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Business termination

How to dissolve a Sole Proprietorship in Luxembourg

A sole trader who stops business activity must complete a number of administrative procedures and formalities relating to: business license; social security; VAT; Registre de commerce et des sociétés (RCS); taxes, etc.

In Luxembourg, the liquidation of a sole proprietor (also known as a sole trader or sole proprietorship) involves several steps. Unlike the liquidation of a company, there is no need to hold 3 meetings, no need to appoint a liquidator and no need to appoint an auditor.

In general terms, the process of the voluntary liquidation of a sole proprietorship can be summarized in 8 steps.

The sole proprietor, also known as the owner, must decide to stop operations and liquidate the business. Unlike the liquidation of a company, it is not necessary to hold 3 meetings, and reach a decision with the board of directors. It is enough for the founder to come to the conclusion on his own that the sole proprietorship should be closed.

Company
Liquidation
Luxembourg

How to dissolve a company in Luxembourg

The first step is to notify the relevant authorities of the decision to liquidate. In Luxembourg, this is primarily the Registre de Commerce et des Sociétés (RCS). You must submit a liquidation petition.

Cancellation of the business permit
Cancellation of the Social Security
Declaration of cessation with the Registration Duties, Estates and VAT Authority
Notification of termination to the Internal Revenue Service
Other requirements

Prioritize the payment of outstanding debts and liabilities. Notify your creditors that you are closing your business and make arrangements to pay any outstanding debts. 

All creditors must be treated equally. This means that the sole trader's remaining assets are distributed fairly, based on how much the sole proprietor owes each creditor.

The self-employed person is fully responsible for any debts and must personally handle all financial obligations to others. They invest their own money in the business. While they get to keep all the profits, they also bear all the risks.

You must liquidate the assets of the business if you have not appointed a liquidator. This may involve selling stock, equipment, machinery or property. The proceeds of the liquidation will be used to pay any remaining debts.

The liquidator serves as the legal representative of a company during its liquidation, with responsibilities that include:

Corporate assets mangement
Sale of the company's assets, which can be anything from real estate to stock.
Identification and notification of creditors
Preparation of a list of all creditors of the company and notification of them about the dissolution of the company.

Find out more about the role of a liquidator in our guide to winding up a company.

You must meet all outstanding tax obligations. This includes paying income tax, social security and value added tax.

The entrepreneur must obtain a tax exemption certificate from the tax authorities.

You can close a sole proprietor's bank account once all financial matters have been resolved. Make sure all outstanding checks and payments are processed. Request a statement from the bank that you have no outstanding liabilities and that the accounts have been closed.

A corporate account is an essential part of any business, from the smallest to the largest. It's necessary for transactions.

If you have existing contracts, you must terminate them according to the terms of the contract. Notify customers, suppliers, and other interested parties that the business is closing. Provide information about how existing contracts and obligations will be honored or terminated.

If there are employees, resolve employment issues, including final pay, accrued vacation, and any other outstanding employment issues.

Prepare and file the necessary documents to close the sole proprietorship with the Registrar of Trades and Companies (RCS). You may also be required to submit a financial statement for your business.

A sole trader must deregister with the RCS using the electronic filing procedure on the official website of the Government of the Grand Duchy of Luxembourg. There is a fee to unregister from RCS. 

Complete the formal process of canceling your registration with the Registrar of Trades and Companies to close the legal entity formally.

faq

Frequently Asked Questions (FAQ)

How to dissolve a sole proprietorship in Luxembourg

Is it difficult to dissolve a sole proprietorship in Luxembourg

We took photos from these sources: AbsolutVision for Unsplash

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