Use Luxembourg Simplified Limited Liability Company (Simplified LLCs / SARL-S)  

The simplified limited liability company (SARL-S) is a variant of the traditional SARL (limited liability company) and is relatively new in the Luxembourg arena, as it has only been in existence since January 2017. The SARL-S (simplified limited liability company) is ideal for those getting into entrepreneurship for the first time, as it favors entrepreneurship by restricting administrative rules and supports growth. 

The SARL-S and the SARL are very comparable and have many features in common. But, the SARL-S differs in the following four aspects:

Social capital 

Thanks to its reduced set-up costs, the SARL-S offers an attractive alternative, especially for young entrepreneurs. 

The minimum capital requirement for the creation of a SARL-S is between EUR 1 and EUR 12,000. This can be made in cash or in-kind (goods). It is thus quite possible to start a SARL-S with just EUR 1, but the SARL-S becomes a regular SARL if its social capital crosses that threshold.

The SARL-S must create a legal reserve, and at least 5% of the annual net profits of a SARL-S must be allocated to the reserve fund. This requirement is relevant until the fund, added to the initial capital, reaches EUR 12,000.

It is important to note that a capital increase or decrease of a SARL-S requires a modification of the statutes.

Shareholders 

Only natural persons can be shareholders of a SARL-S and during the registration of the shareholder with the RCS (Luxembourg Trade and Companies Register), its national ID number must be communicated to the RCS.

A natural person cannot be a shareholder of more than one SARL-S to avoid the accumulation of company formations by the same private person. However, if a private person wants to become a shareholder in two SARL-Ss, they become personally responsible for the debts of the second SARL-S.

Shareholders’ liability 

Shareholders’ liability is restricted to their contributions. But, if a private individual is a shareholder in various SARL-S, he/she becomes responsible for the additional SARL-Ss. 

SARL-S can include 1 to 100 shareholders, although this type of business structure is best suited for individual entrepreneurs. If the number of shareholders of a SARL-S surpasses 100, the SARL-S has one year to change its legal form. 

The shareholders’ decisions are made at general meetings of shareholders. The general meeting of shareholders decides on the amendments to the articles of association, changes in the company name, changes in the share capital, the appointment or dismissal of managers, and the liquidation of the company.

The company shareholders are entitled to a share of the profits. 

All shareholders are allowed to take part in the decision-making process. And each shareholder has a number of votes equal to the number of shares they hold. Rulings are validly made by a majority vote representing 50 % of the capital. 

In SARL-Ss with a single shareholder, the owner alone wields the powers granted to the general meeting of shareholders.

Management body 

A SARL-S is managed by one or more managers elected by the shareholders, for a limited or unlimited term. The shareholders’ assembly represents the company’s capital and made all decisions regarding the company’s capital.

The management of the company is appointed by the shareholders, either in the articles of association or at a subsequent general meeting of shareholders. 

The managers of a SARL-S have the same responsibilities as the managers of a regular SARL

The day-to-day administration of the company, as well as the representation of the company in managerial matters, can be charged to one or more managers, directors, or other representatives acting alone or jointly.

Business license 

SARL-S can only be set up by natural persons and for businesses (commercial, craft, industrial, and certain liberal professions of an intellectual nature) that require a business permit. The application for a business license must be handled at the General Direction of the Small and Medium Enterprises and Entrepreneurs department of the Ministry of Finance. And once formed, SARL-S s must adhere to regulations set in the Law related to business licenses.

Limits of SARL-S a in Luxembourg

The formation of a SARL-S brings some flexibility for entrepreneurs but also includes some obstacles : 

• The SARL-S is intended for natural persons with a business permit, and from the outset excludes specific professions, but also legal entities who might wish to become partners in it
• While some start-up costs are decreased, others are still payable by the SARL-S: registration fees, costs for obtaining the business permits, VAT, etc. 
• Because of its small capital, a SARL-S may suffer from a lack of credibility with suppliers who may fear the company is not adequately robust.

All in all, SARL-Ss certainly hold their place in Luxembourg and come into an active period of economic diversification. 

Luxembourg has a vibrant, and agile environment for startups, and in respect of this, more and more entrepreneurs are entering Luxembourg for their business activities. 

Contact your Damalion expert now to register your company in Luxembourg. 

Use Luxembourg simplified limited liability company (SARL-S) — capital from EUR 1, legal reserve rules, who can be shareholder, business license, and how to move to a classic SARL when the business grows.

For first-time entrepreneurs, micro and small businesses, freelancers and investors using Luxembourg as a base • Damalion helps clients design the structure, prepare company documentation and coordinate with local professionals. Authorisations, registrations and licenses remain with the competent authorities and service providers.

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Why consider a Luxembourg SARL-S?

