Economy

1 euro companies - a Luxembourgish model of success

Simplified private limited liability companies endorse business founders

Simplified private limited liability companies (S.à r.l.-S) are a business creating tool for start-ups in Luxembourg. S.à r.l.-S involve less administrative steps and are cheaper than other forms of companies. Since they were introduced in January 2017, over 1,350 companies were founded, i.e. 62 per month on average. Their success story highlights a highly supportive environment for start-ups in Luxembourg.

Guylaine Bouquet-Hanus, Business Manager at the House of Entrepreneurship, tells us about the conditions at the root of the success of this new form of companies in Luxembourg: "One of the major innovations of the law is that the minimum share capital for this type of company is 1 euro. However, with a view to protecting creditors, a twentieth (i.e. 5%) of the net annual profit has to be transferred to a legal reserve. This obligation is maintained until the legal reserve added to the subscribed and paid up share capital of the company reaches the minimum share capital of "classical" private limited liability companies (S.à r.l.), i.e. 12,000 euros."

Consulting/coaching, web development and graphic design are among the most popular areas.

In an interview, Guylaine Bouquet-Hanus tells us more about S.à r.l-S:

Les S.à.r.l-S

In general, how long does it take to create an S.à r.l-S?

When setting up a business within the framework of the right of establishment, several steps must be taken by the entrepreneur before the business can become operational. Simplified S.à r.l. companies do not involve any particularly simplified administrative process, apart from the fact that the incorporation deed can be drafted without going before a notary. The advantage is that there is one "less" administrative step, which is considerable for a start-up entrepreneur.

In that sense, launching an S.à r.l-S takes a month or a month and a half (from the business permit application to the registration with the administrations). This timeframe is just an indicator and depends on the applicant's proactivity.

What are the main reasons entrepreneurs give when choosing this form of commercial company?

Generally speaking, this vehicle is seen and used as a transitional structure. It's true that many novice entrepreneurs use them as a springboard. It often happens that people who are seniors in their career develop an accessory activity on top of their paid employment, for the purpose of a professional transition.

In that case, this vehicle is interesting to "test the market" and determine if the activity really has a real opportunity to be developed.

Are entrepreneurs generally satisfied with the fact that they decided to opt for the form of an S.à r.l.-S?

According to the feedback we've received, entrepreneurs are happy about the "financial" accessibility of this variation of the classical S.à r.l., which represents its major advantage.

In addition, this legal vehicle is "reassuring" for start-up entrepreneurs as their risk exposure is not as high in the presence of a legal entity. So there's a "psychological" positive factor, as the idea is to reduce risk aversion and encourage more potential entrepreneurs to go for it.

On the downside, entrepreneurs would like to be able to have an "accelerated" process to transform their company into a classical S.à r.l., but there is currently no provision for this (you need to go before a notary to amend the deed of incorporation).

(Article written by the editorial team of the portal www.luxembourg.lu)

  • Updated 02-01-2019