Closing a Business in Denmark

Shutting down a business is a complicated procedure that requires several steps. We are here to guide you through the process, ensuring that all formalities are completed in line with Danish regulations. By following the proper steps, you can retain access to online systems and prevent any future tax, customs, or fee-related obligations.

How to Close a Business in Denmark?

Shutting down a business is a crucial step that demands thorough planning and careful execution. The process entails various formalities and legal procedures, regardless of the reason for ending business operations. It's essential to follow these steps to ensure compliance with Danish laws.

To close a business in Denmark, the following steps must be followed:

1. Conduct a thorough review to ensure there are no outstanding obligations to contractors, employees, or authorities.
2. Formally approve the closure decision:
• For a company, this decision is made by the partners.
• For a sole proprietorship, the decision is made by the owner.
3. Notify the relevant authorities, such as the Tax Authority (SKAT) or the Central Business Register (CVR), of the closure.
4. For companies, a liquidation notice must be submitted to the Danish Business Authority (Erhvervsstyrelsen) via their online portal.
5. The liquidation process for companies includes:
• Preparing a liquidation balance sheet.
• Conducting an audit if required.
• Distributing any remaining assets after all liabilities have been settled.
6. Report the cessation of business activities to Erhvervsstyrelsen after completing the liquidation process.
7. Retain all business-related documents in accordance with Danish regulations, with a typical retention period of five years.

Additionally, the following matters should be addressed:

• Notifying contractors and business partners about the company's closure.
• Ensuring all taxes have been paid and settled.
• Closing the company's bank accounts.

How to Close a Limited Liability Company in Denmark?

The decision to close a business can be made either by the owner directly or without their involvement. The reasons for closure may include the following:

• Voluntary cessation of activities by the decision of the partners,
• Forced liquidation ordered by the court,
• Restructuring,
• Bankruptcy declared by the company or a creditor,
• Declarations from the partners concerning the dissolution of the business.

A company can opt for voluntary liquidation if it is able to meet its obligations, meaning its assets surpass its debts. The decision to close the company should be made public, and creditors should be given a minimum of 3 months to submit their claims.

A business may be closed without the owner's involvement due to a court order. Common reasons for such closures include:

• Resignation of the Managing Director,
• Submission of the annual report past the deadline,
• Failure to conduct a mandatory audit due to the resignation of the auditor and the absence of a new appointment.

If a company is dissolved by court order, the court appoints a liquidator to evaluate the business's financial status. If the company is determined to be insolvent, bankruptcy proceedings will begin. However, if the company is financially stable, it will proceed with liquidation instead.

To avoid bankruptcy proceedings, the company may choose restructuring. In this case, the court assigns a restructuring administrator to manage and oversee the process.

Before a company can declare bankruptcy, it must go through court proceedings. The bankruptcy petition can be filed by either the owner or a creditor. The primary reason for declaring bankruptcy is the company’s lack of financial liquidity.

The process of dissolving a limited liability company or its voluntary liquidation can be lengthy. However, when a company ceases operations based on the partners' decision, the 3-month period for creditors to file claims does not apply. Nonetheless, failing to meet any obligations could result in debts that the partners will be responsible for paying. It is therefore essential to carefully complete all formalities, settle taxes, and fulfill the company’s financial obligations.

How We Help You Close Your Business in Denmark?

We offer comprehensive support for both companies and sole proprietorships in completing all necessary steps, including:

• Maintaining access to the company's email after closure: Although the company’s NemID is deactivated during the closure, preventing access to Digital Post, you can still receive messages in the company’s email inbox. It’s recommended to set up access properly before closing the business to ensure you can continue using the company’s email after operations end.
• Checking the status of the company’s tax account: Before closing the company, it’s essential to verify the status of tax reports and payments on the Skattekonto. This account helps ensure that all required reports have been filed correctly and helps prevent overpayment of taxes, such as VAT or A-skat, after the company is closed.
• Completing the closure form: We handle the formal closure of the business and obtain a certificate of cessation of operations, which may be needed later by banks or unemployment insurance funds.
• Tax settlement: It is crucial to ensure that all reports for every period are submitted by the closure date of the company. Late submissions may result in a penalty of up to 800 DKK. A final report is required, even if the balance due is 0 DKK. Prior to closure, all obligations related to VAT, fees, taxes, payroll, excise duties, and other contributions to the Danish state must be settled.
• Adjustment of tax advances: After the business has ceased operations, the tax declaration must be adjusted to ensure accurate tax settlements.
• Submission of the oplysningsskema and preparation of the skatteregnskab: It is necessary to calculate the business’s profits and losses, as well as prepare the tax declaration for the period from January 1 until the closure. This process should also account for items that have been sold or disposed of, such as computers, furniture, cars, equipment, or inventory. The oplysningsskema information can only be declared in the following year after closure, with a deadline of July 1. Failing to meet this deadline may result in a penalty of 200 DKK per day, up to a maximum of 5,000 DKK.

If the entrepreneur decides to reopen the business in the future, they will retain the same CVR number they previously had.