How to open a company in denmark

Discover how to quickly open a company in Denmark and tap into the European market.

Expanding your business internationally is a significant step, and choosing the right location is crucial. Denmark stands out as an ideal destination for this expansion. Denmark offers numerous advantages for entrepreneurs and established companies because of its robust economy, strategic location within Europe, and exceptional quality of life. This blog post will walk you through everything from understanding the different types of business entities to steps to open a company in Denmark and how you can comply with legal and tax obligations.

Why Choose Denmark for Your Business?

Business-Friendly Environment

Denmark consistently ranks high in terms of global ease of doing business reports. This is mainly due to its transparent regulatory environment, efficient public administration, and robust legal framework. The Danish government actively supports businesses through various initiatives, grants, and incentives, making it easier for companies to set up and thrive. Additionally, Denmark boasts a stable economy and political climate, providing a secure foundation for your business operations. The streamlined processes for company registration and the minimal bureaucratic hurdles make Denmark a beautiful destination for business.

Strategic Location

Denmark’s geographical location makes it an ideal gateway to the European market. With excellent infrastructure and logistics, including well-developed road, rail, and air transport networks, Denmark allows for the efficient distribution of goods and services throughout Europe. The country’s ports are among the most modern and efficient in the world, facilitating smooth international trade. Being part of the EU, Denmark provides access to a market of over 500 million consumers, offering immense opportunities for growth and expansion.

Quality of Life

Denmark is renowned for its high standard of living and attractive work-life balance. The country offers excellent healthcare, education, and social security systems, ensuring you and your employees a high quality of life. The Danish culture emphasises collaboration, innovation, and sustainability, creating a positive and productive work environment. This not only helps attract top talent but also ensures a motivated and satisfied workforce, which is crucial for the success of any business.

Types of Business Entities in Denmark

Limited Liability Company (ApS)

A Limited Liability Company, or ApS, is famous for small to medium-sized businesses in Denmark. This entity provides limited liability protection to its shareholders, meaning their assets are not at risk if the company faces financial difficulties. An ApS requires a minimum capital of DKK 40,000. This structure is ideal for businesses that must protect their owners from personal liability while maintaining flexibility in management and operations. The ApS structure allows for a more straightforward setup and lower initial capital requirements than other business forms.

Public Limited Company (A/S)

A Public Limited Company, or A/S, is suitable for larger enterprises and those planning to list on the stock exchange. This entity also offers limited liability protection to its shareholders. Establishing an A/S requires a minimum capital of DKK 400,000. The governance structure of an A/S includes a board of directors and an executive board, ensuring a higher level of corporate governance. This type of company is ideal for businesses anticipating significant growth and public investment. The A/S structure supports larger-scale operations and provides a robust corporate governance and investor relations framework.

Sole Proprietorship

A sole proprietorship is the simplest business structure suitable for individual entrepreneurs. This entity is easy to set up and operate, with minimal regulatory requirements. However, the owner is personally liable for all business debts and obligations. This structure best suits small businesses or freelance professionals who prefer to control their operations completely. It is an excellent starting point for individuals who want to test their business idea with low initial costs and straightforward management.

Branch Office

A branch office allows an existing foreign company to establish a presence in Denmark. This entity is not a separate legal entity but operates as an extension of the parent company. Setting up a branch office requires registration with the Danish Business Authority and compliance with Danish regulations. This option is ideal for businesses expanding into Denmark without creating a separate legal entity. It allows companies to maintain control over their Danish operations while leveraging the brand and resources of the parent company.

Representative Office

A representative office is used primarily for market research and establishing an initial presence in Denmark. This entity cannot engage in commercial activities or generate revenue. It serves as a liaison between the parent company and the Danish market. Setting up a representative office is relatively simple and does not require significant investment, making it a good option for businesses testing the market before committing to full-scale operations. It is an effective way to gather market insights and build local relationships before fully entering the Danish market.

