Skip to content

The essential information when starting your side business

More and more employees are wanting to merge their full-time job with their desire to be entrepreneurs. The good news is that it’s possible! It’s called a side business and is entirely legitimate even if it’s not well known! To combine these two activities in the best way possible, you need to understand the legal obligations and steps to take, while notably avoiding a legal dispute with your employer. Here are some general tips concerning tax, laws and accounting to help you along the way. You will need to take all of these elements into account to successfully juggle employment and entrepreneurship.

Do I have to inform my employer?

According to article 1134 of the Civil Code, contracts must be handled fairly, thus implying that you remain loyal to your employer and prohibiting direct competition. So long as your side business doesn’t infringe upon these principles and no other measure is included in your work contract, you are free to start a side business without informing your employer. This being said, take a close look at your work contract because it may contain specific clauses that oblige you to notify or get prior authorisation from your employer. If such a clause exists and has been accepted, you must abide by it.

Whatever the case may be, we highly recommend that you establish open communication with your employer, even in the absence of specific clauses. This approach builds mutual trust and enables you to avoid any misunderstanding. If the activity you are interested in can be perceived as competition for your employer, get their written approval beforehand. This will avoid any potential conflict.

Can my employer refuse my request?

In some cases, yes. Your employer can refuse if your work contract has an exclusivity clause. This type of clause falls under contractual freedom between the employer and the employee and is not subject to the Labour Code. However, jurisprudence states that to be legal, such a clause can only be added to a full-time contract and can’t violate an employee’s freedom to work by preventing them from supplementing their income or work time. If this clause is violated, the employer can take disciplinary measures and even immediately sack his or her employee.

It should be noted that the implementation of guideline (UE) 2019/1152 on clear and predictable working conditions could modify this. This guideline establishes the principle of prohibiting exclusivity clauses unless combining jobs is incompatible for objective reasons such as security and health safety in the workplace, protecting business confidentiality, preventing conflict of interests or the integrity of the public service. To be continued…

What about my salary and work time…?

You can invoice your services to your employer on condition of being set up as a freelance or company and invoicing your jobs in this setting.

Concerning your work time, it is crucial that you follow the terms that appear in your work contract and honour your duty of loyalty towards your employer: your entrepreneurial activity shouldn’t impinge on your schedule or compromise your performance. If you are in doubt or have questions on this topic, the Labour Inspectorate (ITM, link in French) will be able to advise you.

What administrative procedures do I need to handle to start my side business?

Creation and registration procedures are the same as for a traditional company. This includes receiving permission of establishment, VAT and social security registration, and if needed, signing up with the Trade and Companies Register (RCS). We recommend the weekly online workshop “Starting your business in Luxembourg”, provided by House of Entrepreneurship for a complete guide of the different steps.

What fiscal, legal and accounting elements do I need to know about?

You can be exempt if you remain under a certain threshold. For example, if the income from your independent activity is lower than a third of the minimum wage, you can be exempt from some social security contributions. This also means that you won’t be covered by social security for any risks linked to your independent activity. These exemptions can only be valid if you already have social protection thanks to your employee or other status. To find out more, head to the National Health Service’s page (CNS).

When it comes to registering your side business with the CCSS (Joint Social Security Centre) and for VAT, even if your employer already pays for your work time as an employee, you need to register separately. Rules and obligations apply to your independent activity separately from your paid employment.

There is good news about VAT, if your annual income is lower than 35,000 euros, you can opt for a VAT-free regime. In this case, you don’t have to invoice VAT to your customers and don’t deduct VAT from your expenses. This can be very interesting depending on your activity and your geographic scope! To find out more, head to the guichet.lu webpage.

Regarding the taxes on your side business’s income, if you choose to be a freelance, you will need to fill in an income tax return as a private individual. You will have to declare the entirety of your income including your income as an employee on which tax has already been deducted. Your paid employment income won’t be taxed a second time, but it will be taken into account to determine the applicable tax rate for your independent activity according to the tax grid. You can also find more information on the subject on the guichet.lu website.

There is no specific legal status for your side business!

Your side business is considered to be a traditional company, so you will be able to choose the legal status that fits best for you! We recommend that you reach out to a legal counsellor or a public accountant to get personalised information about the best legal status to use.

Is it for all ages?

You can start a side business at any age, whether it be when you are starting your career, as a junior, during your professional career or even just before your retirement. Whatever the case, entrepreneurship is an excellent chance to develop additional skills and explore new professional opportunities. For young employees, remember that minors can’t have a trading permit. Minors can’t be salesmen, but they can take part in volunteer work or other small-scale projects. If you are almost at retirement age, make sure that you check the income thresholds. Specific rules apply to combining pensions and other incomes. You can head to the National Pension Insurance Centre (CNAP, link in French) to find out more information about the thresholds.