The Luxembourg simplified limited liability company (SARL-S) is a variant of the classic SARL with a very low required capital, from EUR 1 to EUR 12,000. It is designed for natural persons who want to start a commercial, craft, industrial or certain liberal activities with limited liability and reduced entry costs.

In legal terms, most rules of the classic SARL apply, with specific provisions on capital, shareholders and business license. The SARL-S is often used as an intermediate step: the company can later adjust its capital and transform into a classic SARL once it reaches a more mature stage.

Main legal features at a glance

• Legal form. Variant of the Luxembourg private limited liability company governed by the Law of 10 August 1915 on commercial companies as amended.
• Share capital. Between EUR 1 and EUR 12,000, fully subscribed and fully paid up at incorporation; cash or in-kind contributions are possible.
• Shareholders. Only natural persons may be shareholders; the company can have from 1 to 100 shareholders.
• Limited liability. In principle, shareholders are liable only up to their contributions, subject to cases of fraud, misuse of company assets or personal guarantees.
• Legal reserve. At least 5 % of annual net profits must be allocated to a non-distributable reserve until reserve plus capital reach EUR 12,000.
• Business license. A business permit (autorisation d’établissement) is usually required for commercial, craft, industrial and comparable liberal activities.
• Access reserved to individuals. Legal persons cannot be direct shareholders of a SARL-S.
• Use as a transitional form. When capital and business size increase, many founders decide to amend the articles and adopt the classic SARL regime.

SARL-S and classic SARL compared

Topic	Simplified LLC (SARL-S)	Classic SARL
Capital	EUR 1 to EUR 12,000, fully paid up at incorporation.	Minimum EUR 12,000, fully paid up at incorporation.
Shareholders	Only natural persons; 1 to 100 shareholders.	Natural and legal persons; 1 to 100 shareholders.
Legal reserve	Mandatory reserve of at least 5 % of net profits until capital plus reserve reach EUR 12,000.	Legal reserve under general SARL rules; threshold already met at incorporation.
Business license	Business permit required when the activity falls under the establishment law.	Same rule; permit depends on activity and professional qualification.
Shareholders’ profile	Targeted at founders, small operators and first-time entrepreneurs.	Used for a wide range of businesses and investment structures.
Transformation	Company can be transformed into a SARL when capital reaches at least EUR 12,000 and articles are amended.	Already under the classic SARL regime; no transformation needed.

Main steps to create a SARL-S

Damalion takes care of those following paths to setup your SARL-S:

1. Check eligibility. Confirm that the planned activity, the founders’ profile and the number of companies per person comply with current SARL-S rules.
2. Define capital and shareholding. Set the initial capital between EUR 1 and EUR 12,000 and allocate shares among natural person shareholders.
3. Draft company documents. Prepare articles of association and corporate documents describing purpose, management rules, capital and shares.
4. Obtain the business license, if required. File the business permit application with the competent ministry for activities that need prior authorisation.
5. Register the company. File the incorporation documents with the Luxembourg Trade and Companies Register (RCS) and complete publications.
6. Complete tax and social registrations. Register with the tax authorities, VAT where applicable, and social security for managers and staff.

Costs and timelines

• Capital. Between EUR 1 and EUR 12,000, depending on the business plan and credibility needs with partners and banks.
• Incorporation costs. Fees include drafting of documents, possible notarial fees, registration and publication costs, and any business license fees.
• Ongoing costs. Accounting, annual accounts filing, possible audit or review depending on size, and corporate maintenance.
• Typical timing. When the file is complete and the business license is available, incorporation and registration can usually be completed within days to a few weeks, subject to authorities’ and providers’ workload.

Related reading

• Comprehensive guide to establishing your SARL-S in Luxembourg
• Create your SARL in Luxembourg
• How to register your company in Luxembourg
• More articles on corporate structuring

Frequently asked questions

1. What is a Luxembourg simplified limited liability company (SARL-S)?

A SARL-S is a simplified form of the Luxembourg private limited liability company governed by the Law of 10 August 1915 on commercial companies as amended. It is reserved to natural persons and allows incorporation with a capital between EUR 1 and EUR 12,000 while keeping limited liability, subject to the legal conditions.

2. Who can incorporate a SARL-S?

Only natural persons may be shareholders of a SARL-S. They must meet the legal conditions for the contemplated activity, including any business license and professional qualification requirements. Legal persons cannot directly hold shares in a SARL-S.

3. Can a legal person be a shareholder of a SARL-S?

No. Current rules reserve SARL-S shareholding to natural persons. If a structure with legal person shareholders is required, a classic SARL or another company form should be considered instead.

