How to Register as a Sole Proprietor in Luxembourg

The Grand Duchy of Luxembourg is a tiny nation tucked in the heart of Europe, with less than a million people - yet it aims high when it comes to startups, innovation and business investments. The country is dedicated to diversifying its economy and welcoming venture capital and innovative businesses through its Luxembourg Future Fund.

Luxembourg is a great place to start a small business too. With minimal bureaucracy and smooth procedures, living and working in the Grand Duchy might be your gateway to the entire European market. Lastly, Luxembourg is a multilingual country so it is unlikely a language barrier will prevent you from doing business; its official languages are French, German, and Luxembourgish, but a lot of the inhabitants speak English as well. 

Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.

Sole proprietorship in Luxembourg

A sole proprietor is a natural person setting up their business without establishing a separate legal entity. Being a sole proprietor essentially means being self-employed, and it can be a good choice for those looking to operate their business with as few hurdles as possible.

Sole proprietorship in Luxembourg is the most flexible business model and it involves minimal administrative procedures and costs, but like elsewhere, it is also risky. When you decide to register as a sole proprietor, keep in mind that your personal property will not be legally separated from the business, hence you will be personally liable for all business costs and debts.

Who can be a sole proprietor

The term “sole proprietorship” regards all entrepreneurs who do business in their own name and on their own accounts. Their business can fall under the scope of: 

• The Chamber of Skilled Trades and Crafts (Chambre des métiers), for craftsmen

• The Chamber of Commerce (Chambre de commerce), for traders and manufacturers)

• The Chamber of Agriculture (Chambre d'agriculture), for farmers.

Sole proprietors are also self-employed intellectual workers and they fall under 3 categories: 

• Liberal professions requiring a business permit (engineers, architects, chartered accountants, etc.)
• Liberal professions subject to other laws (doctors, auditors, etc.);
• Other professions, subject to specific registration or authorization.

Entrepreneurs need to acquire the status of a trader, craftsman, or self-employed intellectual worker and must have the qualifications and permits required for their activity. Depending on the profession, additional conditions may apply in order to do business, such as registration with a professional body/council/association.

Registering a sole proprietorship in Luxembourg

As we have already specified, since entrepreneurs are not legal entities, so the procedures for setting up your business in Luxembourg are very simple and straightforward. 

First of all, you need to register with social security as a self-employed person. 

Following that is the selection of your business name, or the “trading as” name. If you choose to use such a name, it has to be unique; the availability of your desired name will be checked by the RCS manager at the time of registration. 

Your “trading as” name needs to be clear and unambiguous in terms of the nature of your business activity. If you plan to operate a store, you will need to display your full name and the “trading as” name visibly on the entrance to the store.

If you're not looking to become an independent contractor, but hire one - learn how you can do it compliantly in Luxembourg.

Duration, conversion, and closure

There is no set duration for the operation of a sole proprietor’s business. However, the operation of the business may be restricted by the duration of validity of administrative authorizations, or rules that are profession-specific. In the event of business closure, you will need to complete certain administrative formalities.

When it comes to conversion, if you wish to form a company at a certain point to continue doing business in your domain, the general rule allows you to do so. However, there are exceptions due to rules governing certain professions that restrict or prohibit operating as a company.

Capital, functioning, and liability

There is no such thing as a minimum capital requirement, so it’s up to you to decide how much capital you wish to commit to the business.The functioning of your business and all decisions related to it are your responsibility, but you can appoint an attorney to act on your behalf.When it comes to liability, sole proprietors alone are responsible for financing their business. They commit their personal assets to their business and assume full liability for debts incurred by the business. As such:

• No distinction is made between private and business assets
• An entrepreneur's liability for all of the business's debts and commitments is unlimited and extends to their personal assets.

Accounting for sole proprietors in Luxembourg

While there is no regulation in Luxembourg about the financial oversight of sole proprietors, they must keep transparent accounts (usually ledgers recording income and expenses).
Sole proprietors who operate as traders must use the uniform minimal chart of accounts. As an entrepreneur, you must also file and keep your accounts at the enterprise's official address and make them available to concerned parties and authorities, if your annual turnover exceeds 100,000 euros (exclusive of VAT).

Taxes for sole proprietors in Luxembourg

For tax purposes, your business is considered "transparent" and the government taxes your profits as part of your income as a natural person. The sole proprietorship business is subject to the following taxes:

• Communal business tax
• Personal income tax
• Property tax

The Luxembourg Inland Revenue (Administration des contributions directes) may require you to make quarterly advance payments on the tax you owe.

Those are all the steps you need to take to register your business in Luxembourg. We hope this article was insightful and will help you on your way to becoming self-employed.

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