Establishing a Sole Proprietorship in Denmark
The most commonly chosen and simplest legal form of conducting business in Denmark is the sole proprietorship, known as Enkeltmandsvirksomhed. This is an excellent solution for novice entrepreneurs who do not have significant capital and cannot predict the future income of the company. If you want to establish a sole proprietorship in Denmark but don’t know how, we are ready to assist you.
Requirements for Establishing a Sole Proprietorship in Denmark
A sole proprietorship is a form of business in which the owner bears full responsibility for the company's debts. This means that the business owner is directly liable for all financial obligations—both business-related and tax-related. In the event of financial difficulties for the company, the owner is required to cover its debts with their personal assets, such as by selling their house or car.
In a sole proprietorship, the founder independently makes all decisions related to running the business. However, they can grant power of attorney to others to represent the company.
In the case of a sole proprietorship in Denmark, there is no requirement to accumulate share capital, making it much easier to run a business. Additionally, the Danish administration assists the self-employed in handling the formalities related to business registration.
Entrepreneurs relocating to Denmark can register their own company with the Agency for Business and Enterprise (Erhvervsstyrelsen), which is part of the Ministry of Economy. Before making this decision, it's advisable to familiarize yourself in detail with the requirements, necessary documents, and deadlines related to various legal forms of companies in Denmark. It is also important to thoroughly analyze all the advantages and disadvantages to make an informed choice that aligns with your expectations and possibilities.
How to Register a Sole Proprietorship in Denmark?
A sole proprietorship must be registered with the Danish Erhvervsstyrelsen. This can be done through the website erhvervsstyrelsen.dk. The registration form requires you to provide the name of the business. It is often the first and last name of the owner, who will use their personal CPR number.
Registering a sole proprietorship in Denmark (Enkeltmandsvirksomhed) involves several steps:
a. Gathering Required Information
Before you proceed with the registration, make sure you have the following information ready:
- Company name and address
- CPR number (personal identification number)
- Business activity code (PKD code)
b. Online Registration
The registration of a sole proprietorship is done online through the portal virk.dk. You need to fill out the registration form, which will be submitted to the relevant authorities upon approval.
c. Obtaining a CVR Number
After submitting the registration form, you will receive a CVR number (Central Business Register), which serves as a unique identifier for your company. The CVR number will be required for all formalities related to running your business.
d. VAT Registration (if applicable)
If you expect your company's annual turnover to exceed 50,000 DKK, it is necessary to register for VAT. This can be done using the virk.dk portal by logging in, searching for, completing, and submitting the VAT registration form.
e. Opening a Bank Account
Establishing a separate bank account for your business will simplify tax-related transactions and the management of the company’s financial resources.
f. Maintaining Accounting
Keep your accounting in accordance with Danish regulations. You can do this yourself if you have the necessary knowledge, or you can use the services of an accounting firm.
g. Filing Tax Returns
Regularly report taxes and file tax returns according to the requirements of the Danish Tax Agency (SKAT).
Additional aspects to consider when starting a sole proprietorship in Denmark:
- Business insurance: Consider purchasing appropriate insurance for your business
- Permits and licenses: Ensure that you have all the required permits and licenses necessary to operate your business in Denmark.
Registering a sole proprietorship in Denmark is a straightforward process that can be completed online. It is important to carefully follow all deadlines and steps to avoid administrative and legal issues in the future.
Why is it Worth Running a Sole Proprietorship in Denmark?
Starting a sole proprietorship in Denmark is a relatively easy process, accessible to any entrepreneur. Due to the minimal administrative and financial requirements, an Enkeltmandsvirksomhed is an attractive option for those taking their first steps in business. The main advantages of a sole proprietorship include:
- Low startup costs – establishing a sole proprietorship in Denmark costs 10,000 DKK (which is over 6,000 PLN, based on the current exchange rate).
- No need to accumulate share capital – reducing initial financial requirements.
- No VAT registration – if the company’s annual revenue does not exceed 50,000 DKK, there is no obligation to register for VAT.
- Ease of running the business – managing a sole proprietorship is simple and doesn't require extensive experience, making it especially beneficial for beginner entrepreneurs.
- Ability to grant power of attorney – the owner can authorize others to act on behalf of the company.
- One tax return – since business income is declared in a single tax form, the income is only taxed once.
- Administrative support – if issues arise, Danish administration assists with formalities related to business registration.
These benefits make sole proprietorships in Denmark easy to manage and attractive for new entrepreneurs.