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Enkeltmandsvirksomhed, or sole proprietorship, is the simplest form of doing business in Denmark, often chosen by people from abroad. It is an excellent solution for those who are just starting out as entrepreneurs or do not have a lot of financial resources.
Carefully reviewing the requirements, deadlines and required documents for the various legal forms of Danish businesses is key before making a decision. It is also advisable to carefully analyze all the advantages and disadvantages so that you can make an informed choice that suits your expectations and capabilities.
If you are planning to start your own business in Denmark and need support at the beginning of this journey, we are happy to help. With our support, the process of registering and running your business will become simpler and clearer. We offer support in every phase of setting up Enkeltmandsvirksomhed, helping with formalities, as well as advising on legal and financial obligations. Let us make it easy for you to start a Danish business.
Here is the key information about a sole proprietorship Enkeltmandsvirksomhed in Denmark:
- There is no requirement to raise share capital when starting a sole proprietorship in Denmark. This means that entrepreneurs starting a business in this form do not have to deposit a certain amount of money as initial capital, as is required for other legal forms of businesses, such as limited liability companies (ApS). This lack of a start-up capital requirement significantly simplifies the process of setting up a company, reducing the financial barrier and allowing those with fewer financial resources to get an easier start in business.
- The Danish administration offers support to the self-employed, helping them through the business registration process. As part of this support, entrepreneurs can count on information regarding required documents, registration procedures and all legal obligations related to running a business.
- Under Enkeltmandsvirksomhed, it is the founder who makes all decisions related to the management of the company and its operations. All responsibility for operations, strategy and day-to-day decisions lies in the hands of the owner. Nonetheless, the founder has the ability to delegate authority to others by granting them powers of attorney. Such powers of attorney allow these individuals to make decisions and act on behalf of the company in certain matters, which may include, for example, negotiating with customers, managing finances or representing the company in dealings with other institutions.
- A Danish sole proprietorship is a form of business in which the owner is personally liable for all financial obligations of the company. This means that all debts, both those arising from operations and tax liabilities, are directly attributable to the owner. In the event of financial problems or insolvency of the business, the owner is required to repay the debts from his own assets, which may include assets such as real estate or vehicles. This structure means that the owner's private assets can be used to cover the company's liabilities, which entails a higher financial risk for the entrepreneur.
- Those who relocate to Denmark have the option of registering their business with Erhvervsstyrelsen, the Agency for Business Activity and Enterprise, which is part of the Danish Ministry of Economic Affairs. This is the institution responsible for overseeing economic activity in the country. Registration with Erhvervsstyrelsen ensures the legality of the operation and allows you to take advantage of the various forms of support and administrative services offered by the Danish government.
One of the main advantages of a sole proprietorship in Denmark is its simplicity in management. Running such a company is much less complicated compared to larger forms of business, making it possible for young entrepreneurs, often without much business experience, to run their business effectively without the need for sophisticated management tools.
Another important advantage is the low cost of setting up a business, amounting to only 10,000 Danish kroner, which, converted into zlotys, is a little over 6,000. The low financial entry threshold makes setting up a business in Denmark accessible to a wide range of entrepreneurs, which further increases the attractiveness of this form of business.
One of the biggest conveniences for those considering starting a sole proprietorship in Denmark is that there is no requirement to raise share capital. Unlike other legal forms where share capital is required, Enkeltmandsvirksomhed allows you to start a business without having to commit a lot of money at the start.
Tax on business income in Denmark is taxed on a single tax return. This means that the entrepreneur declares the income earned from the business in his or her personal tax return, which simplifies the tax settlement process and ensures that the income is taxed only once.
In addition, it is possible to grant power of attorney to others who can act on behalf of the company. This is particularly useful in situations where the business owner needs support in managing or conducting certain business operations.
It is also worth noting that a sole proprietorship in Denmark does not have to be registered for VAT if the annual income does not exceed DKK 50,000. This allows entrepreneurs whose business generates less income to avoid additional administrative and financial burdens related to VAT settlements.
Registering a sole proprietorship in Denmark, known as Enkeltmandsvirksomhed, is quite easy. In order to register this type of business, it is helpful to know the following steps to follow. The process is relatively simple and consists of several steps.
I. Preparing all the necessary information before starting to register a sole proprietorship in Denmark is crucial. Make sure you have the following data gathered:
- Company name - You must specify the name under which your business will operate. In Denmark, it is important that the name be unique and not already used by another registered company.
