Which legal status is the best for my company?

The choice of legal status is a central step in the creation of a business. The sole proprietorship, the LLC (Limited Liability Company) or SLLC (Simplified Limited Liability Company) are the most common status chosen for small businesses. To help you make a decision, here is a table describing the differences and similarities between each of these three types of businesses.

These information are only a general approach before choosing the legal status. Other legal forms exist.

Do not hesitate to ask other professionals for advice and visit the website: guichet.lu by clicking here.

Comparative table

Sole proprietorship (self-employed person)Limited Liability Company (Sàrl)Simplified Limited Liability Company (Sàrls)
Number of shareholders1 1 to 100 1 to 100
Capital amountNo minimum capital neededMinimum 12 000€Minimum 1€
Financial LiabilityFull responsability of the entrepreneur towards third partiesResponsability is limited to the amount of the capitalResponsability is limited to the amount of the capital
TaxationThe income of the entrepreneur is taxedThe company is taxed. Shareholders are only taxed when the profit is distributed.The company is taxed. Shareholders are only taxed when the profit is distributed.
Constitution documentsNo constitutional documents (statuts) needed
Registration at RCS if commercial activity

Constitutional documents (statuts) must be drawn before a notary

Registration at RCS

Constitutional documents (statuts) needed but no obligation to be drawn before a notary)

Registration at RCS


Advantages and disadvantages of the Sole Propierorship (Entreprise individuelle)

AdvantagesDisadvantages
No constitutional documents (statuts) needed, the entrepreneur acts on his own nameThe private assets of the entrepreneur are mixed with the assests of the business activity
Management of accounting and tax is quite easyThe entrepreneur is responible for all the debts of the business  
No minimum capital required Not possible to have shareholders

Advantages and disadvantages of an Sàrl(s)

AdvantagesDisadvantages
Personal goods are not impacted by debts or financial difficultiesMore formalism to produce accounting documents (balance sheet, profit and loss table,...)
Limited responsability towards the capital brought into the companyConstitutional documents, memorandum of association (statuts) are mandatory. (you can download a model here)
Possibility to have one or more partners

 

Before choosing the legal status which corresponds best to your situation, you should ask yourself: 

  • Am I ready to take the risk to link my assets to the company's?
  • Do I want to work alone or have a partner?
  • Depending on my activity and development model, which fiscal regime would be the most beneficial?
  • What is the amount of the capital I will put in the company?

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