Company Formation and Acquisition in Luxembourg: What You Need to Know

SETTING UP VS ACQUIRING A COMPANY

When entering the Luxembourg market, you have two primary options: setting up a new entity or acquiring an existing structure. Each pathway offers distinct advantages and considerations.

SETTING UP A NEW COMPANY

Advantages:· Clean corporate history, no inherited liabilities.

· Full customisation of the company’s structure and objectives.
· Lower entry cost compared to purchasing a ready-made company.
· Complete control over governance and operations from day one.

Disadvantages:

· No existing financial track record or business activity.
· Initial setup requirements involve capital deposit, notarisation, and public disclosure.
· Bank account opening can be challenging, particularly for non-resident founders.
· Immediate exposure to corporate taxes and regulatory compliance.
· Longer setup timeline due to registration and operational onboarding.

ACQUIRING AN EXISTING COMPANY

Advantages:

· Immediate operational readiness with an existing legal structure.
· Potential confidentiality benefits regarding the Ultimate Beneficial Owner (UBO).
· Existing active bank accounts simplify financial operations.
· Ability to leverage carried-forward tax losses for future tax optimisation.
· No need to deposit initial share capital.

Disadvantages:

· Higher acquisition cost compared to establishing a new company.
· Risk of undisclosed liabilities (due diligence essential).
· Full audit of the legal, financial, and operational history required.

KEY FACTORS INFLUENCING THE PURCHASE PRICE

When acquiring an existing company, several factors affect the valuation:

1. Debt-Free Status and Losses Carried Forward
A company without debt is more attractive, while carried-forward tax losses enhance future tax optimisation.

2. Positive Shareholder Current Account
Allows tax-free distributions through debt repayment mechanisms.

3. Liabilities Guarantee
Protects the buyer against hidden liabilities, tax claims, or litigations post-acquisition.

4. Active Bank Accounts
Immediate operational advantages, especially for non-residents.

5. Included Operational Services
Accounting, tax compliance, and administration may be bundled into the transfer, reducing operational onboarding costs.

CONCLUSION.

Luxembourg offers outstanding opportunities for entrepreneurs and investors looking to expand their activities, structure private wealth, or optimise their corporate holdings.

Whether creating a new company or acquiring an existing entity, each option demands a tailored, strategic approach based on legal, fiscal, and operational realities.

Professional advice is essential to secure the right structure aligned with your long-term vision, and to ensure a successful entry into Luxembourg’s thriving business environment.

Our experts are ready to help you structure, set up, or acquire the perfect company for your goals in Luxembourg.