Registering a business company in Luxembourg in 2021 will bring many advantages to any international entrepreneur. Several forms of company ownership are available in the country and each of those will have its own advantages and associated requirements.
Below please find what type of company you can register in Luxembourg. If you have any questions related to the matter, please contact InternationalWealth portal experts without hesitation.
Forms of company ownership in Luxembourg
Depending on your business goals, you can choose from the list of company ownership types available in Luxembourg and register the kind of company that suits your purposes best of all. You will have several choices to make. First, you can form a sole proprietorship without actually establishing a legal entity. Otherwise, you can choose to start a company that will have a personality of its own that will be different from you personally.
If you decide that you want to set up a company, you can choose to set up a joint-stock company (société de capitaux) or a partnership (société de personnes). In the first case, your liabilities will be limited to the amount of capital that you will have contributed to the company formation while in the second case, you will have unlimited liability.
Statistics shows that most entrepreneurs prefer to set up limited liability companies, which should not be surprising, of course. LLCs also come in different types and we have the necessary expertise to help you choose the best one. Each particular business project will have its own requirements and finding an optimal solution is the key task.
Forms of company ownership in Luxembourg: the selection criteria
The choice of the right company ownership form will depend on several factors. The central such factors are as follows:
- The type(s) of the intended business activities;
- The amount of the available investment capital;
- The readiness to form partner relations with other entrepreneurs;
- The existing liabilities;
- The strategic goals.
The list of company types
A sole proprietorship (entreprise individuelle) is the simplest type of business company to establish. A sole proprietor is the master of his/ her business and all decisions rest with him/ her alone. A sole proprietor has unlimited liabilities but he or she does not have to make up company By-laws nor have any registered capital.
Strictly speaking, a sole proprietorship is not a company because no legal entity is created when such a business structure is set up. This form of business structure suits small businesses in the first place.
People engaged in the following types of business activities often form sole proprietorships:
- Small-scale traders, fixers, or manufacturers;
- Liberal arts specialists – architects, painters, designers, consultants, etc.;
- Framers, gardeners, foresters, winegrowers, etc.
Commercial companies registered in Luxembourg can be divided into three main classes: joint-stock companies partnerships, and hybrid companies. Each class, in its turn, can be divided into several subclasses:
- Joint-stock companies
This category includes:
- Public limited company (Société anonyme — SA);
- Partnership limited by shares (Société en commandite par actions — SECA);
Joint-stock companies are separate legal entities and the liabilities of the stockholders are limited to the worth of the respective company ownership shares.
At least two people are required to set up a public limited company (SA) in Luxembourg. The minimum required charter capital is 31,000 euros and it has to be divided into ownership shares. Company founders do not have to be citizens nor legal residents of Luxembourg. The company formation and business activities are governed by the local Law on Companies.
This category includes:
- Ordinary limited partnership (société en commandite simple — SCS);
- General partnership (sociétés en nom collectif — SENC).
Partnerships are formed by people who trust each other and who want to gain profits by engaging into business together. In a General partnership, the partners have unlimited liabilities and the share of the company ownership that each partner has is specified in the Partnership Agreement. In a Limited Partnership, limited partners’ liabilities are limited to the amount of their respective contributions to the company capital.
- Hybrid companies
Hybrid companies possess some characteristics of joint-stock companies and some characteristics of partnerships. They resemble joint-stock companies because the founders have limited liabilities. They resemble partnerships because they are formed by a limited number of people. A Luxembourg SARL is one example of a hybrid company.
SARL (Societee a Responsabilite Limitee) is a type of LLC that is among the most popular company ownership forms in the country. The maximum number of company founders is set at 40 in Luxembourg. The minimum required amount of capital is 12,000 euros. The following conditions have t be satisfied if you would like the set up a SARL in Luxembourg:
- The company shall have minimum 2 and maximum 40 co-founders (shareholders).
- A company director shall be appointed.
- The company is to be registered with the Trade Register in Luxembourg.
- The company is to be registered with the tax authorities in Luxembourg.
Types of investment companies available in Luxembourg
An SICAF (Societe d’Investissement À Capital Fixe) is a closed-end investment fund (or trust). It can be set up by a limited liability company registered in Luxembourg. Minimum required charter capital that an SICAF has to have is 300,000 euros.
An alternative to the SICAF is an SICAV (Societe d’Investissement À Capital Variable), which is an open-end investment fund/ trust. The required amount of the charter capital is the same – 300,000 euros. Both types of investment companies are taxable.
An affiliation or a subsidiary in Luxembourg
A foreign national can register both an affiliation (a branch) of his/ her company and a subsidiary in Luxembourg.
- A subsidiary firm is an independent company set up by the parent company. It works by the same rules in Luxembourg as a joint-stock company or an SARL does in the country. If licenses are required, they have to be obtained.
- Establishing a branch office of your company headquartered elsewhere requires a smaller number of formalities in Luxembourg. This type of company also can work as a joint-stock company or an SARL.
Comparison of company ownership forms in Luxembourg
|Criterion||Joint-stock company||Sole proprietorship and partnership|
|Company founders’ liabilities||Limited||Unlimited for the sole proprietor and the general partner; limited for the limited partner.|
|Ownership confidentiality||A public company (société anonyme) allows keeping the information about the company ownership confidential; an SARL (société à responsabilité limitée) does not because the ownership shares have to be registered.||Not available: the information about the business owners is open to the public.|
|Business inheritance||It is easy to pass an LLC on from one generation to another. The ownership shares have to be left in a will or reregistered in the children’s names.||It is difficult to pass these types of companies on to the next generation.|
|Registration costs||A notary public and the Trade Register are involved in an LLC registration. Besides, the registration information has to be published. Therefore, some fees and state duties are to be paid.||It is comparatively less expensive to register a sole proprietorship or a partnership in Luxembourg.|
|Accounting records||SAs and SARLs in Luxembourg have to keep accounting records in accordance with all requirements. The records have to be submitted annually in the electronic form.||If the company annual turnover is less than 100,000 euros, simplified financial reporting procedures can be applied. If the turnover exceeds the specified amount, full-scale financial reporting is required.|
Taxes in Luxembourg
Luxembourg cannot be referred to as a low-tax jurisdiction. All forms of business are taxable in the country. An LLC is subject to the corporate tax and its owners are subject to the personal income tax when dividends are distributed to them.
If you are interested in setting up a foreign company in Luxembourg, please apply for our assistance in the matter. If you have any questions pertaining to this opportunity, you are welcome to ask them by writing to our email address (see top of the page), to the live chat, or by using the messenger. We always reply promptly!
What form of company ownership is the most popular one in Luxembourg?
A private limited liability company (SARL) is the most popular form of company ownership in Luxembourg. It suits a large number of various business activities perfectly well. Registering an SARL in the country takes about one week.
Can I open a branch office of my company in Luxembourg or set up a subsidiary there?
Yes, you can. These opportunities are quite available in Luxembourg.
What is an ordinary limited partnership in Luxembourg?
It is a rather convenient form of company ownership when at least one partner has unlimited liabilities while the liabilities of other partners are limited to the amount of their contributions to the company charter capital. No legal entity is created when a limited partnership is registered in Luxembourg.