When setting up a company you may want to consider these factors:
In 2011 Luxembourg made starting a business easier by speeding up the delivery of the business license. Trade permits are also important.
Culture and languages may be an influence. Doing business is considered very formally in Luxembourg, and there is a distinct separation between private and corporate life. Assertiveness and being concise are really important in building relationships. Luxembourgish is the national language, although French, German and English are widely spoken.
There are five main types of business available to foreign companies in Luxembourg, regulated under Luxembourg law on commercial companies (15 August 1915 – the “Companies Law”):
Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Luxebourg and the planned business activity.
The Société Anonyme (SA) is joint stock company and it is formed under the Commercial Companies Law 1915, as amended. By law, SAs must have a minimum capital of approx. € 31,000 divided into freely transferable shares held by a minimum of two shareholders, who may be resident or non-resident persons or juridical entities.
The shareholders’ liability is limited to the amount of their subscribed (not necessarily paid-up) capital. There is a Board of Directors (at least three), and day-to-day management may be delegated to a managing director.
By Law, the SA’s statutes must be printed in French or German and a director must give his name, address and occupation.
The SA must have a registered office in Luxembourg, but only the share register need be kept there.
Accounts need to be submitted annually to the Registrar of Companies and need only be audited only if a company exceeds a specific size:
The incorporation deed and articles of association of a S.A. (but also for S.àr.l., S.E. and S.e.C.A.) include, but are not limited to, the following main information:
The Société à Responsabilité Limitée (S.A.R.L.) must have a minimum paid-up capital of around € 12,400 divided into ‘participation certificates’ which cannot be freely transferable. There may not be more than 40 shareholders, and they are liable for the amount of their paid-up capital.
Steps required to set up a Sarl are as follow:
Deposit the minimum capital requirement
The promoters must open a bank account in the name of the company in formation and must transfer the amount of the share capital to this account before the passing of the deed of incorporation. For the purpose of the passing of the notarial deed, the bank will remit an escrow certificate (certificat de blocage) certifying that the funds corresponding to the amount of the share capital are “blocked” in the escrow account. The funds are automatically unblocked on delivery of a certified copy of the notarial deed of incorporation and the issue by the notary of the release certificate (certificat de déblocage).
Verify uniqueness of company name and reserve name
Shareholders are free to choose the company’s name but must ensure that it is unique. Each person requesting the Trade and Companies Register to confirm the availability or non-availability of a company’s name may select four types of documents to reflect the answer of the Trade and Companies Register. The most expensive type of document has a price of EUR 10.
Notary drafts and notarizes the company deed
A private limited liability company must be incorporated before a Luxembourg notary public.
The Luxembourg notary draws up the deed of incorporation which includes the articles of association of the company. Model of articles of association may be found on Internet (the national Chamber of Commerce’s E-space Entreprises information center can help incorporators to complete the model of documents).
The Luxembourg notary is held by law to pay all the costs relating to the incorporation and registration of the company and which include, the notary fees EUR 450 (fee EUR 150 + sundry expenses EUR 200 + certified copies EUR 100); Company Register fees EUR 250; Publication in Official Gazette EUR 250; Sundries EUR 50.
The notary must provide a detailed account/invoice once the company is incorporated.
Apply for business license
This license/permit is issued by the Ministry of Middle Classes for a commercial activity or by the Ministry of Economy for industrial activities upon request and on proof of knowledge of business management. To apply for a business license, promoters must submit the following documents:
The business permit application can be submitted before executing the notary deed because the Ministry of the Economy checks the draft articles of association—the company name, business purpose, and identity of directors and officers for compliance with the provisions of the applicable law.
Generally, the business license/establishment permit application and notary deed processes start more or less at the same time and are pursued simultaneously. Although the company incorporation process requires a notary, the founder may directly register the company with different administrations and obtain identification numbers and the business license/establishment permit.
Since October 2011, business license requests can be handed in online at www.guichet.lu. The required documents are the same ones. They all need to be transformed into a PDF and attached to the online form. In order to be able to deposit the business license online, the applicant is required to have a LUXTRUST certificate in order to sign the application form electronically.
Register at the one-stop shop
The notary public must levy an initial payment for all applicable company incorporation fees and taxes, including registration costs.
