SARL-S vs SARL: Complete comparison for entrepreneurs
Mickaël LOC
Corporate law expert ·
SARL-S vs SARL: Complete comparison for entrepreneurs
The SARL-S (Simplified Limited Liability Company) was introduced in Luxembourg in 2016 to ease entrepreneurship with a token minimum capital of EUR 1. The classical SARL nevertheless remains the most widespread form, with its EUR 12,000 capital and mandatory notarial deed. Choosing between the two has a real impact on banking credibility, taxation, governance and future growth options. This comparison details the key differences and typical use cases to help you arbitrate with full information.
Share capital: EUR 1 against EUR 12,000
The most visible difference is the minimum capital. The SARL-S can be incorporated with EUR 1, but in return imposes a mandatory legal reserve of 5% of annual profit until reaching EUR 12,000. The classical SARL requires EUR 12,000 fully paid up at incorporation, immediately providing financial credibility with banks, suppliers and customers. In practice, the effective capitalisation of a EUR 1 SARL-S makes obtaining bank financing very difficult: most Luxembourg banks ask for at least EUR 5,000 of equity before granting a professional loan.
Synthetic comparison table
| Criterion | SARL-S | Classical SARL |
|---|---|---|
| Minimum capital | EUR 1 | EUR 12,000 |
| Type of partners | Natural persons only | Natural or legal persons |
| Number of partners | Maximum 5 | 1 to 100 |
| Contributions in kind | Forbidden | Allowed |
| Notarial deed | Not mandatory | Mandatory |
| Incorporation costs | EUR 500 to 1,200 | EUR 1,800 to 3,000 |
| Legal reserve | 5% per year up to EUR 12,000 | 5% per year up to 10% of capital |
| Bond issuance | Forbidden | Allowed |
| Possible cumulation | One SARL-S per person | No limit |
SARL-S specific restrictions
- Maximum 5 partners, all mandatorily natural persons (no holding or parent company)
- The manager must be a partner of the company
- No contributions in kind (only cash contributions)
- No bond issuance possible
- A given person can only hold shares in a single SARL-S
- Reinforced legal reserve obligation (5% of net annual profit until reaching EUR 12,000)
Tax regime: no major difference
Both structures are subject to the same tax regime: corporate income tax (CIT) at 17%, municipal business tax (MBT) varying by municipality (6.75% in Luxembourg City), contribution to the employment fund (1.19%). The overall tax rate is around 23.87% in Luxembourg City. VAT, eCDF filing obligations and tax returns are identical. See our full guide on the corporate income tax rate in Luxembourg.
Neither automatically grants the SOPARFI regime or the IP Box: those regimes depend on the actual activity, not on the legal form.
Notarial deed and incorporation costs
The SARL-S can be incorporated by private deed (without notary), reducing incorporation costs to EUR 500 to 1,200 all-in (RESA publication, registration duties, UBO formalities). The classical SARL mandatorily requires a notarial deed, raising the total cost to EUR 1,800 to 3,000. However, even for a SARL-S, it is advisable to have the articles reviewed by a professional to avoid poorly drafted clauses that could cause issues later (approval clauses, pre-emption, partner disputes).
See also our full guide on Luxembourg company formation costs.
Conversion from SARL-S to classical SARL
A SARL-S can be converted into a classical SARL at any time, by decision of the general meeting. Conversion becomes mandatory in several cases: if the number of partners exceeds 5, if a legal person enters the capital, if the company exceeds EUR 12,000 of share capital, or if the sole partner sets up a second SARL-S. The conversion involves a notarial deed, the increase of capital to a minimum of EUR 12,000, and the publication of the new articles in the RESA. Total cost: EUR 1,500 to 2,500.
When to choose one or the other
Choose the SARL-S: low-budget concept testing, craft project or solo service business, micro-business without immediate need of bank financing, first entrepreneurial project where capital limitation protects contributions. Choose the classical SARL: ambitious project requiring funds (hiring, inventory, premises), partnership with a parent company or investor (legal person), willingness to contribute an asset in kind (equipment, business goodwill), regulated activity requiring an establishment authorisation where capital expectations strengthen the file.
See our guide to setting up a SARL in Luxembourg and our guide to setting up a SARL-S.
SARL-S or classical SARL? Contact Bookkeeper.lu for a personalised analysis of your situation and tailored support in choosing and incorporating your company.
