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 shareholders | 1 | 1 to 100 | 1 to 100 |
| Capital amount | No minimum capital needed | Minimum 12 000€ | Minimum 1€ |
| Financial Liability | Full responsability of the entrepreneur towards third parties | Responsability is limited to the amount of the capital | Responsability is limited to the amount of the capital |
| Taxation | The income of the entrepreneur is taxed | The 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 documents | No 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)
| Advantages | Disadvantages |
|---|---|
| No constitutional documents (statuts) needed, the entrepreneur acts on his own name | The private assets of the entrepreneur are mixed with the assests of the business activity |
| Management of accounting and tax is quite easy | The 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)
| Advantages | Disadvantages |
|---|---|
| Personal goods are not impacted by debts or financial difficulties | More formalism to produce accounting documents (balance sheet, profit and loss table,...) |
| Limited responsability towards the capital brought into the company | Constitutional 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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