Choosing your legal status is a crucial step for any IT freelancer in Luxembourg . It directly influences financial responsibility , social security , taxation and administrative obligations . Choosing an unsuitable status can lead to risks such as excessively high social security contributions, a lack of security in the event of loss of business or even heavy administrative constraints. Depending on your objectives, your level of turnover and your need for social security, you will have to choose between the sole proprietorship (EI), the SĂ rl-S, the public limited company (SA) or even wage portage . This detailed guide will help you understand the advantages and disadvantages of each option to make the choice best suited to your business.
Summary
- Sole proprietorship (independent)
- Limited liability company (LLC)
- The simplified limited liability company (SĂ rl-S)
- Salary portage
- Accumulation of activities
- The absence of self-employed status in Luxembourg
- Comparative
Sole proprietorship (independent)
The sole proprietorship is renowned for its administrative simplicity and ease of creation. This status allows for great management autonomy with low initial costs, particularly thanks to the absence of a minimum share capital requirement. It is ideal for freelancers who want to get started quickly without major management constraints.
However, it presents a significant risk since liability is unlimited : in the event of debts or disputes, the entrepreneur’s personal assets may be compromised. In addition, the tax and social security burden can become heavy as the business grows, as income tax applies directly to the profits made. It is therefore essential to anticipate these aspects before choosing this status.
Limited liability company (LLC)
The Limited Liability Company ( SARL ) is a widely used legal form among SMEs in Luxembourg . It is a professional framework that clearly separates personal assets from company assets, with a minimum share capital of 12,000 euros. The creation formalities, although rigorous, meet European standards.
For IT freelancers working in Luxembourg , this model offers concrete advantages over independent contractor status. Let’s see why.
- Enhanced protection: The SARL establishes a clear boundary between personal life and professional activity, thus securing private assets in the event of financial difficulties. A reassuring point for self-employed workers .
- Structural scalability: Bringing in new partners or seeking funding is easier to organize. This provides significant flexibility for developing your project or responding to complex missions .
- Operational credibility: Large companies often show a preference for collaborations with formalized corporate structures. This provides a significant competitive advantage.
- Tax optimization: Thanks to expense deduction mechanisms and controlled salary management, the SARL allows you to adjust your taxable income . This flexibility is particularly useful in the IT sector.
Ultimately, opting for an LLC is a good option for IT professionals looking to balance legal security, business development, and seamless customer relations. It’s worth noting that this choice is part of a common approach in several European countries, where entrepreneurs are also seeking this type of professional framework.
The simplified limited liability company (SĂ rl-S)
The Sà rl-S is a simplified version of the Sà rl, designed to facilitate access to entrepreneurship by offering a more flexible legal structure. It allows IT freelancers to launch their business with a reduced share capital , starting from €1, while benefiting from limited liability on their personal assets. This status is particularly attractive for freelancers wishing to test their project before considering a more complex structure.
In addition to its simplicity of creation, the SĂ rl-S presents several significant advantages:
- Easy access to entrepreneurship without high financial constraints.
- Protection of personal assets , unlike sole proprietorships.
- Reduced administrative management , although requiring structured accounting.
- Increased credibility with customers and partners.
However, this status imposes certain restrictions, including the impossibility of having multiple partners from the outset and the obligation for the entrepreneur to personally manage their business without the possibility of delegating management. This can limit the long-term development and expansion of the business. Thus, the SĂ rl-S represents an ideal intermediate solution for freelancers who wish to test their viability without taking excessive risks.
Salary portage
Payroll outsourcing is a solution particularly suited to IT freelancers who wish to combine independence and security . This status allows them to maintain a great deal of professional freedom while benefiting from the social advantages of a traditional employee , particularly in terms of health, retirement and unemployment .
By using a portage company , the freelancer signs an employment contract and delegates administrative, tax and accounting management , which considerably simplifies his activity. He can thus concentrate on his missions without worrying about tax declarations or invoicing. In addition, this structure allows him to more easily access missions with large accounts , which prefer to work with employees rather than with independent contractors.
Among the advantages of salary portage for an IT freelancer:
- Complete social protection : health coverage, retirement and unemployment benefits like a traditional employee.
