LUXEMBOURG
FIRST STEPS IN CREATING A LUXEMBOURG COMPANY
We can form any type of Luxembourg Company. We need information from you and the procedure will generally be like this:
We will need you to complete our 'Know Your Customer' (KYC) documentation and come to discuss with us what type of Luxembourg Company you need. We will give you ideas on what structure best suits your needs.
You will choose a name for the Company and we will check if that name is available. Names cannot be reserved but as long as it is not used by anyone else, it will be possible to obtain the name for you.
We will provide you with draft statutes for the Luxembourg Company taking into account the purpose for which the Company is being formed. Once you are happy with the wording of the statutes, we will arrange for a Luxembourg Notary to officially complete the documents for your final approval. We will then arrange an appointment with the Notary for the official formation of the Luxembourg Company.
We will discuss details of the many options available to you when we first meet and this will be followed up by further information as you need it - let us know what you need and we will help you with all the options - just contact us.
You can also download our Company Formation Checklist to get an idea of what will be required.
CREATING A LUXEMBOURG COMPANY
LUXEMBOURG COMPANY FORMATION - GENERAL INFORMATION
Some general information on Luxembourg Company Formation follows and you can visit our Company Types pages to find out even more detail.
An enterprise may conduct its trade or business in Luxembourg in one of several organisational forms. The two most common forms of conducting trade or business are the limited liability company and the partnership. Other business forms include the cooperative, foundation and association. Additionally, a foreign trade or business may conduct activities in Luxembourg as a branch of a foreign company or partnership or as a permanent establishment. Management regulations, transfer of companies, equity requirements, liability limitations, accounting and auditing obligations, and taxation and public disclosure rules are significant factors in determining the choice of form.
REGISTRATION
All Luxembourg companies other than pure holding companies (SoParFi) must obtain a permit or authorisation from the Luxembourg Government to conduct a trade or business. The Luxembourg Government will grant authorisation in the name of a director or manager and in the name of the company.
All newly formed businesses must register with the Trade and Companies Register. Special registration rules exist for Luxembourg Companies from the financial industry. These companies must register with the Financial Oversight Regulator (Commission de Surveillance du Secteur Financier or CSSF). The tax authorities inform newly formed businesses of applicable taxes based on the business structure chosen and assign them taxpayer identification numbers.
Certain industries require special licences to do business in Luxembourg (autorisation de commerce) issued by the Ministry of the Middle Classes (Ministère des Classes Moyennes) which is responsible for all matters relating to trade, manufacturing, the skilled craft trades and some liberal professions. Specific businesses in the finance industry sector (e.g. banks, investment funds and insurance companies) require licences issued by the Ministry of Finance.
A branch of a foreign company must register with the Trade and Companies Register. If a branch has commercial activity, it must obtain a permit to do business (autorisation d’éstablissement).
LIMITED LIABILITY COMPANIES
One or more persons, either individuals or legal entities, may form a limited liability company (Luxembourg SA, or Luxembourg SARL) for the purpose of conducting a business venture and dividing profits among investors. The equity capital of a limited liability company is divided into shares. A shareholder may easily transfer shares by contract or, if the Luxembourg company is listed on a stock exchange, without limit. A shareholder’s liability is limited to their nominal equity. Limited liability companies are subject to Luxembourg corporate income tax.
The Luxembourg SA and the Luxembourg SARL are the most common business structures in Luxembourg and the most common business structures used by resident businesses.
COMPANY FORMATION
Incorporation of a limited liability company occurs through a notarial deed that includes articles of association. A private contract does not suffice to create a limited liability company.
The following minimum requirements exist for the share capital of limited liability companies: the minimum share capital for a Luxembourg SA is €31,000. Each shareholder must pay up at least 25% of their part of share capital at incorporation. Shares must have a minimum par value of €1.24 per share. Shares may be in registered or bearer form; the minimum share capital for a Luxembourg SARL is €12,400. The entire share capital of a Luxembourg SARL must be paid up at incorporation. Shares must have a minimum par value of €24.79 per share. Only registered shares are allowed.
OTHER INFORMATION
Since 2006, a Luxembourg SA has no minimum number of shareholders and only requires one director. Prior to 2006, a Luxembourg SA required a minimum of two shareholders and management by at least three directors. Individuals or corporate entities of Luxembourg or a foreign nationality may hold these positions.
A Luxembourg SA must have an annual audit of its accounts by a statutory auditor (commissaire aux comptes). A Luxembourg SA generally must appoint a Luxembourg qualified auditor (réviseur d’entreprises) as its statutory auditor. A small company may appoint an individual or a corporate entity of Luxembourg or foreign nationality as its statutory auditor.
A small company is a limited liability company that does not exceed the limits of two of the following three criteria on its balance sheet dates: balance sheet total - €3,125,000; net turnover - €6,250,000; average number of full-time staff employed during the financial year - 50.
A Luxembourg SA must prepare annual financial statements subject to approval by the shareholder(s) in an annual general meeting.
A Luxembourg SARL requires between one and 40 shareholders and management by at least one manager. Individuals or corporate entities that may be non-resident entities may hold these positions. A Luxembourg SARL with less than 25 shareholders need not hold annual general meetings or appoint a statutory auditor unless it exceeds the small company limits (see above). Otherwise, a Luxembourg qualified auditor must be appointed. In any case, a Luxembourg SARL must prepare annual accounts.
TAXATION
The profits of a limited liability company are subject to tax twice, once at the corporate level and once in the hands of its shareholders when profits are distributed. Corporate and individual shareholders may sometimes be able to mitigate the double taxation inherent in this system contact us to find out how !
A limited liability company may reduce its taxable income and potential double taxation by distributing part of its income as salary to shareholder-employees. The limited liability company may deduct the salary paid to shareholder-employees from taxable income to the extent the salary is reasonable taking into account the activities that the shareholder-employees perform. Salary payments to shareholder-employees may increase the overall tax burden as the personal income tax due on the salary may be higher than the combined taxation on business profits and subsequent dividend distributions.