- Company Address - Prepare the exact address of your company's registered office in Denmark. This can be the place where the business will be physically conducted, such as an office, or a home address if the business is conducted from home.
- PKD code - Choose the PKD code that best describes the type of business you intend to conduct. This code is valid for business classification purposes.
- CPR number - Prepare your CPR number (Central Registration Number), which is the Danish identification number for individuals.
II. Registration of a sole proprietorship in Denmark is done online using Virk.dk. To start the process, you need to fill out a registration form available on this platform. This form requires detailed information about the company, such as its name, address, PKD code and CPR number. Once you have completed all the required data, you need to validate the form, which will allow it to be automatically sent to the relevant business registration offices in Denmark. The entire process is convenient and efficient, as it eliminates the need to submit documents in person to the authorities, speeding up the establishment of a sole proprietorship in Denmark.
III. After submitting the registration form through Virk.dk, your company will receive a CVR number, which is a key identification element for companies in Denmark. The CVR number, or Central Business Register, acts as a unique identifier for your company, which will be used in all official business-related documents and procedures - it is required for activities such as opening a bank account in the company's name, filing tax returns, obtaining licenses and permits, and for all dealings with public and commercial institutions.
IV. If you expect your company's annual turnover to exceed DKK 50,000, you will be required to register as a VAT payer. This registration can be done directly through Virk.dk, which simplifies the entire process. To begin registration, log into your Virk.dk account. Then search for the VAT registration form, which is available on the platform. Once you have found the form, fill in all the required information about your company and your expected turnover. After completing the form, submit it electronically through the portal. After submitting the VAT registration form, you will receive a registration confirmation, and your company will be registered as a VAT payer. You will be required to comply with applicable tax regulations, including issuing invoices at the appropriate VAT rate and filing regular tax returns.
Handling VAT registration and compliance through Virk.dk can be complex and time-consuming. By working with a Danish tax representative, you can streamline the entire process, from registration to ongoing compliance. Let an expert manage your VAT obligations, ensuring accurate filings and freeing you to focus on what you do best-growing your business.
V. Opening a separate bank account for your business is a key step that will help you effectively manage your company's finances. Having a dedicated account makes it easier not only for day-to-day operations, but also for organizing and controlling your cash flow, which is important for the proper running of your business. You will need to provide company registration documents, such as a CVR number, as well as other required documents proving your identity and the legal status of your company. Having a separate bank account allows you to separate your personal and business finances, which simplifies bookkeeping and tax preparation.
VI. Keeping accounts in accordance with Danish regulations is an essential part of managing Enkeltmandsvirksomhed. It is worth ensuring that all financial operations are properly documented and in accordance with applicable regulations. If you have the requisite accounting skills and knowledge, you may choose to do your own bookkeeping. Alternatively, if you don't feel confident in bookkeeping or prefer to focus on other aspects of running your business, you can use the services of a professional accounting firm. Working with such an office can help you manage your finances, prepare tax returns, and ensure that all your books are kept in accordance with Danish regulations.
VII. Regular tax reporting and filing is a key responsibility for any company operating in Denmark. To ensure compliance with the requirements of the Danish Tax Authority (SKAT), it is important that you follow the established deadlines and procedures.
In addition to the basic steps involved in registering a sole proprietorship in Denmark, it is worth noting a few additional issues that can significantly affect the operation of your business.
One such element is insurance. Consider taking out adequate insurance to protect your business from potential risks. Depending on the type of business, this could include liability insurance, insurance for your business assets, or even insurance against accidents or damages resulting from your professional activities. Well-chosen insurance can protect you from unforeseen costs and provide peace of mind in the day-to-day running of your business.
Another important issue is licenses and permits. Make sure you have all the necessary licenses and permits required to legally operate your business. In Denmark, certain types of business may require special licenses, such as in the construction, medical, catering, or transportation industries. Failure to have the proper licenses can lead to financial penalties and even suspension of your business.
Additionally, certain businesses may be required to submit Intrastat declarations to report their trade in goods with other EU member states. These declarations provide crucial data on the volume and value of cross-border transactions and help monitor economic activity within the EU. Regularly reviewing your reporting obligations ensures that your business adheres to all relevant regulations.
Registering a sole proprietorship in Denmark is usually a simple and quick process that can be completed online. However, the key to success is to carefully follow all steps and deadlines, thus avoiding legal and administrative problems in the future. Careful preparation of documents, filings and attention to regulatory compliance will contribute to the successful operation of your business and minimize risks.