Set up a SARL in Luxembourg: the private limited liability company.

What is a SARL in Luxembourg?

The SARL (société à responsabilité limitée) is a capital company in which shareholders' liability is limited to their contributions. It is the most used form in Luxembourg, both to run a business and to hold participations (a SOPARFI is often set up as a SARL).

Its minimum capital is EUR 12,000, fully subscribed and paid up at incorporation. It has 1 to 100 shareholders and is managed by one or more managers. Its flexibility and measured cost make it the default choice for most projects.

Capital, shareholders and shares

The minimum share capital is EUR 12,000, which must be fully subscribed and entirely paid up at the time of incorporation. Capital may be contributed in cash or in kind; a contribution in kind may require a valuation.

The SARL has 1 to 100 shareholders. The shares are not freely transferable: their transfer to third parties requires the approval of shareholders representing at least three quarters of the capital, allowing control over the entry of new shareholders, unlike the shares of an SA.

Management and governance

The SARL is run by one or more managers, who may or may not be shareholders, appointed by the shareholders. Ordinary decisions fall to the management; major decisions (amending the articles, increasing capital, transferring shares) fall to the shareholders' meeting under the majorities set by law and the articles.

For a commercial, craft or liberal activity, a business licence is required and assumes a manager with the necessary qualification and good standing. We frame governance and qualification from incorporation.

The SARL-S, a simplified variant

The SARL-S (simplified private limited liability company) allows a start with capital between EUR 1 and EUR 11,999. It is reserved for individuals and requires a business licence for a commercial, craft or liberal activity.

It is a stepping stone for founders on a limited budget; beyond a certain growth, moving to a standard SARL (capital EUR 12,000) is common. We compare SARL and SARL-S based on your profile and activity.

Single-member SARL and share transfers: entering and leaving the capital

A SARL may have a single shareholder. It is then a single-member SARL, and the sole shareholder exercises alone the powers normally held by the general meeting. The regime does not change: the same minimum capital of EUR 12,000, the same accounting obligations, the same liability limited to the contribution. The only difference lies in the form of decisions, which are recorded in a register instead of being passed in a meeting. Many founders believe they must find a second, nominal shareholder in order to incorporate. They do not, and doing so creates an exit problem where none existed.

Share transfers are where the SARL differs most sharply from an SA. Shares are not freely transferable to third parties: a transfer requires the approval of shareholders representing at least three quarters of the capital. Between existing shareholders, and between spouses, ascendants and descendants, transfer is by contrast free unless the articles say otherwise. The rule protects the balance of the capital, but it has a price: a minority shareholder who wants out cannot impose a buyer.

A transfer is recorded in writing and is only enforceable against the company after notification or acceptance. It must be filed with the Trade and Companies Register to be enforceable against third parties. A poorly formalised transfer remains a classic source of dispute: price left undetermined, approval never obtained, filing never made. Putting it right always costs more than doing it properly the first time.

The anticipation happens in the articles of association, at incorporation, while the shareholders still agree. A calibrated approval clause, a pre-emption right, a share valuation method, the treatment of shares on death or divorce, a tag-along clause. Drafting these clauses costs a few hundred euros at the outset. Improvising them inside a dispute costs an order of magnitude more.

SARL, SARL-S, SA or limited partnership: which form to choose?

The choice of form turns on four variables, and on those alone: how much capital you can tie up, the nature of the shareholders (individuals or companies), the nature of the activity (operating or asset-holding), and how you want to be able to enter and leave the capital. Almost everything else, tax included, follows from those four answers.

The SARL-S wins for a sole founder, an individual, with an authorised commercial or craft activity and little capital available. The standard SARL takes over as soon as a shareholder is a company, the activity is asset-holding, or a second SARL-S is already held. The SA becomes relevant when securities must circulate freely, when a fundraising is contemplated, or when the credibility of EUR 30,000 of capital is a factor in accessing finance. The special limited partnership follows an altogether different logic: no minimum capital, no separate legal personality, tax transparency, and a use almost entirely confined to funds and investment structures.

One confusion comes up in nearly every first meeting. SOPARFI and SPF are not legal forms. They are tax regimes that sit on top of a form. A SOPARFI is, in the overwhelming majority of cases, an ordinary SARL whose purpose is holding participations and which qualifies on that basis for the parent-subsidiary regime. So you are not choosing between a SARL and a SOPARFI: you choose a SARL, then you define its purpose and its regime.

One last comparison deserves to be put plainly, because it is rarely costed. Trading in your own name, as a sole trader, avoids capital and a constitutive deed, but exposes personal assets without limit and caps commercial credibility. The SARL costs more to enter and imposes full bookkeeping. The tipping point is not a theoretical turnover figure: it is the moment a client, a bank or an insurer starts to require a structure. We cost both scenarios over twenty-four months rather than applying a generic threshold.

How to set up a SARL in Luxembourg: the steps, in order

Incorporating a SARL follows a stable sequence, and delays almost always come from the same place: a step begun before the previous one was genuinely closed. Here is how it actually runs, in order.

Step one, scoping. Corporate purpose, allocation of capital, identity of shareholders and managers, final choice of form. This is also when AML checks on the source of funds take place. A badly drafted corporate purpose is paid for twice: once when the business licence is refused, and again through the amendment to the articles needed to correct it. Allow one to two days for name reservation with the RCS.

Step two, depositing the capital. The EUR 12,000 is paid into a blocked account opened in the name of the company in formation, and the bank issues the blocking certificate the notary requires. In practice this is the slowest step of the whole route, not the most complex: opening an account for a company not yet registered, with non-resident shareholders, calls for a complete documentary file. Anticipating this point saves more time than everything else combined.

Step three, the notarial deed. The articles of association are signed before a notary, who records the incorporation and makes the filing. Unlike the SARL-S, the SARL cannot be incorporated by private deed: going before a notary is mandatory. Allow three to ten days once the file and the capital are ready.

Step four, registration. Registration with the Trade and Companies Register and entry of the beneficial owners in the RBE, generally within three days. The company then exists in law and has its RCS number.

Step five, activation. Business licence if the activity is commercial, craft or liberal, VAT registration where the thresholds or the activity require it, release of the capital and opening of the operating account, and affiliation of the manager with the Joint Social Security Centre. Allow one to four weeks, mostly for the licence.

Step six, opening the books. Choice of framework, configuration of the standard chart of accounts, opening balance sheet, filing calendar. This is where the quality of the first two financial years is decided. Books opened properly produce annual accounts that can be filed without rework; books opened in haste are caught up at the first balance sheet, at full price.

We take the whole chain, from scoping to the first filing, with a single point of contact. As a licensed accountant, we then handle bookkeeping, annual accounts, tax filings and ongoing corporate secretarial work, with no change of contact between incorporation and operation.