Types of Companies in Luxembourg: Which Legal Form to Choose?
If you’re starting a business in Luxembourg, you need to pick a legal form. Of the types of companies in Luxembourg, the four most common are sole proprietorship (entreprise individuelle), SARL (société à responsabilité limitée), SARL-S (simplified SARL), and SA (société anonyme). Your choice affects setup cost, tax treatment, personal liability, and paperwork. Most solo self-employed people start as a sole proprietorship or SARL-S.
Whichever form you pick, you still need a business permit (autorisation d’établissement) if your activity requires one.
| Form | Min. capital | Notary? | Liability | Best for |
|---|---|---|---|---|
| Sole proprietorship | None | No | Personal, unlimited | Solo freelancers, small traders |
| SARL-S (simplified) | €1–12,000 | No | Limited | Small businesses starting lean |
| SARL | €12,000 | Yes | Limited | Established businesses, multiple partners |
| SA | €30,000 | Yes | Limited | Larger businesses, raising capital |
Sole proprietorship
You are the business. No separate legal entity.
- Capital: none required
- Liability: unlimited — your personal assets are on the line for business debts
- Tax: profits taxed under personal income tax (IRPP). No corporate tax, no net wealth tax
- Registration: RCS only if your activity is commercial (not for liberal professions). RBE not required
- Accounting: simple cash-basis ledger allowed up to €100,000 turnover. Above that, double-entry bookkeeping
- Setup: cheapest and fastest — business permit + CCSS + AED registration
Good for: freelancers, consultants, small traders, anyone starting solo and testing their market.
Bad for: activities with significant financial risk (damage to clients, large inventories, public works). Personal liability means one bad year can cost you your home.
See our deeper guide on sole proprietorship in Luxembourg.
SARL (société à responsabilité limitée)
The classic limited liability company. A separate legal entity.
- Capital: €12,000 minimum, fully paid up at incorporation (cash or in-kind)
- Liability: limited to your capital contribution as a shareholder. But gérants (managers) can be personally liable for unpaid tax/VAT (under § 103 of the Abgabenordnung, if they fail to ensure the company meets its tax obligations) and for unpaid CCSS contributions (under the Code de la Sécurité Sociale) — two separate legal regimes
- Tax: corporate income tax (IRC) + municipal business tax (ICC) + net wealth tax (IF). Combined effective rate in Luxembourg City ~24% for profits above €200,000 (2026 rates)
- Shareholders: 1 (SARL unipersonnelle) to 100. Natural or legal persons
- Setup: notary required. Typical total cost €1,500–€3,000 (notary + RCS/RESA publication). Timeline 1–3 weeks
- RCS + RBE registrations mandatory. Annual accounts filed within 7 months of year-end
Good for: established businesses, multiple partners, activities where credibility with clients and banks matters.
SARL-S (simplified SARL)
Launched in 2017 to make company creation cheaper and faster for small businesses.
- Capital: €1 to €12,000, fully paid up at formation
- Notary: not required — private deed (acte sous seing privé) is enough
- Shareholders: only natural persons. Maximum 100, minimum 1. You can only be a shareholder in ONE SARL-S at a time
- Activity: must require a business permit (commerce, craft, HORECA, transport, etc.). Pure liberal professions (lawyer, doctor, architect) cannot use SARL-S
- 5% reserve rule: each year, 5% of net profits go to a legal reserve until capital + reserve reaches €12,000. No time limit
- Tax: same as classic SARL (IRC + ICC + IF)
- Liability: same as SARL — limited for shareholders, personal for gérants on tax and CCSS debts
- Setup: ~€200–€500. Timeline 1–2 weeks
Good for: first-time entrepreneurs, small businesses, craftsmen, retailers. A lean way to get limited-liability protection without a notary bill.
See our deeper guide on SARL-S in Luxembourg.
SA (société anonyme)
The “big company” legal form. Rarely used by solo self-employed people.
- Capital: €30,000 minimum, of which 25% paid up at incorporation
- Notary: required
- Shareholders: 1+ (natural or legal)
- Board: one-tier (at least 3 directors, or 1 if sole shareholder) or two-tier (management + supervisory board)
- Tax: same as SARL
Good for: larger businesses, businesses raising equity, holding structures.
Which one to choose?
Three questions to ask yourself:
1. What’s my financial risk?
Solo consultant with low risk → sole proprietorship works. Building something with inventory, staff, or significant client exposure → SARL-S or SARL for the liability shield.
2. How much can I invest in setup?
SARL-S is the cheapest company form (~€200–€500). Classic SARL needs a notary and €12k paid-up capital. Sole proprietorship is almost free.
3. What’s my activity?
Liberal professions (lawyer, doctor, architect, IT consultant without a commercial permit) cannot use SARL-S. They’re left with sole proprietorship or classic SARL.
Practical tip: Many solo freelancers start as a sole proprietorship, then switch to a SARL-S or SARL once revenues stabilise and they want to protect personal assets. You can change form later — it’s not a one-way door.
The business permit is separate from the legal form. Sole proprietorship, SARL, SARL-S, or SA — if your activity needs a permit (commerce, craft, HORECA, etc.), you still need one. The legal form does not replace the permit. See our article on the 4 criteria for a business permit.
Quick reference
| Question | Answer |
|---|---|
| Cheapest form to set up? | Sole proprietorship (almost free) — or SARL-S (~€200–€500) if you need limited liability |
| Form with limited liability? | SARL-S, SARL, SA |
| Form without a notary? | Sole proprietorship, SARL-S |
| Can liberal professions use SARL-S? | No — only business-permit activities |
| Can I be in multiple SARL-S companies? | No — one per person |
| Do I pay corporate tax as a sole proprietor? | No — only personal income tax |
| Do I need a business permit regardless of form? | Yes, if your activity requires one |
Related articles
- Sole proprietorship in Luxembourg — pros and cons
- SARL-S in Luxembourg — the simplified SARL explained
- Sole proprietorship vs SARL — which to pick?
- The 4 criteria for a business permit
- Taxes for self-employed in Luxembourg
No boss, no hierarchy, no ceiling on what you can build. Bravo for choosing your own path.
💜💙 Your BravoLisa Team
This article is for general information purposes only and does not constitute professional tax, legal, or accounting advice. Every situation is different — consult a qualified professional (tax adviser, accountant, or lawyer) for advice specific to your circumstances. BravoLisa does not accept liability for decisions made based on this information.
Legilux — Loi modifiée du 10 août 1915 sur les sociétés commerciales, Legilux — Loi du 23 juillet 2016 (société à responsabilité limitée simplifiée), Guichet LU — Constitution d'une société, Legilux — Loi du 27 mai 2016 portant réforme du régime de publication légale relatif aux sociétés et associations, Guichet LU — Publication et publicité des dépôts au RCS.
