IVSs are abolished - What types of business are there?

Denmark has now passed the bill to abolish entrepreneurial companies and reduce the minimum requirement for the establishment of private limited companies. In the vote held on 09.04.2019, 101 members of parliament voted in favor of the bill, while 5 voted against. With a significant majority, the bill has now been passed.

The bill:

1. abolition of IVS

2. Reduction of minimum requirement for ApS - From DKK 50,000 to DKK 40,000

IVSs are abolished:

Since 2014, it has been possible to establish entrepreneurial companies (IVS). An IVS could be founded for just one krone, and it was hoped that the low start-up capital would motivate more people with an entrepreneurial spirit to start their own business. However, there was a requirement that you had to transfer 25% of the company 's profit to the next one, so you could save up to switch to an ApS in time. Since you are not personally liable for the loan, there have been many forced dissolutions in connection with these companies. Therefore, the government has now decided to close IVSs. It will no longer be possible to establish IVSs.

Existing IVSs have two years to re-register as APSs . If the owner of the IVS fails to re-register the company, the company will be forcibly dissolved.

It can be difficult to know what type of business to set up when you're starting a new business. Should you have a personally owned business or a larger corporation? Here you can get an overview of your options:

Personally owned business:

Sole proprietorship (EV)

A sole proprietorship is characterized by the fact that it has only one owner and that the owner is personally liable for the company's performance of its obligations. It is a simple form of business that is easy and free to set up, which is why sole proprietorships are among the most common forms of business in Denmark. Although many people don't think so, a sole proprietorship can hire employees. There is no requirement for sole proprietorships to have an executive board or board of directors, or for the annual accounts to be published or audited by an auditor .

Personally owned small business (PMV)

This type of business is very similar to a sole proprietorship. There can also be only one owner of the business and you are also personally liable for the company's obligations. A personally owned business differs from a sole proprietorship in that it is not subject to VAT, it can have a maximum annual turnover of 50,000 DKK and it cannot have employees. It is also free to set up a personally-owned small business, making it ideal for entrepreneurs who want to run a part-time or leisure business in the form of a company.

Companies:

Limited liability company (ApS)

Private limited companies are one of the most typical business forms available. There are 232,000 private limited companies in Denmark. A private limited company is a form of business with one or more owners. To start a private limited company, you must contribute a share capital of at least 50,000 DKK in the form of cash or other assets, e.g. machinery, cars or inventory. e.g. machinery, cars or inventory.

As the owner of a private limited company, you are not personally liable for the company's debts and obligations, and the value of the company is the company's and not the owners'. It requires a lot more to set up an ApS than the personally owned companies. It costs DKK 670, it requires articles of association and a foundation document, the company must have an executive board, but not necessarily a board of directors, and the company must publish its annual report. In smaller companies, the annual report does not need to be audited by an auditor.

Public limited company (A/S)

A limited liability company - also abbreviated A/S - is relatively different from both personally owned companies and private limited companies. Above all, it is a question of liability, financing and the governance of the company. In the limited liability company, a distinction is made between legal entities (the limited liability company itself) and natural persons (for example, the board of directors and the CEO).

A limited liability company - also abbreviated A/S - is very similar to a private limited company, however, there is a much higher deposit requirement for limited liability companies. It is 400,000 DKK Another requirement is that there must be a board of directors. The board is responsible for the company strategy, while the executive board is responsible for day-to-day operations. One of the advantages of choosing a limited liability company over other forms of business is the high degree of credibility, as the company capital is of a certain size. This shows that you, as business owners, have a certain financial capacity, which can make it easier to enter into agreements with suppliers.

Partnership (I/S)

A partnership is very similar to a personally owned sole proprietorship, but the difference is that unlike a sole proprietorship, there are two owners who have unlimited joint and several liability. The owners can be both companies and natural persons. There is no capital requirement for the formation of an I/S, nor is it required to submit an annual report if both owners are natural persons.

We wish you the best of luck with your business

The team at Qred

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