Step-by-step guide to open a company in Denmark
Denmark ranks among the top 10 easiest countries to do business globally, offering a corporate tax rate of just 22% and a business-friendly environment with minimal bureaucracy. With over 330,000 active companies registered in the country, it’s clear that entrepreneurs find Denmark an ideal location to start their ventures. Whether you’re looking to establish a small sole proprietorship or a large public limited company, Denmark’s streamlined processes make it efficient to get started. In this blog post, we will learn how to open a company in Denmark.
Choosing the right business structure
Choosing the right business structure is the foundation of opening a company in Denmark. Denmark offers various legal structures to accommodate businesses of different sizes and requirements. These include private limited liability companies (ApS), public limited liability companies (A/S), sole proprietorships, and partnerships.
Private limited liability company (ApS)
The private limited liability company (ApS) is one of Denmark’s most popular business structures. It is suitable for small to medium-sized enterprises looking to limit personal liability. An ApS requires a minimum share capital of DKK 40,000, and the liability of its shareholders is limited to their contribution. This structure allows flexibility in terms of management, making it appealing for growing businesses.
Public limited liability company (A/S)
The public limited liability company (A/S) is ideal for larger enterprises planning to raise substantial capital through public offerings. It requires a minimum share capital of DKK 400,000. The A/S structure is governed by strict regulations, including the necessity of having a board of directors and a management board. This structure is typically chosen by companies intending to operate at a larger scale.
Sole proprietorship
For individual entrepreneurs, sole proprietorship is a straightforward option. It has no minimum capital requirements, making it an accessible choice for those starting small-scale businesses. However, the owner bears unlimited personal liability for the company’s debts, which is a critical consideration.
Partnerships
Denmark also offers partnership structures, including general partnerships (I/S) and limited partnerships (K/S). All partners share unlimited liability in general partnerships, while in limited partnerships, one or more partners have limited liability based on their contributions. Partnerships are typically governed by a partnership agreement outlining the partners’ roles, responsibilities, and profit-sharing mechanisms.
When choosing a business structure, factors such as liability, minimum capital requirements, administrative complexity, and long-term business goals should be carefully evaluated to align with your entrepreneurial aspirations.
Preparing documentation
Proper documentation is essential when setting up a company in Denmark. The required documents depend on the chosen business structure but generally include foundational and financial records.
Mandatory documents
For private limited liability companies (ApS) and public limited liability companies (A/S), the articles of association and the memorandum of association are mandatory. The articles of association define the company’s governance structure, voting rights, and shareholder responsibilities. Meanwhile, the memorandum of association outlines the company’s establishment, including its objectives, share capital, and founding members.
Additionally, proof of share capital payment is required for limited liability companies. This demonstrates that the minimum capital has been deposited into the company’s bank account or an attorney’s escrow account.
Additional documents for branches or foreign entities
Foreign companies establishing branches in Denmark must provide official proof of legal establishment in their home country. This includes the statutes, the memorandum of association, and a proxy authorising the branch manager to act on behalf of the parent company.
Having these documents ready ensures a smooth registration process and compliance with Danish regulations.
Registering your company
Once the appropriate business structure is selected and the necessary documents are prepared, the next step is registering the company with the Danish authorities.
Central business register (CVR)
All businesses in Denmark must register with the Danish Business Authority to obtain a unique Central Business Register (CVR) number. This number is crucial for identifying the company in all legal, administrative, and financial matters. The registration process can be completed online through the Danish Business Authority’s portal, Virk.dk.
VAT and tax registration
Businesses with an annual turnover exceeding DKK 50,000 must register for Value Added Tax (VAT) with the Danish Tax Agency (SKAT). VAT registration is essential for issuing tax-compliant invoices and reclaiming VAT on purchases. Additionally, companies must register for corporate tax and comply with Danish tax regulations.
The registration process ensures that the business is legally recognised and compliant with tax obligations in Denmark.
Financial setup
Establishing a solid financial foundation is critical for the smooth operation of a business in Denmark. This involves ensuring sufficient share capital and setting up a business bank account.
