Key points
- A business (fonds de commerce) combines tangible assets (equipment) and intangible assets (clientele, leasehold right, shop sign, trade marks) used to operate a trade.
- The deed of sale is drawn up in writing and states the identity of the parties, the description of the business, the price and the payment terms. The parties also initial a document showing the monthly turnover (Article L. 141-2 of the French Commercial Code (Code de commerce) (in French)).
- Since Law No. 2019-744 of 19 July 2019, turnover, profits and rent are no longer mandatory statements, but they remain useful to the buyer.
- After signing, the sale is published within fifteen days in a legal notices medium and in the BODACC (Article L. 141-12 of the Commercial Code (in French)).
- The seller’s creditors have ten days after the last publication to lodge an objection (Article L. 141-14 of the Commercial Code (in French)).
- Registration duties are progressive: 0% below €23,000 and 3% from €23,000 to €200,000.
Selling a business (fonds de commerce) is a decisive step for your activity. You want a smooth transaction that is legally sound and compliant with legal requirements. Yet the legal formalities, the tax implications and the administrative requirements concern you. Poor handling can cause costly delays or complex disputes.
You need a clear legal framework and precise support to avoid mistakes. Valuing the business, drafting the deed and mandatory publication in the BODACC all call for rigorous expertise. As lawyers, we understand what is at stake for you. We assist you in making each step of this transaction legally sound: see our page fonds de commerce sale and purchase lawyer.
Discover the key points for a well-managed sale, from valuation to tax obligations. Be ready to sell your business with peace of mind.
What is a fonds de commerce?
A fonds de commerce (business as a going concern) is a set of tangible assets (such as equipment) and intangible assets (such as clientele or the leasehold right) that a trader uses to operate its business. The Commercial Code gives no general definition of it. In connection with pledges, however, its Article L. 142-2 (in French) lists the items that may form part of it: shop sign, trade name, leasehold right, clientele, furniture, equipment and intellectual property rights.
The components of a fonds de commerce
Tangible assets mainly include tools, machinery and sometimes the stock of goods. These assets should be identified and valued at the time of the sale.
Intangible assets include in particular the leasehold right, the clientele, the shop sign and associated trade marks, as well as certain intellectual property rights. Contractually, these items are often the ones that determine the real value of the business.
Formalities for the sale
Carrying out the sale of a business requires a series of rigorous administrative, legal and tax steps. Several sale formalities must be completed to ensure the validity of the deed and that it is fully enforceable against third parties.
Beyond these general formalities, other aspects should be considered, such as a continuation plan in the event of difficulties (in French).
The deed of sale
A deed of sale must be drawn up in writing. It states the identity of the parties, the description of the business, the agreed sale price and the payment terms. The seller and the buyer also initial a document showing the business’s monthly turnover (Article L. 141-2 of the Commercial Code (in French)).
Since Law No. 2019-744 of 19 July 2019, the following statements are no longer mandatory, but it is in the buyer’s interest to include them in the deed:
- Turnover achieved during the three financial years preceding the year of the sale
- Trading profits made during the same period
- The amount of rent paid if the premises are leased
Insurance to consider
Insurance contracts attached to the business continue automatically for the benefit of the buyer, who may terminate them (Article L. 121-10 of the French Insurance Code (Code des assurances) (in French)). You should therefore ask the seller for the list of current contracts and their certificates.
Publication in the BODACC
After the deed of sale is signed, a notice is published within fifteen days in a legal notices medium of the département and in the official bulletin of civil and commercial notices (Bulletin officiel des annonces civiles et commerciales, BODACC) (Article L. 141-12 of the Commercial Code (in French)). This makes the transaction public and informs all potential creditors of it.
Why this publication matters
This step is essentially intended to protect the interests of the seller’s creditors. They have ten days from the last publication to object to payment of the price (Article L. 141-14 of the Commercial Code (in French)).
Once this period has expired without objection, the price, which is generally held in escrow, may be paid to the seller. A payment made before that date does not discharge the buyer as against the creditors (Article L. 141-17 of the Commercial Code (in French)).
The consequences of failing to publish
Failure to publish mainly weakens the buyer’s position. If the buyer pays the price without publication, that payment does not discharge it as against the seller’s creditors (Article L. 141-17 of the Commercial Code (in French)). The buyer then risks paying twice, which creates serious financial difficulties.
Tax steps in the sale
In a sale of a business, several tax questions arise, calling for careful expertise to avoid unpleasant surprises. First of all, you need to know the tax rules applicable to the sale price and the registration duties.
Registration duties
Registration duties apply directly to the sale price of the business. They vary according to the price band:
| Sale price band | Applicable rate |
|---|---|
| Below €23,000 | 0% |
| From €23,000 to €200,000 | 3% |
| Above €200,000 | 5% |
These rates may change as a result of legislative and regulatory amendments, which is why you should consult a lawyer or a chartered accountant for up-to-date information.
Other tax implications
In addition to registration duties, the sale generally has consequences for VAT and for the taxation of any capital gains. Since every situation is different, an individual analysis will be needed.
Practical tips for a successful sale of your business
To maximise the chances of success of your business sale and purchase, a few practical tips may prove useful.
Preparing the business
Good preparation involves:
- Bringing the accounts up to date
- A comprehensive inventory of tangible and intangible assets
- Checking the condition of the premises (état des lieux)
This preparation is essential to reassure potential buyers and to facilitate due diligence.
Negotiating skilfully
You should also devote the necessary time to negotiations. Never underestimate the skill required to negotiate both the sale price and the payment terms. Sound legal advice is often essential.
The sale of a business is a delicate transaction that calls for legal precision and careful planning. By following the necessary steps, from drafting the deed of sale to understanding the tax and legal issues, you will be better equipped to conduct this process with peace of mind.