Steps to Open a Company in Denmark

Step 1. Choose a Company Name

The first step in the registration process is selecting a unique and compliant company name. The name must differ from existing company names and comply with Danish naming regulations. It is advisable to check the availability of your chosen name through the Danish Business Authority’s online database to avoid potential conflicts. Ensuring your company name is unique and reflects your brand identity is crucial for building a strong market presence.

Step 2. Prepare Necessary Documents

Before registering your company, you must gather and prepare several documents. These typically include the company’s articles of association, which outline the company’s purpose, structure, and operating procedures. You will also need identification documents for the company’s founders and directors, proof of the initial capital deposit, and any relevant permits or licenses required for your business activities. Having all your documentation in order ensures a smooth and efficient registration process.

Step 3. Register with the Danish Business Authority

Your company’s official registration is done through the Danish Business Authority (Erhvervsstyrelsen). This process involves submitting the necessary documents and information, such as the company’s name, address, and details of its owners and directors. Upon approval, your company will be issued a CVR number, the unique identification number for businesses in Denmark. This number is used for all official communications and transactions. The registration process is streamlined and can often be completed online, making it convenient for entrepreneurs.

Step 4. Open a Bank Account

Once your company is registered, the next step is to open a business bank account in Denmark. This account is necessary for managing your company’s finances, including receiving payments and paying expenses. Most Danish banks offer specialised services for new businesses, providing tailored financial solutions and support. You need your CVR number and company registration documents to open an account. A local bank account facilitates financial transactions and ensures compliance with Danish financial regulations.

Step 5. Register for Taxes and VAT

All businesses in Denmark must register for taxes and, if applicable, VAT (Value Added Tax). This process is also handled through the Danish Business Authority. You must provide information about your business activities, estimated turnover, and other relevant details. Registering for VAT is mandatory if your company’s annual turnover exceeds a certain threshold. Compliance with tax and VAT regulations is crucial to avoid penalties and ensure smooth business operations. Understanding the tax obligations and managing them effectively is essential for the financial health of your business.

Legal and Regulatory Requirements

Employment Laws

Denmark has comprehensive employment laws designed to protect both employees and employers. These laws cover various aspects of employment, including contracts, working hours, wages, and workplace safety. Familiarising yourself with these regulations is essential to ensure compliance and create a fair and productive work environment. Adhering to employment laws ensures legal compliance and helps build a positive reputation as an employer.

Intellectual Property Protection

Protecting your intellectual property (IP) is essential for safeguarding your business assets and maintaining a competitive edge. Denmark offers robust IP protection through patents, trademarks, copyrights, and designs. Registering your IP with the relevant authorities will help prevent unauthorised use and provide legal recourse in case of infringement. Protecting your IP is crucial for maintaining your business’s unique value propositions and competitive advantage.

Annual Reporting and Compliance

Danish companies are required to submit annual financial reports to the Danish Business Authority. These reports provide an overview of the company’s financial performance and ensure transparency and accountability. In addition to annual reporting, companies must comply with various regulatory requirements, such as tax filings, VAT returns, and employment law obligations. Staying up-to-date with these requirements is crucial for maintaining good standing and avoiding penalties. Regular compliance ensures the long-term sustainability and reputation of your business.

Financial and Tax Considerations

Opening a Business Bank Account

A business bank account is essential for managing your company’s finances effectively. It allows you to separate personal and business transactions, making it easier to track income and expenses. Danish banks offer a range of financial services tailored to the needs of new companies, including loans, credit lines, and online banking solutions. Opening a business bank account requires your CVR number and company registration documents. A dedicated business bank account simplifies financial management and ensures compliance with financial regulations.

Tax Registration and Compliance

Understanding and complying with Danish tax regulations is crucial for your business’s success. All companies in Denmark must register for corporate tax and, if applicable, VAT. Corporate tax rates in Denmark are competitive, and various deductions and allowances are available to reduce your tax burden. Working with a local accountant or tax advisor is advisable to ensure compliance and optimise your tax strategy. Effective tax management can significantly impact your business’s profitability and sustainability.

