How do I open a business bank account in Luxembourg?

When setting up a company in Luxembourg, one of the essential steps is to open a business bank account. However, you need to meet a number of criteria to qualify. Are you eligible? So here’s some practical information to help you move forward.

At the age of 36, Noah has decided to take the plunge and set up his own business in Luxembourg. His project is well thought out and he has looked into the various administrative and financial formalities required for setting up his company. One of the indispensable steps is to open a business bank account.

Why open a business bank account?

Our young entrepreneur must open a bank account in the name of the company. This will enable him to receive payments for the sales he will make and settle his business expenses: start-up costs equipment, rent, charges, suppliers, etc. He must also deposit into this account the amount of his company’s share capital.

Remember, the minimum amount to be paid up for the most common forms of company is:

• • EUR 30,000 to set up an SA (société anonyme – public limited company by shares);
  • EUR 12,000 for an SARL (société à responsabilité limitée – limited liability company);
  • between EUR 1 and EUR 12,000 for an SARL-S (société à responsabilité limitée simplifiée – simplified limited liability company).

Useful info: if you are setting up a company (SA, SARL, SARL-S, etc.), you need to open a bank account in the company’s name in order to separate private assets from business assets. On the other hand, if Noah had set up a sole proprietorship (in his own name or as a self-employed person), the two types of assets could be combined and the creation of a dedicated business bank account would not be compulsory. Nevertheless, it is advisable to do so in order to optimise accounting management by clearly distinguishing between personal and professional transactions.

Lastly, a business bank account will also enable Noah to take advantage of specific services reserved for businesses. For example, access to credit lines, bank guarantees, special payment methods or transaction facilities: European direct debits, electronic collection, national and international credit transfers, etc.

His bank will become a truly trusted partner he will be able to rely on throughout the life of his business.

What are the steps involved in opening a business bank account?

Friends of Noah who also own businesses have warned him: opening a business bank account in Luxembourg can sometimes be complicated, and it is not uncommon for an application to be turned down by the bank. He will have to build a solid case and provide a large number of supporting documents to back up his application.

The bank has the obligation to find out all it can about the entrepreneur and their business plan before granting them a bank account.

The bank is obliged to find out about Noah and his business plan before granting him a bank account. It will require him to fill out a new business relationship questionnaire, detailing the company’s name, legal form and address. It will have to verify not only the identity of the director, but also that of the beneficial owners of the company, its signatories or any authorised agents. The information and evidence to be provided may vary according to the type of business and the level of risk it represents. The bank can ask for additional information on the company’s future plans, request the business plan, the draft articles of association, a copy of the business permit, an organisation chart of the company, or may check the source of funds.

The application will then go through the bank’s internal acceptance committee. Depending on the risks involved, this committee will decide whether or not to open a business bank account in the name of Noah’s company.

Useful info: Noah has to provide the bank with precise explanations. He must make sure to submit all the documents and supporting evidence requested as soon as possible. To have the best possible chance of success, his application must be complete and well documented. For its part, the bank fulfils its legal obligations and seeks to obtain all the guarantees necessary for a rewarding collaboration.

Not all banks are suited to the needs of his business, or ready to welcome new entrepreneurs.

How should he choose a bank for his business account?

Noah is spoilt for choice when it comes to banks in Luxembourg. However, not all of them are suited to the needs of his business, or ready to welcome new entrepreneurs. A full-service bank will have the advantage of being able to help Noah with both his business finances and his private assets.

From the business point of view, our young entrepreneur needs to start by defining his needs according to the nature of his business, the size of the structure and its growth potential. He can then can consider banks that offer services tailored to his business activity.

He can enquire about the cost of banking products and services (debit and/or credit cards, account management and maintenance, commission charges, etc.); the online functions offered (number of authorised credit transfers and direct debits, terms and conditions for national and international transactions, etc.); what collection and payment facilities are provided (payment terminal, type of bank card, authorised limits, etc.); financing terms or the additional services offered (insurance, savings, etc.), etc.

To help him, Noah can consult the contact lists published on the ABBL website which lists banks that may be willing to open accounts for different types of business: SMEs, fintechs or hedge funds. Choosing a bank from one of these lists does not mean that Noah’s application will be automatically accepted. He will have to “show his credentials”, and the acceptance committee will decide whether or not to approve his application.

When it establishes a business relationship with a new client, the bank incurs liability.

Can a bank refuse to open a business bank account?

The bank has the option to accept or refuse a business relationship. Its decision will depend on its commercial policy and development strategy, but obviously also on compliance with the laws and professional obligations by which it is bound.

As part of the fight against money laundering and terrorist financing (AML/CFT Law of 12 November 2004), the bank must comply with strict rules on verification and control of its clients (KYC, or Know your Customer).

By establishing a business relationship with a new client, it incurs liability. If it fails to comply with its obligations, it may be exposed to a fine or prosecution.

What is more, the bank must keep a watchful eye open throughout the relationship. It may therefore be required to check its clients’ transactions to ensure that they are consistent with their business activities. Noah will have to document his transactions so that he can justify them should his bank ask.

For support during the process, business owners can contact the House of Entrepreneurship for advice and help in compiling the documents needed to open a business bank account.

More information on the brochure produced by the House of Entrepreneurship and the ABBL Foundation for Financial Education: New entrepreneurs: ready to open a professional bank account in Luxembourg? We wish you every success in your endeavours.