Business

Is there self-employment in Luxembourg or its equivalent

The legal form of sole trader exists in Luxembourg and offers several options to self-employed people who need a legal form for their expanding business.

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A sole proprietor, also known as a self-employed person, is not a legal entity. He or she is independently responsible for all debts and liable to third parties, and invests his own funds in the business. This legal form has a minimum number of tax obligations. But when you need a legal form as an individual entrepreneur, you might be looking for something else.

SARL-S, company simplifiée unipersonnelle

In Luxembourg, there is the limited liability company and its simplified form, the SARL-S. The Simplifiée unipersonnelle is a subspecies of the simplified SARL-S, i.e. a private company with limited liability and one member. In principle, it is a full analogy of a sole proprietorship, which can also only be created by individuals.

SARL-S key features

There are a number of mandatory requirements for SARL-S, such as

Minimum authorised capital. It may be as low as 1 euro for company.
Private written agreement or statement. However, even here there are exceptions — it can be a private act drawn up by the entrepreneur himself with his signature. The involvement of a notary is not considered mandatory, but it is wise to contact one.
Contributions. Contributions can be in cash or in kind, such as purchased equipment.
Submission of annual accounts to the Register of Commerce (RCS). For sole proprietorships, if the annual turnover does not exceed 100,000 euros excluding VAT, the reports are not published for inspection by third parties.

There are also tax differences. For example, a self-employed person pays business tax, income tax and wealth tax. If you register a SARL-S, you will have to pay corporate tax in addition to the registration fee. And if profits are distributed in the form of dividends, they are also taxable.

It is important to understand that in the case of a SARL-S, unlike a sole proprietorship, there is a legal entity. It therefore has rights and obligations under commercial, accounting and tax law, albeit in a simplified form.

Different liability

However, while a sole proprietorship is fully and unlimitedly liable with its personal assets for the debts of the business, in a SARL-S the liability is limited to the amount of the contributions.

SARL-S is a tool for aspiring entrepreneurs that allows them to start commercial activity almost immediately. That what attracts business people in this form, as well as low shared capital required.

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Company

Luxembourg

How to register a company in Luxembourg

SENC, société en nom collectif in Luxembourg

A SENC can be considered a partial analog of a sole proprietorship. This legal form is well suited for small and medium sized "family" commercial or craft businesses.

Like a sole proprietorship, no minimum capital or internal auditor is required to register a SENC, and in both cases the founders are fully liable for the debts of the business with their personal assets.

SENC key features

Registering a SENC requires the following

Second partner. SENC only if there are at least 2 partners.
Agreement. As in the case of the SARL-S, it can be a private written agreement or a declaration by the entrepreneur himself with his signature. The involvement of a notary is not considered mandatory, but it is advisable to contact one.
Contributions. Contributions can be in cash or in kind, such as purchased equipment.

No reports

Like in case of sole proprietorships, if the annual turnover does not exceed 100,000 euros excluding VAT, the reports are not published for inspection by third parties.

Taxes are also different for sole proprietorships and SENCs. If you register as a SENC, you will have to pay a registration fee in addition to the registration fee:

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Employment

Work