Thinking about starting a limited company? That's exciting! But what is a limited company and how does it actually work? Don't worry - you'll find the answers here. We at Qred explain everything you need to know about starting a limited company.
In 8 minutes or less, you'll learn what a limited company is, how to start one from scratch and how Qred can help you finance your business growth.
What is a limited liability company?
A limited liability company (A/S) is the most common form of company formed by either one or more founders. In an A/S, ownership and liability are structured in a way that means that as the owner of a limited liability company, you have limited personal liability for the company's debts - meaning that your personal assets are protected should the company run into financial difficulties. It acts as a corporate structure with a built-in safety net.
Differences between different types of corporate structures
Now that we understand what an A/S is, how do the other common types of companies work?
Sole proprietorship: A sole proprietorship is a type of business where one person runs the business alone. The business and the owner form the same legal entity and the owner is personally liable for the debts of the business. It's a simple and flexible form of business, but it lacks tax advantages and can be risky if the business doesn't do well.
Partnership: A partnership is a type of company where two or more people run the business together. Each partner is personally liable for the debts of the business and there is no limit on ownership. It's a good form of company for partnerships, but like sole proprietorships, it lacks the tax protection that a limited company can offer.
Are you deciding between starting a partnership, a sole trader or a limited company? Take into account that a sole proprietorship and partnership come with more complex accounting and administrative requirements. While these two options give you full personal ownership and control, this comes with greater personal responsibility for the debts of the business. Differences in taxation and legal aspects are also something to consider when choosing the right company structure for your needs.
Step by step: How to start a limited company
So now it's time to dive into the details and find out exactly how to start a limited company step by step. Remember, good preparation is the key to success, so let's get started on your journey.
Step 1: Preparation
Before you embark on your limited company adventure, you need to start preparing. The first step is to open a company account with your bank. Here you deposit the start-up capital of at least DKK 400,000. Also, make sure you have a strong and memorable company name in place.
Step 2: Register the limited company
Visit virk.dk to start your business. It takes care of everything from registering the business itself, F-tax and VAT to registering yourself as an employer. The registration fee costs a few hundred kroner if you use the digital service, a little more if you don't. In this process, you create the incorporation document, which contains information about the founders, number of shares per founder and share prices.
Tip: At this step, you can also secure all the permits you need to operate your limited company. Depending on the type of activity you operate, permits may vary locally, regionally or nationally, but in general, the municipality can be a good source of information on this.
Step 3: Create the bylaws
The articles of association act as a rulebook for your company. They specify the type of company, address, minimum and maximum capital, the location of the annual general meeting and how future notices should be sent out. It's important to ensure they are clear and in line with your company's goals.
Step 4: Share payment and registration
Now it's time to subscribe and pay for the shares. Normally, all shareholders pay the same price per share, but there is flexibility to set different prices as needed. Payment is made by depositing the money into the bank account linked to your company according to the bank certificate.
Step 5: Register the beneficial owner
Within four weeks of registering your limited liability company, you must register who the beneficial owner is. This means reporting who controls the company through ownership shares or the right to appoint or dismiss more than half of the board members.
Tip: There may be multiple beneficial owners.
Step 6: Business insurance
To protect your business from unexpected costs, it's wise to take out business insurance. This includes protection against damage your business may cause to others, insurance against property damage, business interruption and also collective insurance related to collective bargaining agreements if you have employees.
With these steps in place, you're ready to start your limited company and move into business with confidence.
Can you start a limited company without capital?
Absolutely, you can! It's entirely possible to get started with minimal financial resources. Here are some alternative funding options to consider:
Crowdfunding: Through platforms like Kickstarter or Indiegogo, you can raise capital from a broad public that believes in your idea.
Business angels: Seek support from investors who are willing to invest in your business in exchange for ownership shares.
Personal loans: Consider using your own savings or taking out a personal loan to fund the start-up capital.
Bank loan: Contact your bank to discuss the possibility of getting a business loan to finance start-up expenses.
Bootstrapping: Try to minimize costs by using your own resources and working from home in the beginning.
Outsourcing: Use external services and freelancers instead of hiring full-time employees to reduce costs.
With the right strategy and creativity, you can start your limited company even if you have limited funds. It's important to plan carefully and consider the different financing options that best suit your situation and business idea.
Cost of starting a limited company - budget and expenses
When planning to start your own business, it's important to have a clear picture of the costs that may arise. Here we give you an overview of the most common costs and tips on how to create a realistic budget.
The most common costs of starting a limited company are:
Registration fees: Initially, you'll have to pay fees to register your limited company with DBA: a few thousand dollars.
Start-up capital: This is not directly a cost in itself, but a limited company requires a start-up capital of at least DKK 400,000, which constitutes the company's share capital.
Space and equipment: Depending on your business, you may need to rent office space, buy equipment or invest in storage space.
Staffing: If you're planning to hire staff, you'll need to keep payroll costs and employer taxes in mind.
Marketing and advertising: Marketing your business can require a significant budget for advertising, web design and marketing campaigns.
How to create a realistic budget:
Identify and prioritize costs: Review all potential expenses and categorize them for a clear overview. Focus on the necessary costs that are essential to keep your business running.
Measurable: Make your budget measurable by setting specific goals and timeframes to track cost trends.
Flexibility: Be ready to adjust your budget if the need arises. It's important to be flexible and adapt to change!
A realistic budget is key to keeping your costs under control and ensuring your limited company is financially stable enough to thrive.
Grow your limited company with a business loan from Qred
When your A/S is up and running and you're looking for financing options to expand your business, Qred can be your reliable partner. Qred offers business loans of between DKK 100,000 and DKK 2 million that can help you invest in new equipment, boost your marketing or expand your business. With a simple application process, you can access capital quickly and easily - if everything looks good, you can even get the money in your account the same day!
Frequently asked questions about starting a limited company
How much money is required to start a limited company?
To start a limited company, you need DKK 400,000, but it doesn't have to be cash - you can use property or other assets to reach this amount.
Can you start a limited company all by yourself?
Yes, you can start a limited company all by yourself as a single owner and director if you wish. There is no requirement to have other owners or directors.
Are you obliged to take a salary in a limited company?
No, you are not obliged to take a salary in a limited company. You can choose to take a salary when the company has sufficient funds, or leave the profits in the company and use them for growth.
How long does it take to open an A/S?
The time it takes to open a limited company can vary, but usually you can expect the process to take a few weeks. The registration and processing of necessary formalities can also vary in terms of time.