The simplified limited liability company (SARL-S) is a variant of the traditional SARL (limited liability company) and is relatively new in the Luxembourg arena, as it has only been in existence since January 2017. The SARL-S (simplified limited liability company) is ideal for those getting into entrepreneurship for the first time, as it favors entrepreneurship by restricting administrative rules and supports growth.
The SARL-S and the SARL are very comparable and have many features in common. But, the SARL-S differs in the following four aspects:
Social capital
Thanks to its reduced set-up costs, the SARL-S offers an attractive alternative, especially for young entrepreneurs.
The minimum capital requirement for the creation of a SARL-S is between EUR 1 and EUR 12,000. This can be made in cash or in-kind (goods). It is thus quite possible to start a SARL-S with just EUR 1, but the SARL-S becomes a regular SARL if its social capital crosses that threshold.
The SARL-S must create a legal reserve, and at least 5% of the annual net profits of a SARL-S must be allocated to the reserve fund. This requirement is relevant until the fund, added to the initial capital, reaches EUR 12,000.
It is important to note that a capital increase or decrease of a SARL-S requires a modification of the statutes.
Shareholders
Only natural persons can be shareholders of a SARL-S and during the registration of the shareholder with the RCS (Luxembourg Trade and Companies Register), its national ID number must be communicated to the RCS.
A natural person cannot be a shareholder of more than one SARL-S to avoid the accumulation of company formations by the same private person. However, if a private person wants to become a shareholder in two SARL-Ss, they become personally responsible for the debts of the second SARL-S.
Shareholders’ liability
Shareholders’ liability is restricted to their contributions. But, if a private individual is a shareholder in various SARL-S, he/she becomes responsible for the additional SARL-Ss.
SARL-S can include 1 to 100 shareholders, although this type of business structure is best suited for individual entrepreneurs. If the number of shareholders of a SARL-S surpasses 100, the SARL-S has one year to change its legal form.
The shareholders’ decisions are made at general meetings of shareholders. The general meeting of shareholders decides on the amendments to the articles of association, changes in the company name, changes in the share capital, the appointment or dismissal of managers, and the liquidation of the company.
The company shareholders are entitled to a share of the profits.
All shareholders are allowed to take part in the decision-making process. And each shareholder has a number of votes equal to the number of shares they hold. Rulings are validly made by a majority vote representing 50 % of the capital.
In SARL-Ss with a single shareholder, the owner alone wields the powers granted to the general meeting of shareholders.
Management body
A SARL-S is managed by one or more managers elected by the shareholders, for a limited or unlimited term. The shareholders’ assembly represents the company’s capital and made all decisions regarding the company’s capital.
The management of the company is appointed by the shareholders, either in the articles of association or at a subsequent general meeting of shareholders.
The managers of a SARL-S have the same responsibilities as the managers of a regular SARL
The day-to-day administration of the company, as well as the representation of the company in managerial matters, can be charged to one or more managers, directors, or other representatives acting alone or jointly.
Business license
SARL-S can only be set up by natural persons and for businesses (commercial, craft, industrial, and certain liberal professions of an intellectual nature) that require a business permit. The application for a business license must be handled at the General Direction of the Small and Medium Enterprises and Entrepreneurs department of the Ministry of Finance. And once formed, SARL-S s must adhere to regulations set in the Law related to business licenses.
Limits of SARL-S a in Luxembourg
The formation of a SARL-S brings some flexibility for entrepreneurs but also includes some obstacles :
- The SARL-S is intended for natural persons with a business permit, and from the outset excludes specific professions, but also legal entities who might wish to become partners in it
- While some start-up costs are decreased, others are still payable by the SARL-S: registration fees, costs for obtaining the business permits, VAT, etc.
- Because of its small capital, a SARL-S may suffer from a lack of credibility with suppliers who may fear the company is not adequately robust.
All in all, SARL-Ss certainly hold their place in Luxembourg and come into an active period of economic diversification.
Luxembourg has a vibrant, and agile environment for startups, and in respect of this, more and more entrepreneurs are entering Luxembourg for their business activities.
Contact your Damalion expert now to register your company in Luxembourg.
