Setting up a second company in France: subsidiary, sister company or holding

Your first company is up and running, a new business line is taking shape, and the question comes quickly: should the second company sit next to the first, underneath it, or should everything be reorganised under a holding company? The choice affects the corporate income tax (impôt sur les sociétés, IS) paid by both entities, how cash will move between them and your own pay for years to come.

Quick answer. To set up a second company in 2026, three structures are available: a subsidiary owned by your existing company, a sister company you hold directly, or a top holding company receiving your shares by contribution (tax deferral under article 150-0 B ter of the CGI). Only ownership of at least 95% allows tax consolidation and loss offsetting between companies.

This article is written for business owners who already run a company. If you are starting from scratch, the case for a holding from day one is covered in our article on setting up a holding from the start, and the legal and HR formalities of a subsidiary in our guide to creating a subsidiary.

A second company can be set up under three structures, which differ by who owns the shares of the new entity.

1. The subsidiary (filiale). A subsidiary is a company whose share capital is owned, wholly or partly, by another company (here, your existing company). Company A subscribes to the capital of company B.
2. The sister company (société sœur). A sister company is held directly by you as an individual, alongside the first one. A and B have no shareholding link between them.
3. The top holding company (holding de tête). A holding company is a company whose main purpose is to hold shareholdings. You contribute your shares in A to a new holding, which then creates B as its subsidiary.

The difference is not merely administrative: who receives the dividends, whether results can be offset and how a future sale is taxed all change from one structure to another.

The main impact comes from two mechanisms of the French tax code (Code général des impôts, CGI): the parent-subsidiary regime and tax consolidation, both of which only exist when one company owns the other.

The parent-subsidiary regime (régime mère-fille, articles 145 and 216 of the CGI) is an optional regime that exempts dividends received from a subsidiary held at 5% or more, provided the shares are kept for two years, except for a taxable share of costs and expenses equal to 5% of the dividends. The regime is explained in detail in our article on the parent-subsidiary regime.

Tax consolidation (intégration fiscale, article 223 A of the CGI) is an optional regime under which the parent company pays a single corporate income tax on the combined results of the companies it holds at 95% or more, continuously, directly or indirectly. Within a consolidated tax group, the taxable share of costs and expenses on intra-group dividends drops to 1%, under article 216 of the CGI.

The election for tax consolidation must be filed no later than the deadline for filing the tax return for the financial year preceding the one to which it first applies, according to the official tax guidance (BOFiP, BOI-IS-GPE-10-40). Conditions on the length and alignment of financial years should be checked before the subsidiary is created.

Two sister companies, by contrast, remain fiscally separate: a loss in one can never be set against the profit of the other, and each tax loss can only be carried forward against the future profits of the company that incurred it.

Is the reduced corporate tax rate assessed at group level?#

Yes: the revenue used to test eligibility for the reduced corporate tax rate of a company that belongs to a group is the group's revenue, whether or not the group is tax-consolidated, according to the Conseil d'État decision of 13 March 2025 (no. 481538), adopted by the French tax authorities on impots.gouv.fr.

The reduced 15% rate applies to the first €42,500 of profit per twelve-month period, for companies whose revenue excluding VAT does not exceed €10 million and whose fully paid-up capital is at least 75% held by individuals (or by a company that itself meets these conditions), under article 219 of the CGI. Above that, the standard rate is 25%.

The tax authorities allowed companies that applied the reduced rate wrongly to file amended returns until 20 May 2026 without penalties or late-payment interest.

The underestimated risk. The €10 million threshold is now tested at group level. An owner whose first company is close to that threshold should not assume the new subsidiary "starts from zero": its profits may be taxed at 25% from the first euro. Have the definition of group that applies to your structure checked before the first financial year.

A top holding makes sense when you plan several businesses, different shareholders in each company, or a future sale of one of them.

Contributing the shares of your existing company to a holding controlled by the contributor qualifies for a deferral of tax on the contribution gain under article 150-0 B ter of the CGI. The 2026 Finance Act (loi n° 2026-103 of 19 February 2026, article 11) tightened the regime for sales of contributed shares made from 21 February 2026: if the holding sells the shares within three years of the contribution, the deferral is maintained only if at least 70% of the proceeds is reinvested within three years, and the assets acquired must be kept for five years. These conditions are commented in the BOFiP (ACTU-2026-00099) and detailed in our article on contribution-and-sale and article 150-0 B ter.

