typically processes within two weeks of entity formation.

Map these dependencies before you notify employees or the EOR. A Berlin fintech that tried to compress this into six weeks found its bank account delayed by three weeks. The result was a month where employees sat in limbo between the old EOR contract and the new entity.

Coordinating with Your EOR Provider

Most EOR contracts include a notice period for termination. Check yours. Thirty to ninety days is standard. Give your EOR early warning even before your entity is fully registered. This keeps payroll running without interruption. The EOR needs time to prepare final pay calculations, transfer social security contribution records, and close employee files. Understanding what EOR services actually include helps you identify exactly which handover items to track.

Registering Your French Legal Entity Step by Step

Drafting the Articles of Association

French corporate law requires articles of association (statuts) drafted in French. These define the company's purpose, share structure, and governance rules. A foreign parent company typically appoints itself or a designated individual as president of the SAS.

You need a registered office address in France. A domiciliation service works for the first year. Physical office space is not required at formation but becomes practical once you have employees on-site.

Capital Deposit and Bank Account

The SAS has no statutory minimum share capital. One euro is technically sufficient. Banks assess the deposit practically. Most require at least a few thousand euros to open a corporate account. The capital must sit in a blocked account until the entity receives its Kbis (certificate of incorporation).

French banks are slow with foreign-owned companies. Expect two to six weeks for account approval. Online banks like Qonto or Shine process faster but may lack the full service range needed for payroll transfers. Start the bank application the same week you finalize your articles.

Post-Registration Obligations

Once the Greffe du Tribunal de Commerce issues your Kbis, several registrations follow. URSSAF registration activates your employer account for social contributions. You must also register for corporate income tax (IS) and VAT with the Service des Impôts des Entreprises. Employer social charges in France run above 25% of gross salary. The exact rate depends on the employee's compensation level and applicable collective bargaining agreement.

If you plan to hire compliantly through an EOR in parallel during the transition, your EOR handles these obligations for remaining employees until their contracts transfer.

Transferring Employees Without Breaking French Law

The Article L1224-1 Question

French labor law includes a powerful employee protection mechanism. Article L1224-1 of the Code du Travail provides for automatic transfer of employment contracts when a business or economic entity transfers between employers. This article applies when there is a transfer of an autonomous economic entity that maintains its identity.

The critical question: does moving employees from an EOR to your own entity trigger Article L1224-1? In most EOR arrangements, it does not. The EOR was the legal employer. Your new entity is not acquiring a business from the EOR. It is hiring employees directly.

This distinction matters. It changes the entire transfer process.

Practical Transfer Mechanics

Without Article L1224-1 applying, each employee must resign from the EOR and sign a new contract with your entity. French law does not allow you to force this. The employee must consent. Here is what the transfer involves for each employee:

Recognize seniority contractually in the new employment agreement. French employees value ancienneté. Losing it creates friction and can affect future severance calculations. A US ecommerce company transferring twelve staff from an EOR in Paris retained full seniority by writing it into each new contract. Not a single employee refused the transfer.

Managing the Collective Bargaining Agreement

Your new entity falls under a Convention Collective Nationale (CCN) based on its primary business activity. This may differ from the CCN that applied under the EOR. Check salary minimums, working time rules, and mandatory benefits under the new CCN before drafting contracts. Gaps between the old and new CCN create legal exposure. If the new CCN offers lower benefits, employees may resist transferring. Understanding EOR compliance requirements in France helps you benchmark what employees currently receive.

Managing the Overlap Period

Running Dual Payroll

Plan for one to three months of overlap. During this window, some employees remain on the EOR's payroll while others have already moved to your entity. Your finance team must track two sets of social contributions, two sets of pay slips, and two reporting calendars.

URSSAF expects the Déclaration Sociale Nominative (DSN) monthly. Your entity files its own DSN once it has employees. The EOR continues filing for employees still under its contracts.

Closing the EOR Relationship Cleanly

The final month matters most. The EOR must issue each departing employee a certificat de travail, attestation Pôle emploi, and solde de tout compte. These three documents are legally mandatory at contract end in France. Missing any one of them exposes the EOR to penalties and creates problems for the employee.

Coordinate the last EOR payroll date with the first payroll date on your entity. Zero-gap transitions prevent social security coverage interruptions. URSSAF tracks continuous coverage. A gap triggers administrative corrections that cost time and credibility with your new employees.

Watch out: If your new entity's applicable CCN differs from the EOR's, employees may lose specific benefits like higher overtime rates or supplemental leave days. Compare both agreements line by line before presenting transfer terms.

FAQs

Can employees refuse to transfer from the EOR to our new entity?

Yes. Because most EOR-to-entity transitions do not trigger Article L1224-1, the transfer is voluntary. Each employee must agree to terminate the EOR contract and sign a new one. If an employee refuses, they remain employed by the EOR. You cannot compel the move. Offering equivalent or improved terms, including recognized seniority, reduces refusal risk. One approach is presenting the new contract alongside a comparison table showing identical or better conditions.

What happens to employee probation periods after the transfer?

French courts examine whether the new employer can impose a new probation period. If the employee performed the same role under the EOR, a fresh probation period is legally challengable. The Cour de Cassation has ruled against employers who used transfers to reset probation on identical roles. Best practice is to waive probation in the new contract and recognize prior service. This protects you from litigation and signals good faith to the employee.

Do we need a French payroll provider from day one?

You need compliant payroll processing before your first DSN filing. The DSN is due monthly. Most companies engage a French payroll provider or a dedicated payroll service before the first employee transfers. Setting up payroll software, configuring CCN-specific rules, and testing DSN submissions takes two to four weeks. Start this process in parallel with entity registration, not after.

Can we keep some employees on the EOR while others move to the entity?

Yes, and this is common during the overlap period. Some EOR providers operating in France will continue employing a subset of your team while you transition others. The key constraint is your EOR contract terms. Some providers require all employees to transfer within a fixed window. Others allow indefinite coexistence. Clarify this before you begin. Running a split model beyond three months adds administrative complexity without clear benefit.

What Comes Next

The months after your last employee transfers off the EOR are operationally dense. You will file your first standalone DSN, manage your first URSSAF audit cycle, and handle your first mutuelle renewal as a direct employer. Build internal HR capacity or partner with a local social secretariat before the transition completes, not after. Monitor any CCN reclassification risk as your business activity evolves. The entity is yours now. So is every obligation that comes with it.

Written by TeamUp — EOR, payroll, and compliance across 20+ countries.