Registering a sole proprietorship in Denmark

Registering a sole proprietorship in Denmark

In Denmark, the most popular and simplest legal form of doing business is the sole proprietorship – Enkeltmandsvirksomhed. This is ideal for young start-up entrepreneurs who do not have a lot of financial resources and cannot predict the future turnover of the company. If you don’t know how to register a sole proprietorship, we are here to help you.

Requirements when registering a sole proprietorship in Denmark

Entrepreneurs who move to Denmark have the right to register their own company with Erhvervsstyrelsen (the Agency for Business and Enterprise, part of the Ministry of Economic Affairs). Before making this decision, however, it is advisable to carefully study the requirements, deadlines and necessary documents for the various legal forms of Danish companies and analyze all the advantages and disadvantages in order to make an informed choice that is in line with your expectations and possibilities.

A sole proprietorship is a type of business in which the owner is fully responsible for the company’s debts. This means that all financial obligations, both business-related and tax-related, fall directly on the owner. In the event of financial problems for the company, the owner must cover the company’s liabilities with his private assets, such as his house or car.

In a sole proprietorship, all decisions regarding the running of the business are made solely by the founder. However, he or she can give power of attorney to other people to act on behalf of the company. Running a company is much simpler, as there is no need to raise share capital. In addition, the Danish administration supports the self-employed in completing the formalities of business registration.

Who can become a Sole Proprietor in Denmark?

Anyone, regardless of nationality, can establish a sole proprietorship in Denmark. This business structure is commonly chosen by freelancers and entrepreneurs. Foreign citizens need to secure a residence and work permit in order to register a sole proprietorship in Denmark. Additionally, they need to obtain a NemID, a digital signature, before completing the company registration.

How to register a sole proprietorship in Denmark?

To set up a one-person company in Denmark, you need to register it with Erhvervsstyrelsen, preferably through the website erhvervsstyrelsen.dk. When registering, the name of the company is provided – usually it’s the name of the owner. To operate as a Sole Proprietor in Denmark, you must be a resident and have both a „CPR-number” (Danish Social Security Number) and a digital signature (called „MitID”).

To start your sole proprietorship, you will need a business address. Many businessmen initially use their private addresses as they often start their company from home without an external office. Generally, the business authority approves the use of a private address for this purpose.

You must also specify a start date for your business activities. Choosing a strategic start date can save you money on accounting and annual reports. For instance, if you select December 31st as your start date, you’ll need to submit a VAT declaration for the fourth quarter, a tax declaration, and an annual report for the entire year, even though you only operated for one day. Therefore, in this example, January 1st would be a more strategic and cost-effective starting date.

Furthermore, you need to determine the activity code (referred to as „branchekode” in Danish) for your sole proprietorship. This code specifies the nature of the activities your business will be conducting.

Once you have gathered all the necessary information, you must apply to register your business on the VIRK website. To log in, you will need your Danish digital signature, known as „MitID.” If you have recently moved to Denmark and do not yet have a MitID, you must obtain it prior to registering your business on VIRK.

Documents needed to register a business in Denmark
To register a sole proprietorship in Denmark, you will need the following documents:

  • Proof of identity
  • Proof of local residence (not mandatory) and original residence documentation
  • Civic Registration (CPR) Number as an individual owner

Registering a sole proprietorship in Denmark (Enkeltmandsvirksomhed) is a relatively simple process. Here are the steps you need to take to register such a business:

1. Prepare the necessary information
Before starting the registration, make sure you have the following information prepared:

  • Company name
  • Address of the company
  • PKD code (business activity code)
  • CPR number (personal identification number)

Choose a unique company name that does not match any existing business names.

2. Registration of a sole proprietorship is done online via Virk.dk. A registration form must be filled out. Once approved, the form will be sent to the relevant offices.

3. Receive CVR number
After submitting the registration form, you will receive a CVR (Central Business Register) number, which is your company’s unique identification number. You will need the CVR number for all business-related formalities.

4. Register for VAT (if applicable).

If you anticipate that your company’s annual turnover will exceed DKK 50,000, you will need to register for VAT. This can also be done through Virk.dk:

  • Log on to Virk.dk.
  • Search for the VAT registration form.
  • Fill out and submit the form.

5. Open a bank account
Open a separate bank account for your business. This will make managing your finances and tax returns easier.

6. Bookkeeping
Be sure to do your bookkeeping in accordance with Danish regulations. You can do it yourself or through the services of an accounting firm.

7. Filing taxes
Make sure you regularly report taxes and file tax returns as required by the Danish Tax Authority (SKAT).

Additional considerations:

  • Insurance: Consider taking out adequate insurance for your business.
  • Licenses and permits: Make sure you have all the necessary licenses and permits for your business.
  • Registering a sole proprietorship in Denmark is a simple process that can be done online. It is important to carefully follow all steps and deadlines to avoid legal and administrative problems in the future.

Advantages of running a sole proprietorship in Denmark

Establishing a sole proprietorship in Denmark can provide advantages for global business expansion. The Kingdom of Denmark boasts one of the most stable and resilient economies in Europe. In addition, technology and innovation flourish in this environment. The simplicity of legal procedures, low employer costs, and affordable corporate tax rates make starting a business or sole proprietorship in Denmark straightforward and stress-free.

Establishing a sole proprietorship in Denmark is a relatively simple process that is accessible to any entrepreneur. With few financial and administrative requirements, Enkeltmandsvirksomhed is an attractive option for young businessmen. The advantages of a sole proprietorship primarily include:

  • Simplicity in running the business – a sole proprietorship is easy to manage, which is especially beneficial for young entrepreneurs without much experience.
  • Minimum start-up costs of DKK 10,000, which at the current exchange rate is more than PLN 6,000.
  • No obligation to raise share capital.
  • Business tax is declared on a single tax return, making income taxed only once.
  • Possibility to grant power of attorney to others to act on behalf of the company.
  • In case of problems, the Danish administration assists in dealing with business registration formalities.
  • A company does not have to be registered for VAT if annual income does not exceed 50,000 kroner.

There are also benefits for the owner of sole proprietorship in Denmark:

  • Sole proprietors have unlimited liability.
  • They are not subject to double taxation.
  • There is no requirement for an initial investment or base capital.
  • The owner retains all profits since there is no legal distinction between the proprietor and the business.
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