4. What is the minimum and maximum share capital of a SARL-S?

The share capital must be at least EUR 1 and may not exceed EUR 12,000. It must be fully subscribed and fully paid up at the time of incorporation. Above EUR 12,000, the company normally migrates to the classic SARL regime through an amendment of the articles.

5. How can the capital of a SARL-S be contributed?

Capital contributions may be made in cash or in kind, provided that the contributions are acceptable under Luxembourg law and are properly described in the incorporation documentation. The capital must be fully paid up at the date of incorporation.

6. Is a legal reserve mandatory for a SARL-S?

Yes. At least 5 % of the annual net profits must be allocated to a legal reserve until the sum of paid-up capital and reserve reaches EUR 12,000. This reserve is non-distributable while the threshold has not been reached.

7. How many SARL-S may one natural person hold?

Luxembourg law limits the number of SARL-S in which a natural person may participate, in order to avoid excessive multiplication of such companies. In practice, current guidance refers to a small number of SARL-S per person. The applicable limit and any consequences of a breach should be confirmed with a qualified adviser or the competent authorities at the time of incorporation.

8. How many shareholders can a SARL-S have?

A SARL-S may have a single shareholder or several shareholders, up to 100. If the number of shareholders exceeds the statutory maximum, the company must usually regularise its situation, which may include a change of legal form.

9. Are SARL-S shares freely transferable?

No. SARL-S shares are registered shares and are not freely transferable to the public. Transfers to third parties are subject to the conditions set out in the law and the articles of association and typically require approval by a qualified majority of shareholders.

10. Is a notarial deed required to form a SARL-S?

Luxembourg law allows SARL-S incorporation by private deed with publication, although a notarial deed remains possible. The choice of form should be made in light of the project, financing and any specific legal constraints.

11. When is a business license required for a SARL-S?

A business permit (autorisation d’établissement) is required for most commercial, craft, industrial and certain liberal activities carried out in Luxembourg. The SARL-S may not lawfully start such activities before the permit has been granted by the competent ministry.

12. Are there activities that cannot be carried out through a SARL-S?

Some regulated professions and activities may not be carried out through a SARL-S, or may require a different legal form or regulatory approval. Examples include certain financial services and professions with specific professional bodies. The admissible scope should be checked for each planned activity.

13. How is a SARL-S managed and represented?

A SARL-S is managed by one or more managers appointed in the articles of association or by shareholder resolutions. The managers represent the company towards third parties within the limits of the law and the corporate documents. Their duties and liability are similar to those applicable to managers of a classic SARL.

14. What are the accounting and filing obligations of a SARL-S?

A SARL-S must keep proper accounting records, prepare annual accounts and file them with the Luxembourg Trade and Companies Register within the deadlines set by law. Depending on its size, an audit or limited review may be required. Failure to comply may trigger administrative and, in some cases, criminal sanctions.

15. How is a SARL-S taxed in Luxembourg?

For tax purposes, a SARL-S is generally treated like a classic SARL. It is subject to corporate income tax, municipal business tax and net wealth tax where applicable. Distributions to shareholders may be subject to withholding tax, and double tax treaties may provide relief. Tailored tax advice is recommended before implementation.

16. When must a SARL-S convert into a classic SARL?

When the company’s capital and reserve reach or exceed the minimum capital required for a classic SARL, or when the business outgrows the SARL-S framework, shareholders often decide to amend the articles and adopt the classic SARL regime. In certain cases, such as the capital exceeding EUR 12,000 or persistent changes in shareholder profile, an adaptation may be required to remain compliant.

17. Can a SARL-S distribute dividends while its reserve is still being built?

Dividends may only be distributed out of distributable profits and provided that legal and contractual reserves remain intact. The 5 % allocation to the legal reserve must be respected before distributions. If these conditions are not met, distributions may be unlawful and could give rise to restitution and liability claims.

18. What happens if the SARL-S exceeds the maximum number of shareholders?

If the number of shareholders exceeds the statutory maximum, the company must regularise its situation within the time limits provided by law, for example by reducing the number of shareholders or changing its legal form. Failure to regularise may expose the company and its managers to legal risks.

19. What are the main advantages of the SARL-S compared with a classic SARL?

The SARL-S offers a low minimum capital, access restricted to natural persons and a framework specifically aimed at small businesses. It can reduce initial costs while keeping limited liability and a flexible governance framework, subject to the conditions of the law.

20. What are the main legal risks and limits of the SARL-S?

The SARL-S may have reduced credibility with certain partners because of its low capital, is reserved to natural persons and may be subject to limits on the number of SARL-S per person. It remains fully subject to company law, tax law and regulatory rules. Non-compliance with capital, reserve, filing or licensing rules can lead to civil, administrative or criminal consequences. Independent legal and tax advice is recommended before choosing this form.