Comparative table - Partnerships / Sole proprietorships (self-employed persons)

This page was last modified on 14-07-2017

Sole proprietorships (sole traders with an activity in their own name) as well as each form of partnership have specific characteristics with regard to the setup of the business, its partners, management and taxation.

All these aspects must be taken into consideration when choosing the most appropriate form for the business project.

Choosing the most appropriate business form requires an analysis on a case by case basis which may be carried out with the assistance of specialists in business start-ups/takeovers.

Who is concerned

A sole proprietorship (self employed person/activity in their own name) is a business form where the entrepreneur, skilled craftsman or trader finances the business himself and makes all the business decisions alone.
A sole proprietorship does not have a legal personality as the entrepreneur and his business are not 2 distinct entities. The entrepreneur therefore assumes full responsibility vis-à-vis third parties (debt of the business) and commits his personal assets.

Partnerships (limited or not; société en commandite simple - SECS, société en nom collectif - SENC) are similar to a sole proprietorship in the sense that the deed of partnership is mainly based on the partners as individual persons, i.e. partners who know and trust each other.

Any transfer of shares of a SENC requires the mutual agreement of all the partners. Unless the articles of association provide for otherwise, in an SECS, the shares of limited partners can only be transferred upon mutual agreement by all the general partners. The general partners of the SECS and the partners of the SENC are jointly and severally liable for all the company's debts.

The limited liability company (société à responsabilité limitée - SARL) can be seen as a hybrid company as it has the characteristics of both:

  • a capital company because the financial liability of its partners is limited to the level of their contribution to the company capital;
  • a partnership because of the limited number of partners and the strict framework governing the transfer of company shares.

How to proceed

Starting up the business

 

Sole proprietorship (Entreprise individuelle)

Partnership
(Société en nom collectif - SENC)

Limited partnership
(Société en commandite simple - SECS)

Limited liability company
(Société à responsabilité limitée - SARL)

Simplified limited liability company
(SARL-S)

Constitutional document

/

Private deed or special notarial deed with a published extract

Notarial deed published in full

Notarial or private deed published in full

Legal personality

No legal personality. Only the entrepreneur has legal personality as a natural person

The partnership has a legal form distinct from that of the partners in it. As a legal person, it has rights and obligations under commercial, accounting and tax law

A capital company has a legal form distinct from that of the partners in it.
As a legal person, it has rights and obligations under commercial, accounting and tax law.

Assets

A sole proprietorship does not have its own asset base (merging of professional and private assets, indivisibility of asset base); only the entrepreneur has an asset base, of which the company forms a part

A company has its own asset base

Capital

 

Sole proprietorship (Entreprise individuelle)

SENC

SECS

SARL

SARL-S

Conditions

No minimum

Minimum of EUR 12,000 fully subscribed and paid up

Minimum of EUR 1 fully subscribed and paid up

Contributions

/

Contributions in cash or in kind (contribution in industry is possible under certain conditions for an SECS or an SARL, but this does not contribute to the capital formation in an SARL)

Company shares

/

Registered non-transferable company shares / transferable under conditions in an SECS

Registered company shares which can be transferred under strict conditions

Partners

 

Sole proprietorship (Entreprise individuelle)

SENC

SECS

SARL

SARL-S

Number of partners

Only the business operator

at least 2 partners

Minimum 2: one general partner and one limited partner

No maximum number

from 2 to 100

Financial

liability

The entrepreneur or the partners have unlimited liability on their personal assets for the debts of the business

The general partners have unlimited joint and several liability on their personal assets for the debts of the business

The limited partners are only liable up to the level of their contributions

Liability limited to the amount of contributions

Administrative bodies and Management

 

Sole proprietorship (Entreprise individuelle)

SENC

SECS

SARL

SARL-S

Decision-making bodies

Only the entrepreneur

General meeting and Management

General meeting + business manager or management board

Monitoring and legal auditing of accounts

No internal auditor (commissaire aux comptes) or statutory auditor (réviseur d’entreprises)

Internal auditor (commissaire aux comptes) or statutory auditor (réviseur d’entreprises) for SARLs with more than 60 partners

The obligation to use an approved statutory auditor is depending on the size of the business

Accounting and financial information

The annual accounts are not published to third parties (unless the annual turnover exceeds EUR 100,000 excl. VAT)

Annual accounts lodged with the Trade and Companies Register (Registre de Commerce et des Sociétés, RCS).

Tax aspects

 

Sole proprietorship (Entreprise individuelle)

SENC

SECS

SARL

SARL-S

Tax payer

The entrepreneur carries out a business activity in his own name

The income of the business is allocated to a single person: the entrepreneur

We speak of private withdrawal

A transparent company is not taxable as such

The income of the business is directly taxable at the level of its partners.

No withholding tax is collected on a company level

The income of the business is directly taxable at the level of the company: the partners are only taxable when the profit is distributed. We speak of distribution of dividend with application of withholding tax: rate of 15%, unless there is a more favourable rate (Double tax treaty, parent/subsidiary directive, etc.)

Taxes / Fixed registration fee (formerly capital contribution duty)

Property tax

Communal business tax

Personal income tax

Corporate income tax

/ Net wealth tax if the shareholder is an opaque company

Net wealth tax

/

The distribution of dividends is subject to a special withholding tax.

Correspondence with other legal forms in Germany and Anglo-Saxon countries

It is important to note that the types of business given below are not strictly equivalent. They are simply the ones with most similarities to the forms found in Luxembourg.

 

Sole proprietorship (Entreprise individuelle)

Partnership (Société en nom collectif - SENC)

Limited partnership (Société en commandite simple - SECS)

Limited liability company (Société à responsabilité limitée - SARL)

Germany

Einzelunternehmen

Offene Handelsgesellschaft
(OHG)

Kommanditgesellschaft (KG)

Gesellschaft mit beschränkter Haftung (GmbH)

United States

Sole Proprietorship

General Partnership

Limited Partnership (LP)

Limited Liability
Company (LLC)

Great Britain

Individual Enterprise,
Sole trader

Partnership

Limited Liability Partnership (LLP)

Private Limited Company
by shares (Ltd.)