Company formation in Denmark is usually a procedure that is mainly differentiated by the type of company that is established. Many foreign investors come to set up a company in Denmark, but their first concern is to choose the type of business that suits his objectives and then register it with the Danish Commerce and Companies Agency.
Types of Danish legal entities
Businessmen who want to open a company in Denmarkand don't know what type of legal entity to choose can find more details in the table below which summarizes the characteristics of the main types of business entities in the country. These can be incorporated by local and foreign investors alike.
Type of Company
Danish Private Limited Company
A private limited company can be set up in Denmark by at least one shareholder regardless of his residency. The minimum share capital for setting up a private limited company in Denmark is 40,000 DKK and this amount is divided into shares. These shares are not negotiable, nor transferable. The shareholders of this company are liable only to the extent of their own contribution.
Danish Public Limited Company
At least one founder is required for setting up a public limited company with the condition to provide a minimum share capital of 400,000 DKK. Shareholders are not liable for the company’s obligations. This type of company also provides shares for its members, but they can be offered to the general public as opposed to the private limited company in Denmark.
Danish General Partnership
It is necessary for at least two members to agree on setting up a partnership. The founders can be individuals or legal entities, and they bear full liability for the company's obligations. As a matter of fact, this is the main characteristic of a general partnership. It is mandatory for a general partnership in Denmark to be registered with the Danish trade register.
Danish Limited Partnership
A limited partnership in Denmark has its similarities and its differences with a general partnership. At least two partners need to sign an agreement in order to set up a limited partnership and they can be individuals or legal entities. The characteristic of this type of business is that at least one partner is a general one and at least one is limited, with limited liability to the extent of his own contribution. Registration with the Danish trade register is also compulsory.
Danish Sole Proprietorship
An individual who wants to set up a company in Denmark on his own is called a sole proprietor. The single member has full liability on the company’s obligations and has the obligation to register with the tax authorities if the activity performed deals with trading or if the proprietorship has employees.
Branch and Representative Office
Two other options for a foreign corporation willing to enter the Danish market are the representative office (only suited for marketing and research, no commercial activities) and the branch office (essentially an extension of the parent company that performs the same business activities in Denmark).
As highlighted by our team of Danish company formation agents, each type of business entity has its own characteristics and advantages. One issue to consider for branch formation is that companies that are permitted to open a branch in Denmark must be foreign public or private limited companies, limited partnership companies with a similar business form based in other countries such as the United States, Switzerland or Georgia, among others. The particularities of branch formation can be discussed with our Denmark company formation specialists.
We recommend that investors take into consideration each of the issues mentioned above and seek proper counseling from our agents in case of any questions.
The type of the business entity will depend on the available capital, the plans for future business expansion and many other factors. It is also useful to know that, if the situation demands so, investors can change the business form. Investors interested in starting a business in another jurisdiction, for example in Australia, our team recommends this local company formation firm - AustraliaCompanyFormation.com.
Ways to start a new business in Denmark
There are three main ways in which investors may choose to open a company in Denmark and they are available for much of the types of companies, certainly for the most attractive one such as the private limited liability company (our team can provide complete details on how the process is changes slightly when discussing the registration of a branch, which will depend on the provision of documents concerning the parent company). Investors can opt for:
Online company registration: the most convenient manner to open a company in the country, it relies on the electronic platform provided by the Danish Business Authority; it allows investors to incorporate the business in the fastest way possible and it relies on having a digital signature, which is available only to certain service providers; our team has the ability to assist investors who wish to use this method based on the NemID;
Traditional registration: this is the usual method of registering the business by providing the needed documents to the Danish Business Authority; the process is longer and the business will operate as a company under formation until the registration is complete;
Shelf company: this is an option that may be convenient in some cases; buying a ready-made company can be a solution that allows investors to have a functional, trading company from one day to the next; this is a company that has been registered but has had no previous transactions or activities.
Company registration and requirements in Denmark
All new companies in Denmark must be registered with the Danish Business Authority, the tax authorities and the customs authorities for VAT purposes. The process is a simple one that starts with the drafting of the Memorandum of Association for the new legal entity. The registration with the Business Authority must take place within two weeks after the Memorandum is signed. Also, in order to register a new company, you need to open a bank account in Denmark where you will deposit the share capital of the company. Our incorporation agents can help you set up a bank account.
In terms of accounting and reporting requirements in Denmark, investors must know that the Danish Financial Statements Act applies to companies. The legal entities, such as the A/S are required to file annual financial statements that include the annual report, the profits and loss account, the cash flow statement and the balance sheet along with any explanatory notes. The branch in Denmark must submit the annual report of the foreign company with the Business Authority. One of our agents can give you additional details on these requirements.
Danish companies may decide not to have the annual report audited. For this to be possible, the legal entity is required to not exceed two of the conditions mentioned below for two consecutive years:
- have a balance sheet of DKK 4,000,000;
- have a net turnover of DKK 8,000,000;
- have an average of 12 full-time employees during the respective financial year.
The exception from appointing an auditor may apply as long as the company’s Memorandum doesn’t specify otherwise or as long as it is not decided otherwise at the annual general meeting.
In terms of taxation, registered companies in Denmark are taxed according to residence, where resident companies are taxed on their worldwide income and non-resident ones only on their Danish-source income. For resident corporations, profits and losses derived from foreign permanent establishments and real estate are exempt from taxation.