VAT Requirements

If your company’s annual turnover exceeds a certain threshold, you must register for VAT. This involves charging VAT on your sales and paying VAT on your purchases. The standard VAT rate in Denmark is 25%, but reduced rates apply to certain goods and services. Properly managing your VAT obligations is essential to avoid penalties and ensure smooth business operations. Understanding VAT requirements and integrating them into your pricing and accounting systems is critical for maintaining financial compliance.

Support and Resources for New Businesses

Government Programs

The Danish government offers various programs and initiatives to support new businesses. These include grants, subsidies, and incentives to foster innovation and growth. For instance, the Innovation Fund Denmark funds research and development projects that drive technological advancement and innovation. Additionally, programs like Vækstfonden (the Danish Growth Fund) offer financial support and investment to startups and small businesses. Participating in these programs can provide valuable financial assistance and help you navigate the challenges of starting a business in Denmark.

Business Networks and Mentorship

Connecting with other entrepreneurs and business professionals can provide valuable insights and support. Denmark has a vibrant business community with numerous networking events, conferences, and industry associations. Organisations such as the Danish Chamber of Commerce and the Confederation of Danish Industry offer platforms for networking, sharing knowledge, and collaborating on business initiatives. Joining these networks can help you build relationships, gain knowledge, and find mentorship opportunities to guide you through the early stages of your business. Mentorship programs, such as those offered by Startup Denmark, provide access to experienced entrepreneurs who can offer advice, support, and industry connections.

Funding Options

Securing funding is a critical aspect of starting a business. In Denmark, various funding options are available, including government grants, loans, venture capital, and angel investors. For instance, Innovation Fund Denmark and the Danish Growth Fund provide grants and equity investments to innovative startups. Additionally, venture capital firms and angel investors are actively looking to invest in promising businesses with high growth potential. Exploring these options can provide the financial resources needed to launch and grow your business. Developing a solid business plan and pitch to attract potential investors and secure funding is essential. Moreover, crowdfunding platforms are also gaining popularity as an alternative funding source, allowing entrepreneurs to raise capital from many small investors.

FAQs

How much does it cost to set up a company in Denmark?

The cost to set up a company in Denmark varies by entity type. A Limited Liability Company (ApS) requires a minimum capital of DKK 40,000, while a Public Limited Company (A/S) requires DKK 400,000. Additional costs include registration fees (around DKK 670-750), legal fees, and administrative expenses. Total costs will vary based on specific business needs.

Can a foreigner start a business in Denmark?

Yes, foreigners can start a business in Denmark. Citizens of EU/EEA countries do not need a work permit, but non-EU/EEA citizens will need to apply for one. The Start-up Denmark program offers work and residence permits to talented entrepreneurs from outside the EU/EEA. Denmark provides a supportive environment for foreign entrepreneurs.

How to set up a Danish company?

To set up a Danish company, choose a unique company name and prepare necessary documents, including articles of association and identification for founders. Register with the Danish Business Authority to obtain a CVR number. Open a business bank account and register for taxes and VAT. Ensure compliance with Danish legal and regulatory requirements.

Is Denmark good for starting a business?

Yes, Denmark is excellent for starting a business, offering a business-friendly environment, strategic European location, and high quality of life. The country provides robust infrastructure, efficient public administration, and strong legal protections. Government support programs and incentives make it easier for entrepreneurs to succeed. Denmark’s high standard of living attracts and retains top talent.

How long does it take to register a company in Denmark?

Registering a company in Denmark typically takes a few days to a couple of weeks. The process includes preparing documents, submitting them to the Danish Business Authority, and obtaining a CVR number. Approval is usually quick if all documentation is correct. Opening a business bank account may take a few additional days.