Set up a SARL-S in Luxembourg: the simplified company from EUR 1.

What is a SARL-S in Luxembourg?

The SARL-S, or simplified private limited liability company, is a variant of the SARL introduced in 2016 to lower the entry barrier to starting a business. It keeps most of the SARL regime, including limited liability, share transfers subject to approval and managers appointed by the shareholders, but departs from it on three decisive points: the amount of capital, who may be a shareholder, and the form of the incorporation deed.

Share capital is freely set between EUR 1 and EUR 11,999, which is why it is often called the one-euro company. That capital must be fully subscribed and paid up in full at incorporation, and this holds even for a symbolic amount: partial payment does not exist in a SARL-S.

The SARL-S is not a second-class legal form but a start-up regime. The legislator paired the lower capital with precise trade-offs, designed to prevent the form from being used for wealth-holding arrangements or shell structures with no real activity. Understanding those trade-offs before incorporating avoids having to restructure six months later.

Who can set up a SARL-S? Access conditions

Three cumulative conditions govern access to the SARL-S. First, shareholders must be individuals only. No company, fund or wealth-holding structure may own shares in a SARL-S. That rule immediately rules out the form as a group subsidiary or a holding vehicle.

Second, one individual may be a shareholder in only one SARL-S at a time. The law allows an exception for shares received through inheritance. An entrepreneur who already holds a SARL-S and wants to launch a second activity must therefore use a standard SARL, or transfer the existing shares first.

Third, the corporate object must relate to an activity subject to a business licence under the amended law of 2 September 2011 on access to craft, commercial, industrial and certain professional occupations. In other words, the SARL-S presupposes a real, licensed operating activity. It cannot be incorporated as a pure holding or a passive ownership vehicle: for those purposes, the SOPARFI or the standard SARL are the appropriate forms.

Managers must also be individuals. The manager's professional qualification and good repute condition the granting of the business licence, and therefore the company's ability to actually start trading. We assess this upfront: in practice, this is where refusals and delays concentrate.

Capital, legal reserve and conversion to a standard SARL

The capital of a SARL-S sits between EUR 1 and EUR 11,999. The amount you choose is not neutral. One euro of capital signals fragility to a bank, a landlord or a supplier granting credit terms. Capital of EUR 3,000 to 6,000 costs little and makes the opening balance sheet credible. We advise calibrating the amount against the first six months of cash needs rather than against the legal minimum.

In return for the reduced capital, the law imposes a reinforced legal reserve: each year, at least one twentieth of net profit, that is 5%, is allocated to a reserve, until that reserve together with the share capital reaches EUR 12,000. The SARL-S therefore gradually rebuilds, out of its own results, the equivalent of a SARL's minimum capital. That reserve is not distributable, which reduces the profit available to shareholders during the start-up phase.

Once capital is raised to EUR 12,000 or more, the company leaves the simplified regime and becomes an ordinary SARL. That conversion requires an amendment to the articles in notarial form. It is not a penalty but a milestone: most successful projects reach it within two to four years. We monitor the threshold as part of the accounting engagement and flag it before it is crossed unintentionally.

Incorporation without a notary: the private deed

This is the most tangible advantage of the SARL-S: it can be incorporated by private deed. Unlike the SARL, the SA and the SOPARFI, whose incorporation requires a notarial deed, the SARL-S is formed by a simple written agreement signed between the shareholders, which removes notary fees and notary lead times.

That shortcut does not waive any of the other formalities. The articles must contain all statutory particulars, the company name must be followed by the words identifying it as a simplified private limited liability company, the capital must actually be paid up, registration with the Trade and Companies Register remains mandatory, and so does the filing of beneficial owners with the RBE.

Badly drafted private-deed articles are paid for later: a missing share-transfer approval clause, imprecise management powers, no exit rules. Saving on the notary should not turn into legal debt. We draft the articles and manage the filings with the same rigour as for a notarial incorporation.

SARL-S or SARL: making the call

The SARL-S wins when available capital is limited, the activity is operational and licensed, the founder is alone or surrounded by individuals, and speed matters. Entry cost is markedly lower and the timeline is measured in days rather than weeks.

The standard SARL wins as soon as a shareholder is a legal entity, the activity is wealth-holding or ownership-based, a second SARL-S is already held, a fundraising or investor entry is contemplated, or the credibility of the capital is a factor in accessing bank finance. It also avoids the reinforced legal reserve and the later notarial conversion.

Thinking in full cost usually settles the question. Saving the incorporation cost of a SARL only to convert the SARL-S into a SARL by notarial deed eighteen months later means paying twice. Conversely, tying up EUR 12,000 of capital to test an uncertain activity is a poor use of cash. The right question is not which form is cheapest, but which form matches the next twenty-four months.

Accounting, tax and social obligations of a SARL-S

On the accounting side, the SARL-S is subject to the same obligations as a SARL. Bookkeeping under the standard chart of accounts and the Lux GAAP framework, preparation of annual accounts, approval by the general meeting and filing with the Trade and Companies Register within the legal deadlines. Its small size gives access to abridged formats; it does not waive any deadline.

On the tax side, the SARL-S is a fully taxable capital company: corporate income tax, municipal business tax and net wealth tax. A minimum net wealth tax charge applies, set by bands according to total balance sheet, even where there is no profit. This point is routinely underestimated at start-up: a dormant company still generates a minimum tax charge and annual filing obligations.

On the social security side, a managing shareholder working in the company must be affiliated with the Joint Social Security Centre. The choice between management remuneration and dividend distribution has direct consequences on contributions, personal tax and social entitlements. We quantify both scenarios rather than applying a rule of thumb. From the first hire onwards, payroll for the manager and staff follows exactly the same monthly filing cycle as in a standard SARL: the lighter corporate form simplifies neither the payslip nor the CCSS calendar.

In practice, a well-run SARL-S is cheap and simple to operate. A neglected one quickly accumulates unfiled accounts, late returns and increased administrative fees, for an amount far exceeding the initial saving on capital.