A business’s nature and a purpose of the company formation in Luxembourg affects which entity type should be selected.
Main entity types are listed below:
– SARL “Société à responsabilité limitée” – Private Limited Company
– SA “Société anonyme” – Public Limited Liability Company
– SCA “Société en commandite par actions” – Partnership limited by shares
Besides, there are some special regimes for holding companies – SOPARFI (fully taxable Luxembourg resident company that takes advantage of participation exemption in Luxembourg) and SPF (special tax regime for a private wealth management company).
The Sàrl and SA are the prevailing corporate structures in Luxembourg. They are both established through a notarial deed, overseen by a board of managers/directors, and require a minimum nominal share capital of EUR12,000 (for the Sàrl) and EUR30,000 (for the SA). However, shares of an Sàrl cannot be publicly traded, transferred freely, and the number of shareholders is capped at 100.
The SCA is frequently chosen for collective investment entities. It operates as a partnership limited by shares, initiated via a notarial deed, and permits share listing. Apart from the general partner responsible for governance and bearing unlimited liability, the SCA necessitates one or more limited partners.
Other, less commonly used, legal forms are:
– SAS “Société par actions simplifiée” – the simplified stock company;
– SARL-S “Société à responsabilité limitée simplifiée” – the simplified private limited liability company;
– SE “Société européenne” – the European company;
– COOP “Société coopérative” – the Co-operative;
– SE COOP “Société coopérative européenne” – the European co-operative.
The common law concept of a trust does not exist under Luxembourg law. However, Luxembourg recognises trusts that are validly created in foreign jurisdictions.
Luxembourg has several legal forms deemed transparent for
Luxembourg tax purposes (with the possible exception of municipal business tax), even though some have legal personality:
– SCS “Société en commandite simple” – Common limited
partnership; and
– SCSp “Société en commandite spéciale” – special limited
partnership.
The SCS and SCSp are the most commonly used transparent
entities, especially in collective investment structures, and provide for more structural flexibility compared to the standard forms. The SCS and SCSp are considered tax transparent and, as such, are not subject to tax (any income is recognised at the level of the partners). The main difference is that the SCS has legal personality, whereas the SCSp does not. Both the SCS and SCSp can be incorporated under private seal.
The SCS and SCSp, even though considered tax transparent,
may be subject to municipal business tax if they are engaged in an active business enterprise or are deemed to be engaged in a business enterprise, which would be the case if the general partner of the SCS and SCSp holds at least a 5% interest.
Other, less commonly used, transparent entities are:
– SNC “Société en nom collectif“ – the general partnership;
and
– SC “Société civile“ – the civil company.
