Unlocking Opportunities with Luxembourg’s Simplified Limited Liability Company
In the heart of Europe, Luxembourg offers a simplified path to entrepreneurship through its Simplified Limited Liability Company (SARL-S). This unique business structure deviates from some of the conventional rules associated with the traditional Limited Liability Company (SARL). With a minimum share capital of just one euro and the flexibility of creating the company through a private agreement without the involvement of a notary, SARL-S in Luxembourg empowers entrepreneurs to embark on their economic journey swiftly.
Who Can Establish a SARL-S Luxembourg?
The SARL-S in Luxembourg is exclusively available to individuals. An individual can only be associated with one Simplified Limited Liability Company at a time, except when they inherit shares due to a colleague’s demise. However, they can concurrently be associated with an SARL-S in Luxembourg and a company of a different legal form, such as a traditional SARL or a SA.
Similar to the classic SARL, the SARL-S in Luxembourg can have anywhere from 1 to 100 associates.
The scope of activities for a Simplified Limited Liability Company is limited to craft, commerce, industry, and certain liberal professions, as defined during its establishment. To begin the process of creating an SARL-S Luxembourg, an aspiring entrepreneur must first seek authorization from the Ministry of the Economy. This authorization request must be included in the registration dossier submitted to the Trade and Companies Register (RCS).
Reasonable cost to setup your SARL-S in Luxembourg
Creating an SARL-S in Luxembourg incurs various costs, including:
- Publication fees with the RCS
- A minimum share capital contribution of 1 euro
- Possible expenses related to administrative authorizations
Practical Steps to register your SARL-S in Luxembourg
1. Act of Formation
Establishing an SARL-S in Luxembourg can be accomplished through a private agreement; it is not mandatory to involve a notary.
2. Company Name (Dénomination)
The SARL-S in Luxembourg must have a unique name specified in the formation agreement. This name must be distinct from any existing companies. Before proceeding, applicants must verify the availability of the chosen name with the RCS. The approved name should be used in all company documents, followed by “SARL-S.”
An SARL-S in Luxembourg can be created for a fixed or unlimited duration.
If the number of associates exceeds 100 or the share capital surpasses 12,000 euros, the SARL-S in Luxembourg has one year to change its legal form. The decision for this transformation lies with the assembly of associates.
The SARL-S in Luxembourg can be dissolved due to various reasons, including:
- The expiration of its term
- The completion or termination of its purpose
- Judicial dissolution for justifiable reasons
- Voluntary dissolution initiated by the assembly of associates or the sole associate
Notably, the SARL-S in Luxembourg is not dissolved by the death, prohibition, bankruptcy, or insolvency of one of the associates, unless otherwise stated in the company’s articles.
Any voluntary dissolution must be accompanied by administrative certificates from:
- The Computer Center for Affiliation and Collection of the Common Social Security Center
- The Directorate of Direct Taxes
- The Directorate of Registration, Domains, and VAT
The share capital of an SARL-S in Luxembourg must range from 1 euro to 12,000 euros. It must be fully subscribed and fully paid up at the time of the company’s formation. Associates can contribute capital in the form of cash or assets.
Form of Shares
Shares in an SARL-S of Luxembourg are nominative. Public issuance of shares or beneficiary shares is prohibited. Neither shares nor beneficiary shares can be represented by negotiable registered securities; they are solely represented by certificates issued to specific individuals. Private issuance of bonds is permissible with the consent of the associates, provided they are convertible into shares.
Transfer of Shares
Shares in SARL-S Luxembourg are not freely transferable. Shares with voting rights cannot be transferred among living individuals who are not associates or holders of voting beneficiary shares without approval from a general assembly of associates, representing at least three-fourths of the share capital. However, the articles may reduce this majority requirement to half of the share capital. Share transfers must be documented through a private agreement or a notarial act.
The management of SARL-S in Luxembourg is entrusted to one or more managers, whether associates or not, appointed by the associates either in the articles or through a subsequent agreement, for a fixed or indefinite term. The general assembly of associates represents the capital and makes decisions related to it.
The role of manager is typically filled by one or more individuals, whether associates or not, appointed by the associates in the articles or through a later general assembly, for a fixed or indefinite term. These managers have the authority to carry out all actions necessary for the company’s purpose, except those reserved for the decision of the associates by law or the articles. Day-to-day management and representation of the company concerning such management may be delegated to one or more managers, directors, or other agents, whether associates or not, acting individually or jointly. The company is bound by the actions of the managers, even if these actions exceed its stated purpose.
