You’re ready, you’ve modeled and validated your business idea and want to get started in the near future, either alone or with associates. But when comes time to create your structure, your mind fills with doubts: what company type should you choose, what steps do you need to follow and what formation expenses should you plan for? Here are a few tips to help you out:
What company form should you choose?
Starting out, you need to realize the distinction between partnerships (SCS or special limited partnership, SENC partnership, etc.) and capital companies (public limited companies, simplified or private limited liability companies, partnerships limited by shares, cooperative companies, etc.). Partnerships, which share some of the characteristics of sole (independent) proprietorships, will be further examined in another article.
The most commonly used forms are limited companies (SA), limited liability companies (SARL) and simplified limited liability companies (SARL-S), meaning capital company forms. If you choose one of these forms, your company will have its own legal personality separate from those of its founder(s), thus also implying separation of assets. In principle, the liability of associates is limited to their respective inputs.
Here is some additional information:
- SA: incorporated by notarial deed with a minimum share capital of 30,000 EUR. This form of company facilitates both the entry of new shareholders and access to financial markets;
- SARL: also incorporated by notarial deed, but with a lower minimum share capital of 12,000 EUR. One advantage of the SARL form is that it gives founders better control over held shares, making them less easily transferable;
- SARL–S: a variant of the conventional SARL form, this form can only be incorporated and owned by one or more natural persons and does not require a notarial deed. A minimum capital of between 1 EUR and 12,000 EUR is required.
Do note that each company type has its own specific characteristics (formalities, liabilities, fiscality, management, etc.) that must be taken into account when choosing a legal form. This requires case-by-case analysis. You may also need to seek the assistance of an expert.
What steps are involved in setting up a business?
Once you have selected a company type, the key steps to taking your project forward are as follows:
- Applying for a business permit (+/-1 to 4 weeks): required for any person wishing to engage in a commercial or craft activity, as well as certain liberal professions;
- Availability of the company name: availability of the commercial brand name or company name you plan to use for your business must be checked with the Luxembourg Business Registers (“LBR”);
- Drafting the statutes: the information that must be included in this fundamental company charter setting out operating rules varies depending on the company type. Models for the main business forms can be found on guichet.lu. Keep in mind that statutes can also be helpful for regulating your co-founders association;
- Blocking the share capital: the minimum share capital must be deposited in a Luxembourg bank account before the articles of association are signed. A money blocking certificate is then issued and must be submitted to the notary;
- Going before the notary: where appropriate, this is a mandatory step to have the statutes validated prior to signing;
- Registering with the LBR (+/- 24 hours): the constitutional deed must be electronically submitted for publication;
- Filing of beneficial ownership details with the LBR: as of recently, it is mandatory for all commercial companies to declare the natural person(s) who own(s) or control(s) the company;
- Affiliating with the Joint Social Security Centre (“CCSS”) (+/- 1 week): this must be done for all self-employed (managers) along with a declaration of joint operation when hiring. Some adaptations are possible for occasional or ancillary activity;
- Registering for VAT with the Registration Duties, Estates and VAT Authority (“AED”) (+/- 2 to 4 weeks): to register for VAT, the business must submit an initial declaration to the AED. Registration can be mandatory or optional, and an exemption system exists that is often applies to new activities generating little turnover.
What costs to expect?
Starting a company always costs a bit of money – more than going with a self-employed status. Let’s take a look at the main cost centers (exclusive of VAT) involved in the steps outlined above:
- Notary fees: calculated depending on the nature of the deed in question based on the rates of the Chambre des Notaires (link in French) – approximately 1,500 EUR to 2,000 EUR for incorporation, other than for SARL-S, in the absence of notary fees (+/- 200 EUR);
- Social capital: between 1 EUR and 30,000 EUR minimum, depending on the chosen form;
- Business permit: chancellery dues for issue are 24 EUR;
- Certificate of name availability: approximately 10 EUR;
- Fees for filing the incorporation deed with the LBR: between 15 EUR and 106 EUR;
- Fees for declaring beneficiaries with the RBE: 15 EUR;
- Registration fees for the notarial deed: 75 EUR.
A few other no -mandatory expenses can come up, depending on your procedures:
- Costs of training to enter into real estate professions (995 EUR), HORECA professions (245 EUR) or other regulated professions;
- External consultancy fees (market study, drafting of business plan, review of statutes, writing of a shareholders agreement, etc.)
- Fees for a company auditor (in certain cases of in-kind contributions);
The House of Entrepreneurship of the Chamber of Commerce is the national contact point for future entrepreneurs and established company heads alike. (Future) entrepreneurs can go to the House of Entrepreneurship’s information point on business days from 8:30am to 5:30pm, no appointment required, to move forward with their business creation/takeover project or be put in touch with the relevant structures or partners.
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