Last update 19.06.2018
A sole proprietorship indicates a person who carries out his activity in his own name, whether he or she is a trader, a skilled craftsman or a self-employed intellectual worker. A self-employed entrepreneur takes decisions alone and has sole responsibility for the financing of the business. The entrepreneur therefore assumes full responsibility towards third parties (debts of the business) and commits his personal assets.
This form of operation guarantees independence as well as minimal formalities. There are nevertheless higher risks for the entrepreneur since liability is not limited to the amount of his contribution.
Who is concerned
The term 'sole proprietorship' covers all entrepreneurs running a business in their own name:
- persons who carry out a professional activity on their own account (in their personal name), which falls within the competence of:
- self-employed intellectual workers, who can be divided into:
Entrepreneurs carrying out a business in their own name are affiliated to the social security as self-employed workers.
Entrepreneurs must be in a position to acquire the status of a trader, craftsman or self-employed intellectual worker and must be in possession of the required qualifications and permits for their activity. Depending on the trade (profession), there may be additional conditions to satisfy in order to carry out the desired activity.
It may also be useful for married entrepreneurs to opt for the matrimonial regime of separation of assets in order to avoid exposing common assets to seizure by the creditors of the business.
How to proceed
Creation of the company
- no constitutional document (articles of association) is required because the entrepreneur is acting in his own name;
- no legal personality is created – only the business operator/entrepreneur has a legal personality as a natural person.
In the event of death of the entrepreneur, the business is subject to the common law of successions with the possible risk of dismantling.
No minimum capital is required and the operator alone decides on the amount committed to the business.
Only the entrepreneur.
- the entrepreneur must be capable of administering assets;
- depending on the activity, specific qualification is required.
- private and professional assets are pooled;
- the entrepreneur has unlimited liability for all the debts and commitments of the business on his personal assets.
Accounting and financial information
- the annual accounts do not have to be published to third parties;
- the entrepreneur must keep transparent accounts (ledgers that show monetary inputs and outputs).
- communal business tax;
- personal income tax;
- fiscally 'transparent', profits are taxed on the entrepreneur as a natural person;
- property tax.
There is no withholding tax at source. The tax authority may subject the entrepreneur to a tax regime of quarterly advance payments.
- the entrepreneur (natural person) is affiliated to the Social Security as a self-employed worker;
- he is personally responsible for the timely payment in due form of social security contributions.
Who to contact
'Contact Entreprise' at the Chamber of Skilled Trades and Crafts - Luxembourg2, Circuit de la foire internationale
B.P. 1604 / L-1016