More and more people nowadays are passionate about creating their own business, in a field they love, focused on a product they are interested in. If you are one of those whose professional dream is to have their very own startup, this article might help you get started. The future is all yours to start thriving and we have the best location suggestion: Luxembourg!
Why should I choose to build my startup in Luxembourg?
Luxembourg’s thriving economy, quality of life and financial stability lead quickly to a great business environment, for all kinds of companies, but also for investment and fundraising opportunities. Luxembourg hosts a big number of businesses and organizations, plus it is an international work environment, since it is in the very center of Europe, which leads both local and foreign businesses to success. Among other facilitations, Luxembourg offers double taxation agreements with over 80 countries all over the world, which puts the country on the top as a great choice for startups and company merging.
Besides the attractiveness of Luxembourg though, and even though it is fairly easy to open a business in the country as a resident or non-resident, there are some practical steps to be followed. So before getting too impatient, you would need to consider firstly, if you and your company are eligible, when and how to launch, how to register and all relevant documentation, possibilities for financial aids, but most importantly take into consideration taxation, accounting, legal and compliance matters. Therefore, careful planning is needed in order to follow all necessary Luxembourgish rules and regulations, for your business to be established properly and thrive. There are many entities, state or private associations, who can help you step-by-step to build your business in Luxembourg and we will get into details further in this article. But first things first! Are you eligible?
Eligibility for opening a startup in Luxembourg
At the moment, almost 143000 businesses are registered in Luxembourg, with the top industries being real estate, finance and insurance, followed by retail and other services. For locals including EU citizens, the necessary documentation is fairly self-explanatory, but for foreigners, a resident permit is needed. The next step would be business permit and registration, but before that let’s take a look at the business idea and structure needed to begin.
Business idea and structure for a new startup
For any new startup business, regardless of location, it is always useful to do good market research and planning. Before starting looking into opening and registering your business, you would have to make sure you have a solid business plan, outlining the whole idea, the target market, financial considerations and of course a growth strategy.
But a business plan is not the only thing you have to do before starting. It is very crucial for your new startup to decide on a business structure or form of business specifically in the country you are aiming for, Luxembourg in this case. Luxembourg offers quite a few options on business structure, with unique characteristics for each option, and pros and cons to consider depending on the type of your business and your future goals. Your choice highly depends on if you will be a freelancer, a one-person company, a startup or a non-profit organization. Different terms apply to different companies, so let’s see how the different forms of business illustrate in Luxembourg.
Forms of business in Luxembourg
1. Self-employment - Sole entrepreneurship
This is for freelancers and one-person companies. The advantages are: Simple to set up when it comes to necessary documentation and registration, plus unlimited personal liability.
2. Capital Companies
There are three main types of capital companies: Limited Liability Company (SARL): Offers limited liability with a minimum capital requirement of €12,000. Public Limited Company (SA): Suitable for larger businesses, requiring a minimum capital of €31,000. Simplified Limited Liability Company (SARL-S): Less requirements than a normal SARL.
3. Cooperative company (Société coopérative – SCOP)
Ideal for mutual benefit and flexible structures. Owned and run by employees without minimum share capital requirement. There are two different types though, much like in other company groups: Civil company (Société civile – SC): A specific type of company, created to mainly manage immovable assets or intellectual professions. Societal impact company (Société d’impact sociétal – SIS): Again kind of specific, mainly focused on a social cause, for example inclusion, gender equality, sustainability etc.
4. Partnerships
An expansion of self-employment with the crucial difference that there can be more than 1 owner equally responsible for handling business issues. There are three main kinds of partnerships: General partnership (SENC): An agreement between two or more owners. Limited partnership (SCS): One partner at least has limited liability. That means, their liability only extends to their investment in the company. Special limited partnership (SCSp): Ideal for investment funds, with the difference that it does not have a ‘legal personality’.
5. European company (SE)
Suitable for large MNCs with a minimum shareholder capital of €120,000
Legal and financial guidance for opening a startup in Luxembourg
Business permit and company registration
Before opening a new business it is very important to understand that as a business owner your company will be liable to capital requirements, depending on what legal structure you chose for your company, tax consideration and local labor legislation for hiring employees, including payroll matters and accounting, but also company vehicles. Also, intellectual property and copyright are essential to protect your new business’s original patents and ideas.
If you are professionally qualified and eligible, you can apply online for a business permit here and also get all the forms, guidance, tutorials and tools prior to that here. For further help, check out the detailed Guide to Starting a Business in Luxembourg. Most permits are processed within two weeks if all documentation is in order, but depending on vacation periods or missing documents, it might take up to three months.
After you get your permit with your unique business number, you can register your company in one of the forms discussed above. You would need:
- Business name
- Necessary documentation, such as proof of identity and address
- Notarization of documents
- Registration at Luxembourg Business Registers (LBR)
- Possible necessary licenses depending on specific business activities
- Ensure company compliance with industry rules and regulations
Tax obligations
It would be beneficial to hire a local accountant to assist you with tax and financial management. You would need to comprehend your tax obligations which apply to your business structure, and the different kind of taxes in Luxembourg, for both businesses and individuals, in case you are relocating there for opening your business. The main steps you would have to take though go as follows:
- Register for declaring income tax through the Luxembourg Inland Revenue, soon after your business registration
- Value Added Tax (VAT) registration in case your company income exceeds €35,000
- If you have employees, confirm social security compliance and contributions. Social Security Registration in Luxembourg, also for self-employed, is done through CCSS.
Available financial aids
There are quite a few options in Luxembourg to support your business dream financially. Here is a non-exhaustive list:
- The Société Nationale de Crédit et d’Investissement (National Credit and Investment Society) offers loans for company medium and long-term investments.
- The Mutualité de Cautionnement et d’Aide aux Commerçants (Mutual Guarantee and Assistance fund for Traders) is a mutual loan company operated by the Chamber of Commerce and offers loans from authorized lenders.
- Local and European grants and funding for new businesses
Good luck with opening a startup in Luxembourg in 2024!
Luxembourg is definitely a very hospitable environment for startups, with the government guiding visionaries to their success. The economic, social and political stability of the country makes it an ideal location for new businesses as well as investments. Of course there are some steps to take in order to open your own business, but generally it is a simple and fast process compared to other European countries.