Share capital requirements
For limited liability companies, depositing the minimum share capital is a prerequisite for registration. The required amount for an ApS is DKK 40,000, while an A/S requires DKK 400,000. The share capital must be deposited into a company bank account or an escrow account managed by a legal advisor.
Opening a business bank account
Opening a business bank account is crucial in setting up your company in Denmark. It is mandatory for managing financial operations and ensures compliance with Danish tax and legal regulations. A business bank account is essential for handling day-to-day transactions, tax payments, payroll, and other financial activities.
Preparing the required documents
To open a business bank account in Denmark, you need:
- CVR number: The Central Business Register (CVR) number is your company’s unique identifier and is mandatory for opening a bank account.
- Proof of identity: Banks require proof of identity from the company’s directors or authorised signatories. This usually includes a valid passport or national ID card.
- Articles of association: This document outlines the company’s governance structure, voting rights, and shareholder responsibilities and serves as proof of the company’s legitimacy.
- Memorandum of association: Banks sometimes request a memorandum of association to verify the company’s objectives and initial shareholders.
Choosing the right bank
Denmark has several banks offering business banking services, including Danske Bank, Nordea, and Jyske Bank. When selecting a bank:
- Compare monthly charges and transaction costs to find a cost-effective solution.
- Ensure the bank offers comprehensive digital tools for managing your account remotely.
- Check the availability of dedicated support for businesses.
The application process
Once you’ve gathered the required documents and selected a bank, the application process involves the following steps:
- Visit the bank in person or apply online through their business banking portal.
- The bank will review your documents to ensure compliance with regulatory requirements.
- Upon approval, the bank will provide account details, and you can begin using the account for your business transactions.
Extra requirements
Some banks may require a minimum deposit to open a business account. Additionally, if you are a foreign business owner, providing extra documentation, such as proof of residence or a Danish work permit, might be necessary.
Establishing these financial setups early ensures that the company operates smoothly.
Operational compliance
Compliance with Danish regulations is crucial for maintaining a business’s legality and smooth operation. Adhering to these requirements ensures the company operates within the legal framework, protects employees’ rights, and maintains stakeholder transparency. Below is a detailed look at Denmark’s key aspects of operational compliance.
Establishing a registered office
Every Denmark company must have a registered office address within the country. This address is the official location for receiving legal notices, administrative correspondence, and communication from government authorities.
The registered office must be a physical address in Denmark, not a P.O. box, representing the company’s presence in the country. Engaging a professional service provider to establish a registered office is a common practice for foreign entrepreneurs. This ensures that the address meets all regulatory requirements while providing a reliable point of contact for official communications.
Employment regulations
Compliance with Danish labour laws is mandatory for companies intending to hire employees. The key requirements include:
Written employment contracts
Employment contracts must be provided to all employees in writing and should detail essential terms, including salary, working hours, job responsibilities, and notice periods. This ensures transparency and protects the rights of both the employer and the employee.
Social security and pension contributions
Employers must contribute to social security schemes, which cover benefits such as health insurance, unemployment, and pensions. Contributions are calculated as a percentage of the employee’s salary and must be paid on time to avoid penalties.
Workplace regulations
Danish law emphasises workplace safety, equality, and employee well-being. Employers must ensure compliance with regulations related to health and safety, anti-discrimination policies, and fair treatment of all employees.
Understanding and adhering to these employment regulations not only ensures compliance but also helps build a positive workplace culture.
Annual filing and auditing
Annual reporting is a critical aspect of operational compliance in Denmark. Businesses are required to submit financial statements annually to the Danish Business Authority. These statements provide transparency about the company’s financial health and ensure stakeholder accountability.
Audit requirements
For certain companies, an audit of financial statements is mandatory. This applies to businesses meeting two of the following criteria:
- Annual turnover exceeding DKK 8 million.
- Balance sheet total over DKK 4 million.
- More than 12 full-time employees.
A certified auditor must conduct the audit to verify the accuracy of financial records and compliance with Danish accounting standards.
Failing to meet these compliance requirements can result in penalties, reputational damage, or even suspension of the company’s operations. By adhering to these standards, businesses maintain their legal standing and demonstrate professionalism and reliability to partners and clients.
