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Do you want to start your own business and become your own boss? Have you analysed the market and the competition? Have you carefully worked out your business model and market strategy? Now all you have to do is start your own business. But how do you go about it?
The first way to set up a business is to become self-employed, which is quite common in Luxembourg. This solution requires very light formalism. The self-employed person carries out their activity on their own account, without having to create a specific company.
There is no obligation to pay a start-up share capital to be self-employed. No specific incorporation act is required, other than the basic administrative steps. However, an establishment (business) permit is mandatory and must be requested from the Ministry of the Economy together with the necessary proof of the right to exercise one's profession (i.e. recognition of diplomas and validation of professional experience).
The self-employed person must also be registered with the VAT authorities in order to be able to issue invoices with VAT collection (if applicable). However, below a certain amount of annual turnover, an exemption regime can be applied.
Unlike employees, however, the self-employed person must pay all their social security contributions. The self-employed person must be registered with the CCSS, which will allow them to contribute to the various insurances, including that for retirement pension. Depending on the profession they carry out, they must also contribute to a specific accident insurance scheme.
They have the same rights as employees in terms of retirement pension, maternity and parental leave. In the event of incapacity for work, benefits will be paid from the fourth month. In the event of unemployment, they will be compensated under certain conditions.
The second way to start your own business is to create your own company. In this case, in Luxembourg, the two most common forms of commercial enterprise are the private limited liability company (SARL) and the public limited company (SA).
The SARL requires a capital of €12,000 and at least two shareholders. The registered office must be located in the Grand Duchy of Luxembourg; the director does not need to have Luxembourg nationality. This form of company requires the fulfilment of some legal formalities and is subject to a fixed registration fee. In terms of direct and indirect taxes, an SARL is subject to Corporate Income Tax (CIT), Municipal Business Tax (MBT), Net Wealth Tax (NWT) as well as Value Added Tax (VAT - if applicable to the case at hand).
In the case of a simplified private limited liability company (SARL-S), the incorporation can be carried out under private written agreement. The capital will be between €1 and €11,999.
Creating an SA requires a capital of €30,000. A single shareholder is sufficient. This form of company, although intended for large companies, can be chosen by an SME. Similar to an SARL, an SA is required to fulfil some legal formalities and is subject to a fixed registration fee. In terms of direct and indirect taxes, an SA is subject to CIT, MBT, NWT as well as VAT (if applicable to the case at hand).
So, are you ready to start?
