Importance of a business bank account in Luxembourg
Opening a bank account is one of the first steps an individual must take in Luxembourg when starting a business, whether operating as an independent entrepreneur or through a partnership.
When operating as an independent entrepreneur some people may be tempted at first to use their personal bank account for professional purposes. While this is possible it is highly advisable to open a business specific bank account, keeping separate accounts for personal and business finances facilitates accounting and financial management and avoids confusion.
Now, technically, self-employed entrepreneurs in Luxembourg can also operate using a personal bank account dedicated exclusively to their business activity, however opting for a professional account offers a number of advantages that facilitate the management of the business and enhance its development.
On the other hand, entrepreneurs who wish to operate through a company must open a professional bank account even before they start trading. This is because the funds required for the incorporation of the company must be deposited in this account.
A professional bank account is therefore optional for those who operate as independent entrepreneurs and indispensable for those who operate through a partnership. Whatever the case, this type of account offers multiple benefits over personal bank accounts, here are some of them:
- Reinforcement of the professional image: professional accounts allow to operate under the trade name of the business, which improves brand perception.
- Lines of credit and financing: professional accounts offer loan options, overdrafts and other financial tools that are not usually available in personal accounts.
- Multi-currency accounts: If you operate internationally, professional accounts allow you to manage payments in different currencies, reducing conversion costs.
- Access to payment methods for professionals: some accounts include additional services such as electronic payment terminals (EFTPOS terminal) to charge clients.
- Insurance for professionals: with this type of account it is possible to subscribe to professional insurance including property and business insurance, equipment theft, travel insurance, etc.
- Accounting tools: these types of accounts can offer direct integrations with accounting management software, which facilitates the tracking of income, expenses and financial reports and also allows the generation of detailed account statements for analysis and audits.
- Advice: banks can offer specialized financial advice to help you optimize operations and explore growth opportunities.
- Flexibility: as the business expands, a professional account is prepared to meet more complex needs such as managing payroll, opening subsidiary accounts or expanding financing.
Requirements to open a business bank account in Luxembourg
We have already seen why it is important for an entrepreneur to open a professional bank account, now let's see what documents are required to open a business bank account. Generally, in order to open a professional bank account, banks ask entrepreneurs for documents concerning the company, concerning the natural persons who are members of the board of directors and the management body and concerning the legal persons who are shareholders of the company:
- Information and documents concerning the company: A copy of the articles of association, as they will be accepted at the time of incorporation. The organization chart of the company showing the members of the management body and the shareholders. A copy of the list of persons with power of signature and the rules of engagement.
- Information on all natural persons who are members of the board of directors, management body and shareholders: A copy of the identity card or passport. Proof of address less than 3 months old, such as an electricity bill. A curriculum vitae. Information on marital status and profession.
- Information on legal entities that are shareholders of the company: The articles of association of the company. The list of beneficial owners. Annual accounts and consolidated accounts. For groups, banks ask for an organization chart including shareholding links in terms of number of shares and percentage.
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Learn moreStep-by-step guide
Let's now examine the step-by-step process to open a professional bank account in Luxembourg.
Step 1 - Choosing a bank that offers the best options for you
Consider your needs and what is important to you: security, prices, availability of certain products or services, the bank's social and ecological commitment, availability of certain products, customer service, etc. There are many points to consider and each bank positions itself differently on each. Here are some criteria that you should take into account:
- Costs and fees: one of the most important aspects is to evaluate the total cost associated with the account, this includes the maintenance fee and all other fees associated with handling the account.
- Services available: banks offer different services that can be of great help to your company, it is important to make sure that the bank offers those that you need or plan to need in the future. It is also important to consider the availability of financial products such as lines of credit, commercial loans or advanced payment tools.
- Requirements and ease of opening: although the requirements for opening a professional account are usually similar among different banks, each one may have specific requirements. It is therefore important to make sure you can meet them.
- Specialization in international business: if your business has an international orientation, the bank should offer services adapted to this profile, such as managing transactions in multiple currencies. It is also relevant to consider whether the bank offers services in several languages, such as English, French or German, to ensure smooth communication.
- Customer service and support: a good bank should offer accessible and personalized customer service, with availability beyond standard business hours. In addition, specialized financial advice can be an added value to optimize the financial structure of your business and plan its growth.
- Reputation and stability of the bank: working with a recognized bank with a solid track record in Luxembourg provides confidence and stability. At this point, it can be useful to research the opinions of other entrepreneurs about the bank.
- Compatibility with your type of business: each company has unique needs, and the bank you choose should be able to adapt to them. Some banks have specific products for sectors such as startups, e-commerce or exports. It is also important to consider whether the bank can scale its services as your business grows.
- Additional incentives or benefits: some banks offer loyalty programs, discounts on financial services or even strategic partnerships with software and insurance providers.
In addition to these criteria, it is advisable to visit several banks or consult with specialized financial advisors in Luxembourg to obtain personalized comparisons.
Step 2 - Gathering the documents required by the bank
As mentioned above, the requirements for opening a professional account are usually similar from one bank to another, however, each bank may request specific documents depending on the type of business activity. A good starting point may be the list of documents mentioned above, although it is advisable to visit the bank's website or contact an advisor directly to learn first-hand about all the documents required to open a professional account with the bank in question and according to the characteristics of the company.
Step 3 - Apply to open an account
Some banks allow you to start the application online while others require an in-person visit and, in many cases, it is also necessary to make an appointment for this visit. It is therefore important to check with the bank which are the opening modalities in the selected bank.
Whatever the opening process is, it is important to have all the required documents at hand in order to easily provide them and sign the necessary documents for the opening.
Step 4 - Deposit the initial capital
In the case of opening a professional account for the incorporation of a new company, it is important to keep in mind that certain structures require the deposit of a minimum share capital in a bank account.
In this case, it will be necessary to make this deposit and be aware that it will be blocked until the formal incorporation of the company. Upon deposit of the capital, the bank will issue a blocking certificate which will be indispensable to register the company at the time of incorporation and to file documents with the Luxembourg Trade and Companies Register. The funds will be released when the bank has received the certificate of release of funds issued by the notary upon registration of the company.
In the case of a professional account for an independent entrepreneur or a company already incorporated this step is not necessary.
Step 5 - Account Approval and Activation
Once the above steps have been completed and the application has been approved, the bank will activate the professional account, account details such as IBAN number will be provided and the necessary access cards and credentials will be issued. In the case of opening a professional account for the incorporation of a new company, it will be necessary to provide the bank with the certificate of release of funds issued by the notary and wait for the bank to process it before being able to start using the account.