Some general recommendations and best practices to take away:

  • Be open with your employer about your entrepreneurial project. Even if you aren’t legally obliged to do so, maintain a relationship based on trust and transparency to avoid any misunderstandings and to promote a harmonious collaboration.
  • Follow the specific clauses in your work contract, notably non-compete clauses and the obligation to inform your employer. If such a clause exists, it’s important to respect it to avoid any legal issues.
  • Keep your books in order by clearly separating income and expenses linked to your side business. This will make handling finances and your income tax declaration much easier when the time comes.
  • Look into the different options available for protection and insurance for your business. Depending on the nature of your side business, you may need specific coverage such as professional civil liability insurance.
  • Finally, look for resources and specialised counselling, whether it be from legal counsellors, accountants, coaches or support organisations devoted to entrepreneurship. Their knowledge and expertise will help you throughout your entrepreneurial journey.

By following these best practices and taking into account the specific cases brought up, you will be as well prepared as possible to create and develop your side business, all while maintaining a good balance with your paid employment.

Creating a Social Impact Company (SIS) in 5 steps

By Jerome Laurent | 01/03/2024

Social enterprises have gained popularity in recent years in a world where people increasingly recognize the importance of local, fair, and environmentally friendly consumption. The Social Impact Company (Société d’Impact Sociétal) accreditation is designed for individuals or entities wishing to establish a business aligned with the values of solidarity and participatory management. Whether you are…

Financial education for entrepreneurs

By Jerome Laurent | 26/02/2024

Financial education is a topic that concerns us all: individuals and professionals, entrepreneurs and employees. As a new entrepreneur, you often learn on the job, and frequently from your mistakes. A good financial education can mitigate these errors and enable you to aim for success and sustainability for your business. Our experts at Spuerkeess are…

The business model in practice

By maintenance-adoraweb | 19/02/2024

The business model is the first step to formalize, structure, model, and bring your project to life. Working on a business model is an essential step. It is a clear, synthetic document that covers all the themes of your company without technical details. It is also a communication tool for your project and serves as…

Avoid these 5 accounting mistakes!

By maenyuko | 16/02/2024

Financial management of your company is pretty much your activity’s lifeline. Without it, you won’t get far! This being said, accounting and invoicing are frightening for a lot of future and young entrepreneurs. By looking into this beforehand, by training and by surrounding yourself with qualified professionals, you will avoid obstacles in the future that…

Build a niche e-commerce

By maintenance-adoraweb | 12/02/2024

You acquired the Nutri-bay brand and website in 2017, what were your first actions? We first underwent a technological migration and expanded our range of suppliers. There were already customers, but not enough, so we had to increase this customer base. It was truly a new beginning, not only for the company but also for…

The 6 common misconceptions about startups (and the reality they hide)

By maintenance-adoraweb | 18/01/2024

The term “startup,” once reserved for a select few, has now become commonplace. However, its use is not always accurate and is often thrown around casually. Furthermore, the startup world conveys numerous images that may not always align with reality, potentially leading entrepreneurs to significant disillusionment. Let’s examine some deeply rooted prejudices and their real…

5 common beliefs about SIS (Sociétés d’Impact Sociétal)

By Pelagia Baxevani | 22/12/2023

You have to establish a company before applying for approval False! Contrary to common beliefs, it is not mandatory to create a company before applying for approval. The application can be submitted by existing companies or those in the process of being established. If the company meets legal requirements, meaning it defines a clear and…

Building a successful e-commerce

By maintenance-adoraweb | 16/11/2023

feedback from Carlos Quintas, co-founder of LToys How did you get into entrepreneurship? My background is in electronics, which I pursued for 17 years. When I parted ways with my employer at the time, I teamed up with someone, and together we founded an online electronics store: Electronic Shop. We deliberately avoided having a physical…

How can you overcome procrastinating and optimise productivity?

By maenyuko | 10/11/2023

Procrastination can be a real nuisance, especially for entrepreneurs: it can jeopardise your company’s growth and prevent you from reaching goals. Everyone is prone to it! Luckily, there are useful strategies to avoid this recurring problem. In this article, I will share some helpful tips to help you beat procrastination and optimise your productivity. Understanding…

I launched my IT recruitement agency

By maenyuko | 24/10/2023

Once upon a time in a distant land… Oh no! It’s happening right here and today… This is the story of Chaffa Zaroui, who launched Fidès, her IT recruitment agency for the financial sector in Luxembourg. Shall we introduce her to you? In a nutshell… For you, being an entrepreneur is, above all, about… Freedom!…

You liked this content? Share it now!