In Denmark, a business can be organized in many different forms. There are currently over 20 types of forms of business organizations to choose among in Denmark. The choice of one particular form will affect the company’s and parent company’s/owner’s liability and income tax treatment. Here are the most common options and their major defining characteristics.
What you should know:
- Limited companies are the most typical forms of business in Denmark.
- Private limited companies (ApS) require a minimum share capital of 40,000 DKK (~EUR 5,400).
- Public limited companies (A/S) require a minimum share capital of 400,000 DKK (~EUR 53,700).
- An ApS should have at least one manager, but does not need a board.
- Unlike an ApS, A/S companies require a two-tier management system, i.e. an A/S should be managed by a manager (or management) and a Board of Directors or a Supervisory Board.
- Sole-proprietorship is the simplest business form in terms of establishment requirements. However, be aware that as a sole-proprietorship you will be fully liable for all your business debts and liabilities.
Private limited company or “Anpartselskab (ApS)”
A Private limited company (ApS) is an independent legal entity. The assets of the limited company form are the company’s assets and the owner/s are not personally liable for any losses.
This business form is typical for small- and mid-size companies or as new Danish subsidiaries of international company groups.
As the smallest limited liability company, an ApS requires a minimum share capital of 40,000 DKK when registered. The company should have a management, but one manager is enough. Therefore, this business form may be suitable for small-size and medium companies. Often we see international groups establish their Danish subsidiaries as an ApS as it is an easy way of doing business right away without risking liability for the non-Danish parent company.
An ApS with adequate capital reserves can later convert to Public limited company (“Aktieselskab” / A/S), provided the share capital is raised to minimum 400,000 DKK.
Public limited company or “Aktieselskab (A/S)”
For the registration of a Public limited company (A/S), a minimum share capital of 400,000 DKK is necessary.
As opposed to an ApS, an A/S companies require a two-tier management system. Thus an A/S should be managed by a manager (or management) and a Board of Directors or a Supervisory Board – it will be the A/S’ choice, although the most common management in an A/S will be formed by 1-3 manager(s) and the Board of Directors.
Although an A/S is more challenging to manage in the day-to-day business, due to extra regulatory burdens it is sometimes preferred by international owners who wish to signify the solidity and high-end corporate image that follows from the more expensive A/S.
Self-employed (sole-proprietorship) or “Enkeltmandsvirksomhed”
Forming your business as self-employed or freelance is the simplest option in terms of establishment requirements. Registration as self-employed to the Danish Business Authority (“Erhvervsstyrelsen”) can be done online through the Danish Business Authority’s website virk.dk and does not require the payment of the usual registration fee.
In addition, other advantages of being self-employed are that there is not a requirement for minimum social capital for forming your business (0 DKK), and that eventual deficit from your business is deductible from your personal general income.
If you decide to sell your business later on, be aware that the gains obtained in this transaction, would be in most of the cases taxed as personal gains, depending on how the sale has been carried out.
However, if you decide to sell your business later on, be aware that the gains obtained in this transaction, would be in most of the cases taxed as personal gains, depending on how the sale has been carried out.
Moreover, if you are considering this business form, you should also be aware that you will be considered personally (fully) liable for all your business debts and liabilities. This is because your business and you are the same person, legally speaking, i.e. when you register yourself as a self-employed (freelance), your business does not constitute an independent legal entity.
Register of Foreign Service Providers (RUT)
If you are a self-employed or have a company working temporally in Denmark, you have to register your company to RUT, before you start working in Denmark.
If you are a self-employed or have a company working temporally, on a short-term basis, in Denmark, then you have to register your company to RUT, before you start your work in Denmark. In addition, you have to report information about all the carried out work as well as the posted workers in Denmark. Otherwise, if you do not register to RUT, or if you provide incorrect or incomplete information, you risk to be fined by the Danish Working Environment Authority.
Registration can be done online through the DBA’s website at www.virk.dk/rut . In this case, it is not necessary to have a CPR number (civil registration number) and a NemID (Danish digital signature) to register and report to RUT. If you do not represent a Danish company and do not have a NemID, you can use your national ID or create a user account to access to RUT.