Setting Up a Sole Proprietorship in Denmark: A Complete Guide

Denmark is regarded as a nation with high values and ethics besides the excellent quality of life and scenic beauty. When it comes to investments and business as well, Denmark is a good option. 

The country is a free-market economy and follows a capitalist model. It comes with a secure social welfare net for citizens and ranks among the best locations for setting up a business. Almost no corruption, a trustworthy workforce, and transparency of work processes make operations smooth in Denmark. You can easily connect with government agencies and benefit from the tax structure. The business environment is safe here, and the country offers a well-educated labor force.

The Kingdom of Denmark has one of the most stable and robust economies in Europe. Besides this, technology and innovation thrive here. The World Bank’s ‘Ease of Doing Business Index’ ranks Denmark among the top five positions regarding starting a business, protecting minority businesses, and paying taxes. Thanks to the ease of completing legal procedures, low employer costs, and affordable company tax rates, establishing a business or sole proprietorship in the country is hassle-free.

Setting up a sole proprietorship in Denmark can benefit you when expanding your business globally. Read up on the process to register a sole proprietorship in Denmark, along with related considerations. 

Who can be a Sole Proprietor in Denmark

A sole proprietorship is an entrepreneurial setup that forms a single-owner company. The structure is typical, with an individual being a sole owner regarding business rights, decision-making, and enjoying profits. 

It is a simple business form in Denmark, without extra hassles of formalities involved with another form of company. However, setting up a sole proprietorship in Denmark allows owners to hire staff as per needs. 

Anyone can set up a sole proprietorship in Denmark, regardless of nationality. Foreign citizens in Denmark can also choose to establish a sole proprietorship in the country with proper documentation. Freelancers and entrepreneurs generally decide to operate under this company type. 

Benefits of Sole Proprietorship in Denmark

Setting up a sole proprietorship in Denmark offers umpteen benefits to the sole proprietor or owner. A few of these are as follows:

• Individual owners or sole proprietors enjoy unlimited liability.
• Sole proprietors in Denmark do not come under the purview of double taxation. 
• Sole proprietorships in Denmark do not come with any base or initial investment mandate.
• The owner can enjoy all profits thanks to zero legal separation of the proprietor from the related business.

Documents Required for Registering Your Business in Denmark

The documents you need to register a sole proprietorship in Denmark are listed below-

• Identity proof
• Local residence (not mandatory) and original residence proof
• As an individual owner, you need the Civic Registration (CPR) Number 

Other Criteria for Registering a Sole Proprietorship in Denmark

You must consider the following pointers to establish a sole proprietorship in Denmark. 

• No specific needs around start-up capital, subscriptions, or structure-related fees apply to such a business.
• The proprietorship can begin business activity immediately after registration.
• Make sure to keep the maintenance of accounting in business in place.
• There is no need for annual report filing.
• There is no mandate regarding the company seal.

Post-registration compliances 

• Registration means that you are entered into the Danish Company database.
• Register for the Civic Registration Number at the outset.
• The proprietor must register for income tax and social security.

Hiring employees is allowed if the proprietorship operates as a sole owner company or ENKELTMANDSVIRKSOMHED. If it operates as a small business, hiring employees isn’t allowed.

Taxation

• Sole traders don’t pay corporate taxes. 
• The company owner pays only income tax based on individual profits. 
• The company format is easier to register, and the owner is exempted from VAT if the annual turnover is less than 50,000 DKK.
• Businesses having turnover higher than 50,000 DKK must register for VAT. As per the general rate for VAT in Denmark, the applicable figure is 25%.

How to Establish a Sole Proprietorship Company in Denmark?

Here’s how to register a sole proprietorship in Denmark:

Step 1- Company naming

• You need to choose a company name and ensure it does not match any other existing business name.

Step 2- NemID signature

• Obtain the NemID online at nemid.nu. This is the newer substitute for Digital Signature.

Step 3- Registration

• Register the proprietorship with DBA or the Danish Business Authority using the Webreg system. DBA provides a single centralized service related to all business and tax registration work. 
• Complete the registration form and submit the same electronically, along with the proprietorship details. 

• You will receive a registration receipt via email, stating the unique business identification number or CVR, along with confirmation that registration can be seen at cvr.dk. The National Gazette is published here electronically. 

Conclusion

Sole proprietorships in Denmark have minimal specific requirements. Payroll management might be challenging as you open a business and hire in the country. In this context, Multiplier is the right bet for sole proprietors. 

Multiplier is a global employment solution for companies planning to expand their business. It offers reliable EOR solutions to ease your management process of international employees. You can easily utilize our payroll services and manage freelancer payments with just one click.