Establishing a Sole Proprietorship in Denmark

The sole proprietorship, or Enkeltmandsvirksomhed, is the most popular and straightforward legal structure for running a business in Denmark. It is an ideal choice for new entrepreneurs with limited capital and uncertain future earnings. If you're interested in setting up a sole proprietorship in Denmark but need guidance, we are here to help.

Conditions for Starting a Sole Proprietorship in Denmark

A sole proprietorship is a business structure where the owner assumes full responsibility for the company's debts. This means the business owner is personally liable for all financial and tax obligations. If the company faces financial challenges, the owner may need to use their personal assets, such as their house or car, to settle the debts.

In a sole proprietorship, the owner makes all decisions regarding the business operations, although they can delegate authority to others through power of attorney to act on behalf of the company.

In Denmark, a sole proprietorship does not require the accumulation of share capital, simplifying the process of running a business. Furthermore, the Danish government provides assistance to self-employed individuals with the formalities involved in business registration.

Entrepreneurs moving to Denmark can register their business with the Agency for Business and Enterprise (Erhvervsstyrelsen), which operates under the Ministry of Economy. Before proceeding, it's advisable to carefully review the requirements, necessary documentation, and deadlines for different company structures in Denmark. It's also important to thoroughly assess the pros and cons to make an informed decision that aligns with your expectations and resources.

What Are the Benefits of Operating a Sole Proprietorship in Denmark?

Starting a sole proprietorship in Denmark is a straightforward process, making it an accessible option for entrepreneurs. With minimal administrative and financial requirements, an Enkeltmandsvirksomhed is especially appealing for those new to business. The key advantages of a sole proprietorship include:

• Low startup costs: Establishing a sole proprietorship in Denmark costs 10,000 DKK.
• No need for share capital: This lowers initial financial barriers.
• No VAT registration: If the company’s annual revenue is under 50,000 DKK, VAT registration is not required.
• Ease of business management: Running a sole proprietorship is simple and doesn’t demand extensive experience, making it ideal for beginner entrepreneurs.
• Ability to grant power of attorney: The business owner can delegate authority to others to act on behalf of the company.
• Single tax return: Business income is reported on one tax form, ensuring only one round of taxation.
• Administrative support: The Danish administration offers assistance with the formalities involved in business registration.

These advantages make sole proprietorships in Denmark simple to operate and appealing to new entrepreneurs.

How to Register a Sole Proprietorship in Denmark?

A sole proprietorship must be registered with the Danish Erhvervsstyrelsen, which can be done online at erhvervsstyrelsen.dk. The registration form will ask for the business name, typically the owner's first and last name, along with their personal CPR number.

Registering a sole proprietorship in Denmark (Enkeltmandsvirksomhed) involves a few steps:

a. Gathering Necessary Information

Before beginning the registration process, ensure you have the following details prepared:

• Company name and address
• CPR number (personal identification number)
• Business activity code (PKD code)

b. Online Registration

To register a sole proprietorship, you must complete the process online through the portal virk.dk. After filling out the registration form, it will be submitted to the relevant authorities for approval.

c. Receiving a CVR Number

Once the registration form is submitted, you will be issued a CVR number (Central Business Register), which serves as your business's unique identifier. You will need this number for all formal business-related activities.

d. VAT Registration (if applicable)

If your business expects an annual turnover exceeding 50,000 DKK, you must register for VAT. This can be done through the virk.dk portal by logging in, locating the VAT registration form, completing it, and submitting it.

e. Opening a Bank Account

Opening a separate bank account for your business will help streamline tax-related transactions and manage the company’s finances more effectively.

f. Maintaining Accounting

Ensure that your accounting complies with Danish regulations. You can manage this yourself if you have the necessary expertise, or alternatively, you can hire an accounting firm to handle it for you.

g. Filing Tax Returns

Ensure that you file tax returns and report taxes regularly in compliance with the Danish Tax Agency (SKAT) requirements.

Additional Considerations for Starting a Sole Proprietorship in Denmark:

• Business Insurance: It's advisable to acquire the necessary insurance coverage for your business.
• Permits and Licenses: Make sure to obtain any required permits or licenses to legally operate your business in Denmark.

Registering a sole proprietorship in Denmark is an easy process that can be completed online. However, it's crucial to follow all deadlines and procedures carefully to avoid potential administrative or legal complications down the line.