Read below a short list of taxes presented by our team specializing in company formation in Denmark:
- corporate income tax rate of 22%, with a higher rate of 25% for companies in the gas and oil industries.
- withholding tax on dividends is taxed at a 22% rate of 15% rate if the company receiving the dividends owns less than 10% of the company making the payment; special withholding taxes can apply if a double tax treaty is in place.
- the value-added tax in Denmark has a standard rate of 25% and a 0% rate, with services such as insurance, education, financial activities and others being exempt;
- social security contributions calculated per employee, at values between 10,000 DKK and 12,000 DKK;
- the building tax applicable to business property owned by companies, with a maximum rate of 1% of the building’s value.
We invite you to watch a video on the main business entities in Denmark:
Other information on company management and control in Denmark
Our team of Danish company formation agents can provide complete details on the taxes applicable to companies, how to declare corporation tax and how to handle the reporting requirements in place. What’s more, we can also assist investors who are interested in changing an existing business form or dissolving a company.
When an investor wishes to stop the activities of a Danish company he may choose to do so through a declaration to dissolve the legal entity or by liquidation, according to the Company Act. These two processes are subject to different requirements. For example, when the chosen method is to dissolve the company, the statement asking for the commencement of this process is submitted within one month after the company is closed. The applicant also submits the company tax return for the period during the dissolution process as well as other documents, as needed. The owner who dissolves the company will need to cancel the company obligations and file the final VAT return, e-tax for business and a-tax (as well as others).
Closing down a company in Denmark is a process for which the declarations are submitted in Danish only. Foreign investors who wish to commence this process can request our services as needed. In case you need company formation services in an Asian country, we reccommend our partners from CompanyFormationTaiwan.com.
Reasons to open a company in Denmark
Foreign investors are allowed to have full ownership and control over any type of company in Denmark they choose to incorporate. This, combined with a number of other advantages listed below by our agents, makes the country a suitable location to base a Nordic office.
The main reasons why Denmark is attractive for company formation purposes are:
- no residency requirements: there is no need for the company founders, its managers or directors or board members to be Danish residents;
- easy formation: as previously mentioned, investors can easily open a company online; moreover, the rules on the language in which the corporate documents may be registered is quite flexible as these documents can be filed in Swedish or Norwegian; more information on this can be provided on request by our team of Danish company formation agents;
- online administration: the required shareholder and board meetings can take place online;
- less documents: there is no need to draw up notarial deeds when opening a company – a requirement that is still present in other jurisdictions;
- tax advantages: apart from the overall attractive taxation regime compared to other Nordic countries, dividends can be distributed after the first financial year, on an interim basis.
Denmark offers numerous business opportunities in many different business fields, some of them well-established, other fast-growing and promising. Some examples are listed below for those who consider opening one of the types of companies in Denmark:
Maritime: with a long-standing tradition for seafaring, Denmark continues to offer opportunities for those interested in maritime shipping and the development of the maritime industry;
Transport and logistics: closely linked to Denmark’s favorable position in Europe and its ports, investors can explore business opportunities in the transport and logistics sector;
Manufacturing: product development and optimization is closely liked with advanced and sustainable technologies;
Research and development: Denmark is a favorable location for innovative companies involved in research and development; projects abound, from clean tech to food technology;
Services: Denmark can serve as the Nordic headquarters for a services company; moreover, the international workforce and the flexible business conditions are important advantages;
Other opportunities: the life sciences and food sector also offer business opportunities; design companies can also benefit from setting up in this country.
These are some examples of business areas that may be of interest to foreign investors in Denmark. Opening a regional head office in Denmark presents opportunities for expanding to the Nordic countries while remaining close to other European capitals. In most of these cases, when a foreign company chooses to set up a distribution center or headquarters, the operations will be conducted through a Danish ApS company or A/S company, depending on the size of the operations. However, for in some cases, foreign companies might benefit from setting up a branch office, as described above.
According to Statistics Denmark, most companies activate in the trade and transport sector. In 2018, the data showed the following numbers:
- 67,121 enterprises in the trade and transport sector;
- 55,923 in other business services;
- 33,306 in construction and 29,654 in real estate;
- 26,217 companies in agriculture, forestry and fishing.
Most companies were small or medium-sized, having below 10 employees, most of which were men. In terms of size, the following category in terms of total enterprises included companies with 10 to 49 employees (again, most of them were men). As expected, the industry in which the largest employers activated was also trade and transport, followed by other business services. At the end of November 2019, the data showed that 74,914 employees were working in the trade and transport sectors.
The Ministry of Foreign Affairs supports foreign investments through its dedicated investment agency. Denmark is not only a good location to open a business for logistics purposes or for ease of doing business (as per the World-Bank report 2012-2019) but it is also a country where foreign investors can enjoy a good work-life balance and where they will find it easy to communicate with business partners as it is estimated that 9 out of 10 people in Denmark speak English. The labor market is flexible and the pool of talented workers is significant, with options to hire both Danish employees and foreign nationals who have come to the country specifically for employment opportunities.
Company formation in Denmark is simplified for all available types of companies, however, we do still recommend that investors seek personalized assistance from one of our incorporation agents before they begin the process. Whether you are looking for pre-incorporation or post-incorporation information, our team can guide you throughout the process.
David Nikolaj Rachat-Nielsen is our expert in company formation matters in Denmark. He is the director of Lou Advokater and he is specialized in corporate law.
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