Private Limited Company (ApS)
A private limited company (abbreviated as “ApS”) is a popular business structure for many entrepreneurs, partly because, as an owner, your liability for the company’s activities is limited. Limited liability in connection with an ApS means that, as an owner, you are only liable for the capital you have invested in the company. This means that you, as an owner, are not personally liable for any debts incurred by the company with your personal assets.
Embarking on an entrepreneurial journey introduces a whole new world of disciplines that you, as a business owner, must address and, in many ways, become a generalist in. One of these disciplines is legal matters. For many, law feels like a foreign language, and understanding legal texts and regulations can be challenging. This article will guide you through the essential steps and considerations when establishing your private limited company.
Capital Requirements:
An ApS requires a minimum capital to be established. In Denmark, this amount is set at DKK 20,000. Therefore, the first step is to ensure that you can provide this amount. It is also possible to contribute non-cash assets, known as an “in-kind contribution.” For example, an asset can be contributed as company capital, but this requires a valuation report prepared by a qualified auditor.
Choosing a Name:
Choosing an appropriate name for your ApS is crucial. Under Danish law, the company’s name must be unique and not easily confused with existing company names. It must also not infringe on the names, trademarks, or other rights of others.
You can check the availability of names with the Danish Business Authority to ensure your desired name is available. Additionally, you can search for terms included in your desired company name with the Danish Patent and Trademark Office to avoid infringing on others’ rights.
Furthermore, it is a requirement that the name includes “ApS” or “private limited company” when establishing a private limited company.
Memorandum of Association:
To establish an ApS, you must prepare a memorandum of association, which must include information about the company’s founders, the subscription price of the capital shares, and any special rights or benefits granted to the founders or others. This document must be signed by all founders and submitted to the Danish Business Authority along with other required information.
Articles of Association:
The articles of association are a legal document that sets out the company’s rules and structure. They can be viewed as the company’s internal “law.” It is essential to draft clear articles that cover all aspects of the company’s operation, including the company’s name, purpose, share capital size and distribution, management structure, procedures for general meetings, and the company’s financial year.
The articles establish the company’s legal framework, ensuring clarity and coherence within the company.
Regarding the management structure, it is worth noting that there is no requirement for a board of directors in an ApS, as there is in public limited companies. The management of an ApS can consist of just one director or multiple members of the executive board.
Registration with the Danish Business Authority:
Once the above steps are complete, you must register your ApS with the Danish Business Authority. You need to submit the memorandum of association, including the articles of association—either as part of the document or as an attachment. Registration can be done electronically via the Danish Business Authority’s online portal.
Tax Obligations:
As an ApS owner, it is essential to be aware of your tax obligations. You must register your company for VAT and potentially other taxes, depending on your business activities. It is recommended to consult an accountant or tax expert to ensure compliance with all relevant tax rules for you and your company.
Employment Relations:
If your ApS employs staff, you must comply with employment laws and remember to take out the mandatory occupational injury insurance. You must adhere to rules regarding wages, working hours, holidays, and other employment conditions. Seeking legal advice or consulting an HR expert is a good idea to ensure compliance with labour laws.
Annual Reporting and Other Obligations:
As a registered company, you must meet certain annual reporting requirements. This includes submitting annual accounts and other information to the Danish Business Authority and the Danish Tax Agency. It is vital to be aware of these obligations and ensure timely compliance. Failure to comply may result in sanctions from public authorities against the company or those managing it.
Advice:
Establishing and running an ApS can be complex, especially if you are unfamiliar with business law and tax regulations. Seeking professional advice from a legal advisor or accountant with expertise in business law can help ensure that you make the right decisions and comply with all relevant rules and regulations.
Establishing a private limited company can be an exciting and rewarding process for entrepreneurs and startups. By paying attention to the above points and seeking relevant advice, you can minimise the risk of mistakes and ensure a solid foundation for your ApS.
Be patient, carefully go through the process, and take the time to address all necessary legal and tax aspects. With the right preparation and assistance, you can position your ApS for success and growth, laying a stable foundation for your entrepreneurial journey.
This article does not constitute and cannot replace legal advice. Raadgiver.dk ApS assumes no liability for any damage or loss, directly or indirectly, attributable to the use of the information provided in the article.
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Do you have questions about the establishment of limited liability companies? Or if you have other commercial legal issues, you are more than welcome to contact us.