- Zero administrative management : the umbrella company takes care of the tax and accounting procedures.
- Financial security : guarantee of payment for missions without risk of non-payment.
- Increased credibility : facilitates access to large companies that favor employee status.
- Optimal flexibility : freedom to choose your missions and set your fees while having a stable legal framework.
However, this simplicity comes at a cost : the umbrella company charges management fees that generally vary between 5 and 10% of turnover . Despite this, many IT freelancers consider this solution to be an excellent compromise between security and autonomy , particularly for those who wish to avoid administrative complexity while optimizing their social protection .
Accumulation of activities
Combining salaried and self-employed work is permitted in Luxembourg, but certain rules must be observed. An employee may also work as a freelancer, provided that they do not breach their duty of loyalty to their employer and avoid unfair competition . Furthermore, the legal working week must not exceed 40 hours , unless an exemption has been declared to the Labour and Mines Inspectorate (ITM). Some employment contracts also include an exclusivity clause , prohibiting any other professional activity.
For cross-border workers residing in France , this accumulation can impact social security and taxation . As a general rule, social security contributions are due in the country where the salaried activity is carried out. Thus, an employee in Luxembourg carrying out a self-employed activity in France remains affiliated with the Luxembourg regime. However, they must respect the tax treaties between the two countries in order to avoid double taxation and correctly declare their income in each jurisdiction.
Although combining activities is an opportunity to diversify one’s income, it requires careful anticipation of the legal and tax implications in order to avoid any irregularities or administrative overload.
The absence of self-employed (micro-enterprise) status in Luxembourg
Unlike France, Luxembourg does not offer a self-employed or micro-enterprise status. Self-employed workers must choose between structures such as the sole proprietorship or the simplified limited liability company (SĂ rl-S) . This absence implies more substantial administrative and tax procedures from the start of the activity, with stricter accounting and social obligations than in France.
The main impact for freelancers is the lack of a simplified tax system , as in France where contributions and taxes are calculated on a percentage of turnover. In Luxembourg, self-employed workers are subject to taxation on their actual profits and must manage their social security contributions with the Joint Social Security Centre (CCSS) . From 1 January 2025 , the annual turnover threshold for mandatory VAT liability has increased from €35,000 to €50,000 , with a tolerance of up to €55,000 before being liable ( pfi.public.lu ).
Comparison of the different statuses
The choice of legal structure in Luxembourg varies depending on several factors: the nature of the project , the target clientele, and development prospects. For freelance IT professionals , it is important to summarize the key elements. Which solution offers the most flexibility? Which option proves economically advantageous in the short term?
| Criteria | Individual Enterprise (EI) | SĂ rl-S (Simplified limited liability company) | SĂ rl (Limited Liability Company) | Salary portage |
|---|---|---|---|---|
| Responsibility | Unlimited (personal asset commitment) | Limited to contributions | Limited to contributions | None (employee contract with the umbrella company) |
| Minimum share capital | None | 1 € minimum | €12,000 minimum | None |
| Taxation | Income tax | Corporate tax (IS) | Corporate tax (IS) | Income tax (withholding tax) |
| Accounting obligations | Reduced (annual declarations) | Strict accounting requirements | Annual balance sheet obligation | None (supported by the umbrella company) |
| Social protection | Low (social security contributions on profits) | Average (protection limited to contributions paid) | Good (possibility of contributing for better coverage) | High (equivalent to an employee) |
| Administrative simplicity | High (simplified procedures) | Average (more supervised procedures) | Low (heavier steps) | Very high (no management) |
| VAT compulsory from (2025) | €50,000 | €50,000 | €50,000 | Not concerned (covered by the umbrella company) |
| Credibility with customers | Average | High | Very high | Very high |
Choosing a legal status in Luxembourg requires a clear understanding of the available options. Between the simplicity of a sole proprietorship, the protection offered by an SARL, or wage portage for optimal flexibility, each option directly influences your daily rate and operational management . Which option best suits your project? To start your business with peace of mind , anticipate your specific needs before you get started: appropriate preparation often makes all the difference.
