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.
|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)
|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)
|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?