Our view. We advise against creating a top holding for a single second business that is still at the testing stage. A direct subsidiary of the existing company often achieves loss offsetting at a lower structural cost. A holding becomes relevant when your business assets are being built across several companies or a sale is on the horizon. The full comparison of levers is in our article on holding companies and tax trade-offs. If the second entity is mainly meant to own the business premises, the real choice is between a holding company and a property company (SCI).

Simplified and purely illustrative assumptions: company A makes a profit of €120,000, the new company B loses €40,000 in its first financial year, group revenue stays below €10 million and the financial years are aligned.

In this example, the €10,000 gap is a cash-flow advance rather than a permanent saving if B becomes profitable, since the sister company would have used its loss against its own future profits. It becomes a real saving if B never turns a profit. The actual calculation depends on financial year dates, the scope of the group and the specific rules on losses incurred before joining the group.

Flows between companies of the same group must be set out in writing, invoiced on arm's-length terms and approved under the French Commercial Code (Code de commerce).

• Cash management agreement (convention de trésorerie). Article L511-7 of the French Monetary and Financial Code allows cash management transactions between companies that have, directly or indirectly, shareholding links giving one of them effective control over the others. Between two sister companies with no shareholding link, whether this exception applies must be assessed case by case. The options for moving cash up the chain are compared in our article on dividends versus shareholder current accounts.
• Management fees. Management fees are fees invoiced by one company (often the holding) for real services provided to another: management, finance, sales. They are deductible only if the service is real, documented and invoiced at market price, as explained in our article on management fees.
• Related-party agreements (conventions réglementées). In an SAS, article L227-10 of the Commercial Code requires a report to shareholders on agreements with the president, a manager, a shareholder holding more than 10% of voting rights or the controlling company; ordinary transactions on normal terms are excluded. In a single-shareholder SAS, a simple entry in the register of decisions is enough.

In practice. Before the first flow, draft three documents: the cash management agreement (rate, cap, term), the services agreement if one company works for the other, and the allocation key for shared costs (premises, software, staff). Without these documents, a tax audit may recharacterise ordinary flows.

Yes, the same person can manage two companies, and each office is handled separately for social security and tax purposes.

Each company should only pay for work actually performed for it. Having one company pay for work done for the other exposes it to the "abnormal act of management" doctrine (acte anormal de gestion), discussed in our article on abnormal acts of management. Social security contributions are calculated on the pay from each company, according to the manager's status in each (an SAS president is treated as an employee for social security, a majority manager of a SARL is self-employed).

Under criminal law, using a company's assets or credit against its interest to favour another company in which the manager has an interest is misuse of corporate assets (abus de biens sociaux), punishable by five years' imprisonment and a €375,000 fine (article L241-3 of the Commercial Code for SARLs, article L242-6 for SAs, extended to SAS managers by article L244-1). Financial support between companies remains possible, provided it serves a genuine group interest and does not unbalance the paying company.

• Who should own the new company: you, the existing company or a holding?
• Target ownership (5% for the parent-subsidiary regime, 95% for tax consolidation)
• Group revenue compared with the €10 million threshold
• Timing of the tax consolidation election and aligned year-end dates
• Cash management agreement and services agreement drafted
• Manager's role and pay defined in each company
• Shareholders' agreement if the new company takes in other partners

• Setting up a second company opens three structures: subsidiary, sister company or top holding.
• Only ownership of at least 95% allows tax consolidation and loss offsetting (article 223 A of the CGI).
• The €10 million threshold for the reduced corporate tax rate is assessed at group level, consolidated or not (Conseil d'État, 13 March 2025, no. 481538).
• For sales since 21 February 2026, a holding that sells within three years of the contribution must reinvest at least 70% of the proceeds within three years and keep the assets acquired for five years.
• Every flow between companies must be written, invoiced on normal terms and justified by the interest of the paying company.