The notary must register:
The Trade and Companies Register arranges for the publication of the incorporation deed in the Official Gazette within 2 months of the company’s registration. Upon usually 24 hours of the registration, the Trade and Companies Register generates an administrative or official (register) number that accompanies the company during its corporate life. This number forms the basis for all other identification numbers to be issued by the administration for direct taxes (tax number), the administration for indirect taxes (VAT number), or the social security service (pay-as you-earn number and employer number). Applications can be filed for both VAT and social security at the one-stop, which distributes the forms to the relevant administrations. The company’s registration with the Chamber of Commerce is done automatically.
Unblock the authorized capital
Once the company is incorporated, the notary public immediately issues a release certificate (certificat de déblocage), indicating that the company has come into existence. This certificate will be sent to the bank, together with a copy of the incorporation deed, for the release of the funds corresponding to the share capital.
Approx. 1 month
There are two types of partnerships in Luxembourg, namely Société en Nom Collectif or S.E.N.C. (normal partnership) and Société en Commandite Simple or SECS (limited partnership.
Société en Nom Collectif or S.e.N.C.
A Société en Nom Collectif (SENC) is considered to be a partnership, which may be formed by two or more persons all of whom are personally, jointly and indefinitely liable for the partnership’s debts. As a general rule, shares of an SENC are not normally transferable, though the articles of association may provide for departures from this rule.
No minimum share capital is required to form this company.
Constitutional documents are notarized or private deed. It is necessary to publish the extracts in the official journal (Mémorial C) (signed by the notary and mentioning the precise names of the jointly and severally liable partners).
Find and register a company name
The company name is mandatory and it should include the indication of the name of one or more partners. The company name must be changed if one of the partners mentioned in it leaves the company.
The duration of the company can be unlimited, unless otherwise specified in the articles of association.
Accounting and financial information
An SENC must comply with the standard chart of accounts (plan comptable normalisé) and keep its accounts at the registered office for inspection by interested parties if the annual turnover exceeds EUR 100,000 (excluding VAT).
In addition, an SENC must follow the chart of accounts where:
Société en Commandite Simple or S.e.C.S.
A Société en Commandite Simple (SECS) is limited partnership, which is formed by one or more partners (the “general partners”) who are jointly and indefinitely liable for the partnership’s debts and by one or more “limited partners” whose liability, is limited to their contribution.
Both SENC and SECS are not subject to tax in their own name, but to personal income tax which is payable by the partners to the extent of their share in the partnership’s income.
Constitutional documents must be notarized or private deed. Also publication of extracts in the official journal (Mémorial C) must be signed by the notary and mention the precise names of the jointly and severally liable partners.
The company name must include the names of one or more general partners in order to make known to third parties the unlimited liability of the general partners (by including the names of limited partners gives rise to their unlimited liability).
The duration of a SECS is unlimited, unless otherwise specified in the articles of association.
A sole proprietorship indicates a person who carries out his activity in his own name, whether he/she is a trader, a skilled craftsman or a self-employed intellectual worker. A self-employed entrepreneur takes decisions alone and has sole responsibility for the financing of the business, assuming therefore full responsibility towards third parties (debts of the business) and commits his personal assets.
This form of operation guarantees independence as well as minimal formalities. There are nevertheless higher risks for the entrepreneur since liability is not limited to the amount of his contribution.
No constitutional document (articles of association) is required because the entrepreneur is acting in his own name. Also no legal personality is created – only the business operator (entrepreneur) has a legal personality as a natural person.
In the event of death of the entrepreneur, the business is subject to the common law of successions with the possible risk of dismantling.
No minimum capital is required and the operator alone decides to commit capital to his business.
Whether to incorporate in Luxembourg, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.
If the company intends to have staff in Luxembourg they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where
– the company is looking to setup an office quickly;
– the company wants to work within a defined budget;
– the company wants to limit its initial commitment in Luxembourg;
– the company needs help with tax, employment, immigration and payroll compliance in Luxembourg.
The complexity of employment regulations in Luxembourg makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.
Shield GEO provides a comprehensive service in Luxembourg allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Luxembourg.
Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Luxembourg. Read more about outsourced employment through Shield GEO.