The General Assembly of Associates
It’s important to note that associates of an SARL-S in Luxembourg must be individuals; a company cannot be an associate of an SARL-S Luxembourg. An individual can only be an associate of one SARL-S Luxembourg at a time, unless they inherit shares due to a colleague’s death.
Decisions of the associates are made in a general assembly, where they can discuss:
- Amendments to the articles
- Changes to the company’s name
- Alterations to the share capital
- Changing the company’s legal form
- Appointment or removal of statutory managers
- Liquidation of the company or changing its nationality
Associates have a right to a share of the profits. They also have the right to information regarding the inventory, balance sheet, and the report of the supervisory board, if one exists. The management report produced by the SARL-S Luxembourg must be approved by the general assembly of associates. For SARL-S of Luxembourg with more than 60 associates, the general assembly must be convened annually, with the period set by the company’s articles. Other assemblies can be convened by the manager or managers.
For SARL-S of Luxembourg with fewer than 60 associates, unless the articles state otherwise, holding a general assembly is not mandatory. In such cases, associates are invited to cast their votes in writing after receiving the resolutions or decisions to be made. All associates have the right to participate in decisions, and voting rights can be subject to agreements among associates. Each associate has a number of votes equal to the number of share parts they own, and decisions are validly made by a majority representing 50% of the share capital. The sole associate exercises the powers of the general assembly.
The founders of the company and, in case of an increase in share capital, the managers, are jointly liable to third parties for:
- Any part of the capital not validly subscribed and the difference between the minimum capital and the amount subscribed
- The actual payment of share parts and the part of the capital they subscribed to
- The reparation of damages resulting from either the nullity of the company or false statements in the company’s articles
However, the articles of the SARL-S of Luxembourg can limit the definition of founders to subscribers collectively holding at least one-third of the share capital. In this case, other signatories to the formation document are considered simple subscribers. Associates are responsible up to the amount of their capital contribution. The company is bound by the actions of the managers, even if these actions exceed its stated purpose, unless it can be proven that the third party knew or should have known that the action exceeded the company’s purpose.
It is possible to define the collective or individual responsibilities of managers, which must be published in the Electronic Trade and Companies Register (RESA) and become legally binding on third parties. Managers are responsible to the company for the execution of their mandate and any faults committed.
Surveillance by Auditors
SARL-S with more than 60 associates are subject to mandatory oversight by one or more auditors, whether associates or not, appointed in the company’s formation document.
SARL-S must register with the RCS. This process involves providing information about the company, including:
- The company name or business name, and, if applicable, any abbreviation and trade name used
- The legal form and, if necessary, any additional information required by law
- The precise address of the registered office
- The description of the company’s purpose
- The amount of share capital
Additionally, SARL-S must disclose:
- The identity of associates, their precise private or professional addresses, and the number of share parts held by each
- The authorization number for establishment
Subsequent modifications must be published in the RCS for inclusion in the Electronic Trade and Companies Register (RESA). Company documents must include:
- The company name
- The mention “Simplified Limited Liability Company”
- The registered office address
- The registration number in the trade and companies register
- The signatory’s capacity
The mention of share capital is no longer obligatory.
SARL-S is obliged to produce:
- A balance sheet
- An income statement, along with any necessary annexes
- Typically, a management report that must be approved by the general assembly of associates
SARL-S of Luxembourg can prepare an abridged balance sheet if, at the end of the financial year, they do not exceed two out of three of the following criteria:
- A balance sheet total of 4.4 million euros
- A net turnover of 8.8 million euros
- An average of 50 full-time employees
SARL-S of Luxembourg can consolidate certain items in the income statement if, at the end of the financial year, they do not exceed two out of three of the following criteria:
- A balance sheet total of 20 million euros
- A net turnover of 40 million euros
- An average of 250 full-time employees
Tax Considerations for the Luxembourg simplified limited liability company
SARL-S is subject to the following taxes:
- Fixed registration fees
- Property tax
- Commercial tax
- Wealth tax
- Corporate income tax
- VAT declaration based on the following criteria:
- Annual turnover (excluding tax) below 112,000 euros: annual VAT declaration
- Annual turnover (excluding tax) between 112,000 euros and 620,000 euros: quarterly VAT declaration
- Annual turnover (excluding tax) exceeding 620,000 euros: monthly VAT declaration
Establishing an SARL-S in Luxembourg provides a simplified and flexible path to entrepreneurship, allowing individuals to embark on their business journey with minimal capital and streamlined administrative procedures. By understanding the legal and financial aspects of this business structure, aspiring entrepreneurs can make informed decisions to achieve their business goals in the heart of Europe.
Please contact your Damalion expert now to start your simplified limited liability company in Luxembourg.