Comparative table - Partnerships / Sole proprietorships (self-employed persons)
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Sole proprietorships (sole traders with an activity in their own name) as well as each form of partnership have specific characteristics with regard to the setup of the business, its partners, management and taxation.
All these aspects must be taken into consideration when choosing the most appropriate form for the business project.
Choosing the most appropriate business form requires an analysis on a case by case basis which may be carried out with the assistance of specialists in business start-ups/takeovers.
Who is concerned
A sole proprietorship (self employed person/activity in their own name) is a business form where the entrepreneur, skilled craftsman or trader finances the business himself and makes all the business decisions alone.
A sole proprietorship does not have a legal personality as the entrepreneur and his business are not 2 distinct entities. The entrepreneur therefore assumes full responsibility vis-à-vis third parties (debt of the business) and commits his personal assets.
Partnerships (limited or not; société en commandite simple - SCS, société en nom collectif - SENC) are similar to a sole proprietorship in the sense that the deed of partnership is mainly based on the partners as individual persons, i.e. partners who know and trust each other.
Any transfer of shares of an SENC requires the mutual agreement of all the partners. Unless the articles of association provide for otherwise, in an SCS, the shares of limited partners can only be transferred upon mutual agreement by all the general partners. The general partners of the SCS and the partners of the SENC are jointly and severally liable for all the company's debts.
The limited liability company (société à responsabilité limitée - SARL) can be seen as a hybrid company as it has the characteristics of both:
- a capital company because the financial liability of its partners is limited to the level of their contribution to the company capital;
- a partnership because of the limited number of partners and the strict framework governing the transfer of company shares.
How to proceed
Starting up the business
Sole proprietorship (Entreprise individuelle) |
Partnership |
Société en commandite simple |
Limited liability company |
Simplified limited liability company |
|
|---|---|---|---|---|---|
| Constitutional document | / |
Private deed or special notarial deed with a published extract |
Notarial deed published in full |
Notarial or private deed published in full |
|
| Legal personality | No legal personality. Only the entrepreneur has legal personality as a natural person |
The partnership has a legal form distinct from that of the partners in it. As a legal person, it has rights and obligations under commercial, accounting and tax law |
A capital company has a legal form distinct from that of the partners in it. |
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| Assets | A sole proprietorship does not have its own asset base (merging of professional and private assets, indivisibility of asset base); only the entrepreneur has an asset base, of which the company forms a part |
A company has its own asset base |
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Capital
Sole proprietorship |
SENC |
SCS |
SARL |
SARL-S |
|
|---|---|---|---|---|---|
| Conditions | No minimum |
Minimum of EUR 12,000 fully subscribed and paid up |
Minimum of EUR 1 fully subscribed and paid up |
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| Contributions | / |
Contributions in cash or in kind (contribution in industry is possible under certain conditions for an SCS or an SARL, but this does not contribute to the capital formation in an SARL) |
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| Company shares | / |
Registered non-transferable company shares / transferable under conditions in an SCS |
Registered company shares which can be transferred under strict conditions |
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Partners
Sole proprietorship |
SENC |
SCS |
SARL |
SARL-S |
|
|---|---|---|---|---|---|
| Number of partners | Only the business operator |
at least 2 partners |
Minimum 2: one general partner and one limited partner No maximum number |
from 2 to 100 |
|
| Financial liability |
The entrepreneur or the partners have unlimited liability on their personal assets for the debts of the business |
The general partners have unlimited joint and several liability on their personal assets for the debts of the business The limited partners are only liable up to the level of their contributions |
Liability limited to the amount of contributions |
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Administrative bodies and Management
Sole proprietorship |
SENC |
SCS |
SARL |
SARL-S |
|
|---|---|---|---|---|---|
| Decision-making bodies | Only the entrepreneur |
General meeting and Management |
General meeting + business manager or management board |
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| Monitoring and legal auditing of accounts | No internal auditor (commissaire aux comptes) or statutory auditor (réviseur d’entreprises) |
Internal auditor (commissaire aux comptes) or statutory auditor (réviseur d’entreprises) for SARLs with more than 60 partners The obligation to use an approved statutory auditor is depending on the size of the business |
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| Accounting and financial information | The annual accounts are not published to third parties (unless the annual turnover exceeds EUR 100,000 excl. VAT) |
Filing of annual accounts in the Trade and Companies Register (RCS) of the Luxembourg Business Register (LBR) |
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Tax aspects
Sole proprietorship |
SENC |
SCS |
SARL |
SARL-S |
|
|---|---|---|---|---|---|
| Tax payer | The entrepreneur carries out a business activity in his own name The income of the business is allocated to a single person: the entrepreneur We speak of private withdrawal |
A transparent company is not taxable as such The income of the business is directly taxable at the level of its partners. |
The income of the business is directly taxable at the level of the company: the partners are only taxable when the profit is distributed. We speak of distribution of dividend with application of withholding tax: rate of 15%, unless there is a more favourable rate (Double tax treaty, parent/subsidiary directive, etc.)
|
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| Taxes | / | Fixed registration fee (formerly capital contribution duty) | |||
| / | Net wealth tax if the shareholder is an opaque company | ||||
/ |
Distributions of dividends are subject to a special withholding tax |
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Correspondence with other legal forms in Germany and Anglo-Saxon countries
It is important to note that the types of business given below are not strictly equivalent. They are simply the ones with most similarities to the forms found in Luxembourg.
|
Sole proprietorship |
Société en nom collectif (SENC) |
Société en commandite simple (SCS) |
Société à responsabilité limitée (SARL) |
|---|---|---|---|---|
Germany |
Einzelunternehmen |
Offene Handelsgesellschaft |
Kommanditgesellschaft (KG) |
Gesellschaft mit beschränkter Haftung (GmbH) |
United States |
Sole Proprietorship |
General Partnership |
Limited Partnership (LP) |
Limited Liability |
Great Britain |
Individual Enterprise, |
Partnership |
Limited Liability Partnership (LLP) |
Private Limited Company |
Related procedures and links
Procedures
Links
Legal references
-
Loi modifiée du 10 août 1915
concernant les sociétés commerciales
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Règlement grand-ducal du 5 décembre 2017
portant coordination de la loi modifiée du 10 août 1915 concernant les sociétés commerciales
-
Loi modifiée du 19 décembre 2002
concernant le registre de commerce et des sociétés ainsi que la comptabilité et les comptes annuels des entreprises
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Loi du 27 mai 2016
modifiant, en vue de réformer le régime de publication légale relatif aux sociétés et associations, - la loi modifiée du 19 décembre 2002
