Starting Your Business in Luxembourg: Essential Steps to Success

Luxembourg, with its robust economy, strategic location, and business-friendly legislation, is an excellent destination to start a firm. To ensure a smooth start, follow these crucial steps:

1. Determine whether your activity requires a business permit.
Certain activities in Luxembourg demand a business authorization, such as crafts, trade, industrial operations, and certain liberal professions. This is covered by Luxembourg's establishment legislation. Before proceeding, check with the Ministry of Economy or House of entrepreneurship to see if your specific activity requires a permit. Operating without the proper permits might result in penalties or business closure.

2. Determine your eligibility for a business permit.
If your activity needs a business permit, the procedure differs according to your status:
• EU/EEA nationals: Typically, you must offer confirmation of financial probity and a clear criminal background. Professional qualifications and suitable work experience, longtime required, is not anymore a requirement, except for certain activities.
• Non-EU nationals: The process is more difficult and may include additional approvals, including residency permits. It is critical to meet all legal requirements before initiating operations.

3. Select the Right Legal Form.
It is vital to have a legal structure that is in line with your business aims. In Luxembourg, the most popular options are:
• SARL (Société à Responsabilité Limitée) suitable for small and medium-sized firms with a minimum share capital of €12,000. SARLs are also often used as SPVs in financial transactions and structuring;
• SA (Société Anonyme) ideal for larger firms with a minimum share capital of €30,000. An auditor and a board of at least 3 directors (when there are at least 2 shareholders) are compulsory, but there is more flexibility on share transfers and classes of shares;
• Simplified SARL (SARL-S): Designed for sole proprietors and small firms with share capital starting at €1. However, SARL-S has restrictions on the nature of activity and the type of owners (natural persons only).

 There are many other legal forms, especially suited for fund or financial services, which are not covered by this article. 

4. Consider the limitations of SARL-S.
While the SARL-S is inexpensive and easy to set up, it is not appropriate for many operations. Certain regulated industries, such as financial services and activities and legal professions, may be excluded. Furthermore, SARL-S imposes shareholder constraints, so consider if this structure corresponds with your long-term growth goals. 

5. Create clear, detailed articles of incorporation.
The articles of incorporation (AoA) provide the basis of your company's governance. While standard templates are widely used, it is prudent to add unique provisions on:
• Establish guidelines for selling and transferring shares.
• Specify conditions for admitting new shareholders and partners.
• Develop decision-making processes and management responsibilities.
• Outline exit strategies for stockholders who leave the company.

Remember that for SARL and SA structures, any changes to the AoA require a notarized document, which incurs additional fees. Addressing these issues early on will help you avoid future troubles.

Final Thoughts
Starting a business in Luxembourg requires careful planning and adherence to legal and regulatory regulations. Understanding the steps above can help you traverse the procedure more efficiently. Consider seeking professional help to guarantee that your company is set up for success from the start.

We at BLBInLaw are here to help you along all those lines.