Operational compliance in Denmark involves continuous attention to regulations and reporting standards. With proper planning and professional guidance, businesses can seamlessly integrate these practices into their operations, ensuring long-term success and sustainability.
Cost and timeline for opening a company in Denmark
| Step | Cost | Time required |
|---|---|---|
| Choosing the business structure | No direct cost | 1–2 days |
| Preparing documentation | DKK 0–5,000 (legal fees) | 3–7 days |
| Registering with Danish authorities | DKK 670 (registration fee) | 1–3 days |
| Depositing share capital | ApS: DKK 40,000; A/S: DKK 400,000 | Immediate upon registration |
| Registering for VAT and tax | No cost | 2–5 days |
| Opening a business bank account | DKK 0–1,500 (varies by bank) | 1–2 weeks |
| Establishing a registered office | DKK 5,000–15,000 annually | Immediate (ongoing cost) |
| Compliance with employment regulations | Variable (based on salaries) | Ongoing |
| Annual filing and auditing | DKK 10,000–50,000 (audit fees) | Annual |
Additional considerations to open a company in Denmark
When setting up a company in Denmark, additional factors must be considered, particularly for non-EU/EEA citizens, hiring employees, and leveraging professional advisors for legal and financial matters.
For non-EU/EEA citizens
Non-EU/EEA citizens must obtain a residence and work permit to start a business in Denmark. The Danish Agency for International Recruitment and Integration (SIRI) handles these applications. Applicants must demonstrate their business plan, financial resources, and potential economic contribution to the Danish economy.
The Start-up Denmark scheme is a dedicated programme for international entrepreneurs. This initiative allows non-EU/EEA citizens with innovative business ideas to obtain a work and residence permit. An independent expert panel must approve the business idea before the application can proceed.
Hiring employees
When hiring employees, companies must comply with Danish labour laws, ensuring fair treatment and workers’ benefits. Employers are required to provide written employment contracts outlining the terms and conditions of employment. These include salary, working hours, and notice periods.
Employers must also register with the Danish Labour Market Fund (ATP) and contribute to social security schemes covering pensions, health insurance, and unemployment benefits. Workplace safety and equality regulations must also be observed to ensure a positive working environment.
Utilising professional advisors
Engaging legal and financial professionals can significantly simplify setting up a company in Denmark. Lawyers and accountants familiar with Danish business regulations can assist in drafting necessary documents, ensuring compliance with tax laws, and navigating the registration process.
These professionals also provide valuable insights into optimising financial operations and minimising risks associated with running a business in Denmark. Their expertise can save time and resources, allowing entrepreneurs to focus on growing their business.
FAQs
Can a foreigner start a business in Denmark?
Yes, foreigners can start a business in Denmark. EU/EEA and Nordic citizens do not require a permit, while non-EU/EEA citizens need a residence and work permit. The Start-up Denmark programme supports non-EU/EEA entrepreneurs with innovative ideas. Registration is required with the Danish Business Authority, and having a Danish CVR number is mandatory. Professional guidance can simplify the process.
How much does it cost to open a company in Denmark?
The cost depends on the type of company. A private limited liability company (ApS) requires a minimum share capital of DKK 40,000, while a public limited liability company (A/S) needs DKK 400,000. Additional expenses include registration fees, legal and advisory services, and bank charges. Operational costs, such as renting a registered office, also apply.
Is Denmark startup-friendly?
Denmark is highly startup-friendly, ranking among the easiest countries to do business. It offers a supportive ecosystem with low corruption, efficient digital infrastructure, and government initiatives like Start-up Denmark. Entrepreneurs benefit from access to funding, innovation hubs, and a skilled workforce. The straightforward registration process further enhances its appeal.
How much is the Danish tax?
Denmark has a corporate tax rate of 22%, which is competitive in the EU. Value Added Tax (VAT) is 25% and applies to most goods and services. Employees are subject to progressive income tax, which can reach up to 55.9%. Employers must also contribute to social security schemes.
What is the 27% rule in Denmark?
The 27% rule in Denmark refers to a special tax scheme for foreign researchers and key employees. Eligible individuals can pay a flat income tax rate of 27% for up to seven years. This scheme is designed to attract skilled professionals and is subject to specific criteria and approval by Danish authorities.
