The SCS is a flexible, tax-transparent limited partnership commonly used for real estate and private equity holdings
The SCS (Société en Commandite Simple) is a traditional Luxembourg limited partnership, offering a flexible and tax-transparent structure suited for real estate holdings, private equity investments, and joint ventures. This vehicle is ideal for clients seeking a simple yet effective structure without the need for regulatory approval or public disclosure.
While similar in many respects to the SCSp (Société en Commandite Spéciale), the SCS is governed by the Luxembourg Commercial Code and is an established option for those preferring a more conventional framework with minimal regulatory burdens.
Legal Structure and Participants
The SCS is composed of two categories of partners:
- General Partner (GP): Has unlimited liability and is responsible for managing the partnership. This can be a physical person or a legal entity (such as a Luxembourg SARL or SA).
- Limited Partners (LPs): Contribute capital and share in the profits but do not participate in management. Their liability is limited to the amount of their committed contribution.
The SCS has no legal personality of its own; it operates based on a private partnership agreement that governs the rights, obligations, and profit-sharing arrangements between partners. This contractual nature allows for high levels of confidentiality and structural flexibility.
Key Features
- No Minimum Capital Requirement: Partners are free to determine the capital contributions and terms within the partnership agreement.
- Unregulated: The SCS is not a regulated entity unless it is structured as an alternative investment fund (AIF) under the AIFM Directive. In its unregulated form, it benefits from simplified compliance and reporting.
- Private Governance: The SCS does not require board meetings, and the general partner is the sole decision-maker unless otherwise agreed by the partners.
- Confidential Partnership Agreement: Unlike companies, the SCS’s internal governance arrangements are not publicly disclosed, except for a limited set of information required at registration.
Common Use Cases
The SCS is suitable for a variety of investment and holding purposes, including:
- Real Estate Investment Holding: Investors use the SCS to hold and manage real estate portfolios directly or via subsidiaries.
- Private Equity and Venture Capital: The SCS allows investors to pool capital and invest in private companies or startups without triggering regulatory obligations.
- Joint Ventures: Two or more parties can co-invest in a specific asset or opportunity, with clear risk allocation and profit-sharing rules.
- Family Wealth Structures: Families or closely held groups use the SCS to manage long-term asset holdings and succession planning.
Tax Transparency and Efficiency
One of the main advantages of the SCS is its fiscal transparency:
- The SCS is not subject to corporate income tax, municipal business tax, or net wealth tax in Luxembourg unless it performs a commercial activity in its own name.
- Instead, taxation is passed through to the partners, who declare and pay tax in their respective jurisdictions.
- No VAT or subscription tax (taxe d’abonnement) applies to the SCS, unless it qualifies as a regulated investment vehicle.
This tax treatment is particularly beneficial for cross-border investors seeking to avoid double taxation and manage fiscal exposure efficiently.
Formation and Maintenance
Setting up an SCS is straightforward and cost-effective:
- Incorporated by private deed (no notary required), with a simple registration at the Luxembourg Trade and Companies Register (RCS).
- No publication of the full partnership agreement, protecting the privacy of the partners and their arrangements.
- Annual accounts must be prepared but are not required to be filed publicly unless specific thresholds are met or if the SCS qualifies as an AIF.
- No regulatory licensing is required unless the SCS is marketed to professional investors under the AIFM Directive.
Why Choose the SCS?
The SCS is a trusted, time-tested structure offering the following advantages:
- Flexible and confidential partnership structure
- No regulatory oversight for standard holding or investment purposes
- Attractive tax transparency for international investors
- Simple governance and operational efficiency
- Ideal for real estate, private equity, and joint investment ventures
The SCS is a favoured option for asset managers, family offices, real estate developers, and investors seeking a strong Luxembourg partnership that offers full control with minimal administrative burden. Its tax-transparent nature allows income and gains to flow directly to partners, avoiding double taxation, while offering flexibility in profit distribution and governance. This makes the SCS particularly suited for complex investment structures and long-term asset management strategies.
