Company Formation in Denmark
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Denmark Company Formation
So you've decided to start a business in Denmark and researched your market. Now it's time to decide how you will register and set up a business in Denmark. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?
Here are your typical options when expanding a business into Denmark:
This type of business is set up and carried out by a sole proprietor and is commonly used by small businesses when starting a business in Denmark. It is the simplest way to set up a new business as there is little formal filling and requirements when expanding a business in Denmark. They are able to trade once they have the correct local permits. Unfortunately the owner is subject to unlimited liability and should there be debt on the company the owner own personal assets are at risk.
Partnerships that are formed when starting up a business in Denmark break down into three sections
General Partnerships Whether as two individuals or as legal entities, a general partnership is a contract of association in order to operate a business based on commercial principles. It must be registered in the register of commence. As part of a general partnership business it can incur liabilities, be sued and take legal action; however it does not have its own legal personality. Each partner is subject to tax, and is personally liable for any business debts. This means if a debt occurs they will be responsible to pay that back with their own assets.
A Limited Partnership Once again this type of partnership has two kinds of partner. Each partner is taxable and it must also be registered in register of commence. However in this case only one partner is will be personally liable for the business debts, and without limitation. The other partner will only be liable for to the extent of their capital contribution i.e. the amount of money they have invested in the business.
The Civil Law Partnership this is a partnership of two or more partners who combined their funds for a common purpose. This is not entered in the register of commence, however partners are still liable for taxation and are also liable with their own personal assets if any business debts should occur. This type of partnership is commonly used by businesses such as law firms as the partners of the civil law partnership represent themselves to third parties.
Public Limited Company
A Public Limited Company - this can be formed by one or more person, with at least one being a resident of Denmark, an EU national resident in another member state or a resident of an EEA country.
A Private Limited Company
A Private Limited Company - this only requires one person to set up and who need not be a resident of Denmark. This type of company is suited to businesses that have only a few proprietors and can have an unlimited number of shareholders.
Limited Liability Cooperative
When starting a business in Denmark this type of business is set up by three or more people, who contribute a fixed amount financially to the business in return for shares. The liability is limited to the amount that is contributed. Often suitable for SMEs and family run businesses.
There are certain conditions to this type of business and are highlighted below:
a fixed part must be fully paid
a variable part, depending on the partners joining or departing
There must be a fixed amount of capital paid.
It is made up of:
Three or more shareholders
One or more manager directors, who run the business.
Licensing in Denmark is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:
Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.
Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.
Patent License - The allowance of another party to use your patented product, design or process.
Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.
Franchising In Denmark
Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.
The benefits of franchising your business in Denmark include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.
Disadvantages of franchising a business in Denmark: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.
Franchising, like in many EU countries is relatively straightforward and there are a wide range of franchises you may consider. The Danish Franchise Association can help with possible advice.