The Carmejane Ruling: Why French Tax Authorities No Longer Assume Your US LLC Is Transparent (2026)

For over a decade, French tax residents who owned a US LLC could reasonably assume it would be treated as a transparent partnership for French tax purposes — income taxed directly in their hands, no corporate-level layer in between. A November 2025 ruling from France's highest administrative court changed that assumption in a way that's still creating real uncertainty for founders as of mid-2026.

This guide covers how France classifies a foreign entity like a US LLC, what the old presumption was, and exactly what the Carmejane ruling changed.

How France Classifies a Foreign Entity: The Comparability Test

Like several countries covered elsewhere in this series, France doesn't simply defer to your US tax election. Instead, French tax authorities and courts apply a comparability methodology: for the tax treatment of an entity formed under foreign law, the first step is identifying — based on all of the entity's characteristics and the law governing its formation and operation — which type of French-law entity it most closely resembles.

For a US LLC, the practical question is whether it looks more like a société de personnes (partnership, taxed transparently under Article 8 of the French tax code) or a société par actions simplifiée (SAS) — a French joint-stock company, taxed opaquely at the entity level.

The Old Presumption: Transparency by Default

For roughly a decade before late 2025, French administrative appellate courts had built up a fairly consistent body of case law concluding that a non-electing US LLC (one that hadn't elected corporate treatment for US federal tax purposes) would, in the great majority of cases, be assimilated to a transparent partnership under Article 8. Founders and their advisors had reasonable grounds to plan around this — it wasn't a guess, it was an established pattern across multiple appellate decisions.

The Carmejane Ruling: A Fundamental Shift

On November 12, 2025, the Conseil d'État (France's highest administrative court) issued its ruling in Carmejane LLC (No. 502894), and it changed the analysis significantly. The Court held that where an LLC's characteristics point in conflicting directions — what French commentators call "structural hybridity" — the limited liability of the members becomes the preponderant (decisive) criterion. Since limiting members' liability to their capital contributions is essentially the defining feature of an LLC, this factor, when it dominates, points toward opaque, SAS-like treatment rather than partnership treatment.

The practical effect described by French tax commentators is stark: this reverses the presumption of transparency that had applied to non-electing LLCs for the prior decade. The line of appellate cases that had previously downplayed the limited-liability factor is now considered outdated by that same commentary — a US LLC can no longer be assumed, by default, to receive transparent partnership treatment in France.

What Made the Carmejane LLC's Case Distinctive

It's worth understanding the specific facts, because they help clarify when this shift actually matters most. The LLC in this case (formed in California, involving a family-held real estate structure) had several notable characteristics:

• Its capital was structured in membership units with a proportional relationship between each member's contribution and their rights in the LLC — closer to how shares work in a corporation.
• Members had broad freedom in setting essential governance terms, including the powers granted to the manager and provisions protecting the family character of the capital (such as a right of first refusal for remaining members if a member sought to transfer their interest).
• Members could not be held personally liable, beyond their capital contributions, for the entity's expenses, debts, or obligations.

These are common features in a great many US LLCs — not an unusual edge case — which is exactly why the ruling has broader implications than just this one family's real estate holding structure.

What This Means Practically for French Residents

If you're a French tax resident with a US LLC, the safe assumption going forward is that you cannot rely on an automatic presumption of transparency the way founders could before November 2025. Whether your specific LLC lands as transparent (partnership-like) or opaque (SAS-like) now depends on a genuine facts-and-circumstances assessment of your LLC's actual governance terms — with limited liability weighing heavily in ambiguous cases.

The consequences of the classification are significant and go in opposite directions depending on which way it lands: transparent treatment means income is taxed directly to you as it's earned (similar to US pass-through treatment); opaque treatment means the LLC is taxed at the entity level, and distributions to you are taxed separately as dividend-like income — a materially different timing and structure, with real double-taxation risk if the US and French classifications don't align.

Common Mistakes

• Assuming your US LLC is automatically transparent in France because it's disregarded or partnership-taxed in the US. The Carmejane ruling specifically closes off that assumption for LLCs with hybrid, ambiguous characteristics.
• Relying on older guidance or older appellate case law without accounting for Carmejane. Commentators describe the prior line of cases as effectively superseded on this point — advice based only on the older framework may no longer reflect current law.
• Assuming this only affects unusual, non-standard LLCs. The features that mattered in Carmejane — limited liability, proportional membership units, negotiated governance terms — are common in ordinary US LLCs, not exotic structures.
• Not revisiting your LLC's classification analysis after this ruling. If you structured your French tax position around the old transparency presumption, it's worth reassessing specifically in light of Carmejane rather than assuming nothing has changed.

Frequently Asked Questions

Does this ruling mean every US LLC is now taxed as a corporation in France?

No — it means the automatic presumption of transparency is gone for LLCs with conflicting (hybrid) indicators. Where an LLC's characteristics point clearly and consistently toward partnership treatment, that classification can still apply. The change is in how ambiguous, mixed-indicator cases get resolved.

If my LLC elected C-Corp treatment in the US, does that automatically make it opaque in France too?

A US corporate election is one relevant fact among several that French courts consider, but France's classification methodology is independent of the US tax election — it's based on the entity's actual legal characteristics under the law governing its formation, not solely on what box was checked with the IRS.

How can I find out how my specific LLC would likely be classified post-Carmejane?

By reviewing your LLC's actual operating agreement and governance terms — membership structure, transferability provisions, manager authority — against the criteria highlighted in the ruling, ideally with a French tax advisor familiar with the current post-Carmejane framework.

Does this affect my US filing obligations, like Form 5472?

No — Form 5472 and the pro forma Form 1120 obligation for foreign-owned single-member LLCs is a separate US federal filing requirement, independent of how France classifies the entity.

Information reviewed August 2026. This is a genuinely evolving area of French tax law following a significant late-2025 court ruling — this guide is not a substitute for advice from a French tax advisor familiar with the current post-Carmejane framework and your specific LLC's terms.

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