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Luxembourg Routes to Market

So you've decided to expand your business in Luxembourg and researched your market. Now it's time to decide how you will register and set up the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into Luxembourg:

A General Partnership

This type of business is registered under a business name or by two or more persons. Should there be any debt with the business, all partners are liable. Each partner is subject to their own tax. The partnership is managed by a manager.

A Limited Partnership

You may consider this type of business when starting up a business in Luxembourg. This type of business is set up under a business name or by two or more partners. All partners are liable. Also there is one or more limited partner who contributes capital and whose liability is limited to their contribution.

Another form of limited partnership

The partnership is limited by shares which are freely transferable.

A Public Company

If you wish to set up a medium and large sized business, you may consider starting up this type of business in Luxembourg. The liability of the shareholders is limited to the extent of the capital invested. There is a minimum of two shareholders and the company is managed by a board of at least three directors.

A Limited Company

If you wish to register a business in Luxembourg you may consider a limited company. This type of company can have a minimum of two shareholders and a maximum of forty. The liability of the shareholders is limited to the amount of capital invested. Management of the company is by one or more managers; they may or may not be shareholders.

A Limited Co-operative Society

This company must have at least seven members and shares are non-transferable to third parties. This is the only form of company which is subject to oversight by the Ministry of Justice.

As Luxembourg is part of the EU, it means that workers from any other EU states can work and travel within those countries without having a work permit. Workers from countries outside the EU will require a permit issued by the Minster of Labour.

It is important to enroll your business within one month of establishing it. You will need to register for income tax, value added tax and social security.

Offshore Companies

By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
  
  

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

• Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.
• Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.
• Patent License - The allowance of another party to use your patented product, design or process.
• Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.
  
  

Franchising In Luxembourg

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Luxembourg include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in Luxembourg: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

Although there is no specific franchise law in Luxembourg, there is the Luxembourg Franchise Association. This association is a member of the European Franchise Federation and follows regulations within the EU.

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