A sole proprietorship (enkeltmandsvirksomhed) is the simplest way to run an independent business in Denmark. You can get started quickly, there is no requirement for share capital or formal incorporation documents, and administration is relatively simple.
In return, you are personally and unlimitedly liable for all the business's obligations, which makes it important to have a grip on risk, tax and bookkeeping — right from the start.
Capital requirements and liability
There is no statutory capital requirement for a sole proprietorship:
- you can in reality start without any contributed capital,
- but in practice you should ensure financial robustness to pay suppliers, tax, VAT etc.
Liability is:
- personal — creditors can pursue you as a private individual,
- unlimited — your private assets can ultimately be seized,
- direct — there is no "shield" as with an ApS or A/S.
In our advisory work we therefore consider, among other things:
- the risk profile of your business,
- whether it may be appropriate, sooner or later, to convert to a company,
- how best to separate private and business finances.
Formalities for getting started
The actual start-up requires that you:
- register the business digitally via Virk/the Danish Business Authority,
- choose a business name and industry code (NACE),
- decide on registration for: VAT, A-tax and labour-market contributions (if you will have employees), and import/export registration where relevant.
There is no requirement for:
- a memorandum of association,
- articles of association,
- a board or general meeting.
We help you to:
- complete the registration correctly,
- ensure the choice of industry code and registrations match the activity you will actually conduct,
- get an overview of the most important deadlines for VAT, tax and filings.
Bookkeeping, accounts and tax
As the owner of a sole proprietorship you are obliged to:
- keep accounts in accordance with the Danish Bookkeeping Act,
- be able to document income and expenses,
- submit accounts to the tax authorities.
Taxation takes place at your personal level. You can typically choose between:
- the personal tax scheme (the business result is taxed as personal income),
- the business tax scheme (virksomhedsordningen), which allows e.g. saving at a lower preliminary tax rate and deduction for interest in the business,
- in some cases the capital return scheme (kapitalafkastordningen).
The choice of scheme has a major impact on your tax position. As a rule we recommend that this be clarified in close cooperation with an auditor. Our role is to:
- give you an overview of the differences,
- help you describe your situation so the auditor can advise precisely,
- ensure the choices made are also reflected correctly in the bookkeeping.
Practical and legal considerations
Even though the form is simple, there is a range of practical and legal matters to address:
Contracts and terms
- terms of trade with customers,
- agreements with suppliers and partners,
- any agency or distribution agreements.
Liability and insurance
- need for commercial and liability insurance,
- any industry requirements (e.g. professional liability for advisers).
Data and compliance
- if you process personal data, you must comply with the GDPR,
- need for a privacy policy, data processor agreements etc.
We help you identify the most relevant documents and risks for exactly your type of business, so you get off to a proper start.
Outlook: from sole proprietorship to company
For many entrepreneurs a sole proprietorship is a good first step — but not necessarily the final structure. When turnover, risk or headcount grows, it can be sensible to:
- convert the business to an ApS (potentially tax-free),
- establish a more professional structure around ownership and management,
- obtain limited liability.
Even at the formation of the sole proprietorship, it pays to keep these options in mind, so bookkeeping, contracts and structure are ready for a later conversion. We can help with both planning and execution.