What is an SCA business
An SCA may have unlimited members, as long as a general partner and a limited partner are included, and requires a minimum share of 30,000 euros. The duality between general and limited partners makes an SCA ideal for businesses that want to divide management and capital ownership. While the general partners manage the company and have unlimited liability regarding debts, limited partners contribute capital and have liability only limited to their investment.
Comparison between an SCA and a SA
| Matter | SA | SCA |
| Minimum and Maximum Capital needed | 30,000 euros providing 25% of that is paid up at the corporation (7,500 euros)No legal limit to maximum capital. | 30,000 euros providing 25% of that is paid up at the corporation (7,500 euros)No legal limit to maximum capital. |
| Shareholders | Minimum 1 - No maximum limit. | Minimum 2, at least one general partner and one limited - Unlimited upper limit. |
| Who is it best for | Medium to large businesses, companies in search of investors, entrepreneurs desiring flexible ownership and secure, legal structure. | Ideal for family businesses, private equity firms, or ventures needing specific roles. |
| Opening and development process | It requires a notary and detailed association articles. | Same as SA. |
| Liability | Limited to the shareholders’ contributions. | Unlimited for general partners, limited for limited partners. |
| Management | Two different structures: Managed by a board or by a single director (may be allowed in specific cases) There might also be a dual model, where both are in effect. | Managed by general partners only. |
| Restrictions | There is general flexibility when it comes to business activities but some (ex. gambling) are not allowed or require professional accreditations (ex. medical or legal services). | No specific restrictions. |
| Taxes | Corporate taxes, municipal business taxes, net wealth tax, dividend tax and VAT obligations. | Corporate taxes, municipal business taxes, net wealth tax, withholding taxes including dividend, tax and VAT obligations. There might be tax exemptions and special regimes depending on if the company qualifies. |
Steps to open an SCA in Luxembourg
- Check your eligibility first
- Business idea and structure
- Choose form of business depending on your company’s needs
- Market research and planning
- Apply online for business permit here
- After you get your permit, register your company here by providing business name, proof of identity and address, potential notarized documents
- Ensure company compliance with industry rules and regulations
- Draft association documentation
- Publish a notice of incorporation
- Register for declaring income tax at the Luxembourg Inland Revenue
- Social security registration in Luxembourg for both employees and self-employed entities is done through CCSS
- Look into potential financial aids - Luxembourg, both privately and the State, offers quite a few options
- Open a business bank account
- Develop GDPR policies
- Quite a few more steps in case your company has employees, such as adherence to local employment laws, contracts, salaries, work permits and more. It is worth hiring a lawyer, an accountant and maybe an employer of record as well, for those parts of setting up the business.
- If you need a physical office, one of the latest steps would be to find a home for your company, taking into consideration not only the rental price, but other costs, lease terms, workplace safety and more
Specific considerations for an SCA in Luxembourg
Since an SCA does not have the simplest of set ups, you might need some supplemental documentation compared to other business forms, like the SARL. So, in order to open a SCA, besides the business permit, articles of association, the proof of capital and all IDs of general and limited partners, you will need a notary to formalize the articles of association, as well as potentially special licenses, power of attorney in some case and board resolutions. Those are to consider during the registration process.
Pros and cons of opening an SCA in Luxembourg
| Advantages✅ | Disadvantages❌ |
| Management. The distinction between managers and investors can offer flexibility in governance. | Liability for debts. General partners have unlimited liability for company debts. |
| Flexible management. Flexible structure when it comes to voting, profit-sharing and partner roles. | High initial capital. The initial investment needs to be at least 30,000 euros. |
| Tax-efficient. Favorable tax regulations. | Complex administration. It is quite complicated to set up, needs a notary and detailed association articles. |
| Limited partner liability. Limited partners enjoy liability protection. | Limited management. Limited partners cannot participate in management. |
| Structure. This type of business is ideal for investors due to its clear and solid corporate structure. | Compliance. It requires more regulations comparing to a -much simple- SARL. |
Converting an SCA to another type of business
It is worth mentioning here that an SCA can be converted to another type of business.
The things to take into consideration before proceeding to a business conversion are:
- The general partners need to settle any pending liabilities before conversion
- You should have legal and financial experts by your side for a smooth process
- You would need to look into, most likely with the help of an accountant, the differences in tax requirements before conversion
Other than those few points, you are good to go and the process goes like this:
- 1️⃣ There must be a legal resolution of the company after all liabilities are settled
- 2️⃣ New articles of association need to be drafted, as it will be a new business form and therefore structure, and different legal regulations might apply
- 3️⃣ The conversion needs to be notarized
- 4️⃣ The new business status would need to be communicated to Luxembourg Business Registers (RCSL)
Conclusion: Why choose to open an SCA
The final decision of opening an SCA in Luxembourg heavily depends on the type, size and conditions of your business. Starting a business is never an easy decision and it requires a lot of research and preparation in advance, so it is great to have a good understanding of the advantages and disadvantages of this type of company to be able to make an informed decision. An SCA can definitely be a great option for a new business set-up, if it matches your specific requirements and financial needs, specifically the need for:
- Investor attraction
- Division between management and ownership
