How the Simplified SARL is paving the way for entrepreneurs to launch companies
At inception a business is nothing more than an entrepreneur with an idea. Layers of logistics, legal limitations and financial constrains join the equation, and soon the race to transform an idea into a company resembles a minefield.
Most startups never see the finish line. Luxembourg’s Simplified SARL, which came into effect on January 16, 2017, seeks to boost the number of those that succeed. Within the new SARL structure, an entrepreneur with an idea and some spare change can launch a company.
A Fast-track to Market
Momentum – a fragile ingredient central to startup success – builds fast and disappears faster. An entrepreneur knows all too well the daily headaches of administrative hoops, loan acquisitions and legal paperwork.
The Simplified SARL squashes these barriers, freeing startups to focus on getting to market quickly. Furthermore, a speedy launch equates to a less expensive one by accelerating the arrival of profits.
Dubbed the One-euro or 1-1-1 Company, it essentially lets one individual launch a business with one euro in one day.
Simplified SARL vs. SARL
As the name suggests, the Simplified SARL is a version of the SARL stripped of the standard formalities, complicated processes and expenses. One such example is the replacement of the notarization requirement with the option to instead be incorporated by private deed.
Unlike its predecessor, the Simplified SARL is exclusively available to natural persons, not legal persons. The structure excludes the usual €12,000 minimum share capital. To compensate, it demands that 5% of net profits be saved every year until the reserve reaches that minimum.
Generally speaking, if a startup does not succeed quickly it will not succeed at all. Parliament’s decision to introduce this solution aims to funnel projects to the market immediately. Startups can easily transform into a traditional SARL when ready, making the simplified version a stepping stone to growth.
While convenient for young, service-oriented companies – from gardeners to event planners to consultants – the Simplified SARL may prove less relevant for new businesses that require significant capital expenditures.
How to create a Simplified SARL
- Ensure that share capital falls between €1 and €12,000
- Apply for a business permit
- File with the Luxembourg Trade & Companies Registry
- Register with the Social Security Administration
- Inform the tax authorities
The Big Picture: Economic Growth & the Simplified SARL
Deputy Prime Minister and Minister of the Economy Étienne Schneider recently articulated Luxembourg’s need to build its image as an ideal home to companies.
Attracting established corporations is important. Conversely, so is attracting nascent businesses that are still just concepts floating around in an inspired mind. The Simplified SARL reflects the reality that all lucrative businesses began with an entrepreneur and an idea.
A host of local efforts are helping drive the country’s image abroad: the modernization of business law, willingness of the CSSF to collaborate with nontraditional entities, and cross-border friendly regulations.
The vast majority of companies, roughly 85% as of 2015, are micro companies with five employees or less, making them a substantial economic component. In recognition of that statistic, the Simplified SARL targets entrepreneurs on the cusp of launching one such micro company.
In 2014, the Luxembourg Chamber of Commerce conducted a study that argued for the potential benefits of a SARL reduced to its essentials. As a result, the concept to cut the red tape for this vulnerable and important segment began gaining traction.
Simplified SARL: The Entrepreneur’s Cheerleader
With its sights set on surpassing Paris and Berlin as innovation hubs, the Luxembourg regime knows the importance of expanding beyond its traditional financial scene to create tomorrow’s startup landscape. Attracting talented entrepreneurs remains central to that plan.
Leaving secure employment to create a company can be a scary prospect. However, the entire economy collectively benefits from those risk takers. Encouraging them to take the leap hits the heart of potential job market growth.
For Europeans outside of the Grand Duchy, leaving a home country to establish a business abroad is even more daunting, given linguistic, cultural and financial challenges. Inviting bright minds and giving them a roadmap to company creation diminishes their reluctance to make the commitment.
By adopting the Simplified SARL and simultaneously streamlining the existing one, Luxembourg ensures that entrepreneurs and growing businesses can turn to appropriate options for each phase in their journeys.
What’s Next?
Quantity – multiplying the number of businesses, small or large – represents one piece of the puzzle. The next, announced by Schneider at a recent press conference, emphasizes their quality: internationalizing, and consequently, growing existing Luxembourg-based businesses to raise their cross-border potential.
About Fiduciary Tucci & Partners
Fiduciary Tucci & Partners provides comprehensive and agile fiduciary services to individuals and small to mid-sized companies. Based on the understanding that no two clients’ needs are the same, we develop individualized solutions in a range of areas:
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