What type of company?

In order to do any type of business in Sweden, you need to register a company. There are different types of company that you can register. The requirements for registration, taxation rules, board composition, changes, way of making decisions, expenses, responsibilities and some other parameters are different in different types of companies. The wisest choice about what type of company you should register can be made after you prepare your business plan. Here we shortly explain the major differences between the most common types of companies which you can register.

We highly suggest that you study in details the properties and differences of companies before you actually register one because after registration, it may take you some time and include expenses to close and drop it. (Registered companies can change their form under specific circumstances

 

1. Sole Trader (in Swedish Enskild Näringsverksamhet or Enskild Firma):

The most common type of company in Sweden for entrepreneurs who want to run their business alone. If you are planning to run your own business, have no partners and have the full ownership, maybe this would be your choice. 

  • A sole trader company is not a legal entity. The organisation number of your company will be the same as your social security number. However, you can still select a name for your company and register it.
  • You, as an sole trader, are personally responsible for all the obligations of the company, such as debts and agreements that you sign and enter into. For example, it is you as a person not the company who rents an office space or takes part in a court process. It also means that you have to pay the company's debts if the company's money is not enough. Part of the personal risk in this type of company can be reduced by providing a business insurance. 
  • A sole trader may have employees. When you hire someone for the first time, you must register your sole trader company as an employer at the Swedish Tax Agency.
  • It is not mandatory for sole traders to hire an accountant but, all sole trader companies should have and deliver their accounts periodically as the others.
  • You can have multiple types of activities in your sole trader. For example you can be a carpenter, an electrician and a musician at the same time. But the accounting for all your activities should be reported together since they all relate to a single person.

 

 

2. Limited Liability Company or .LLC (in Swedish Aktiebolag):

A limited liability company can be started by one or more individuals and/or legal entities. When starting a limited company, you must have a share capital. Personal responsibility for the company's debts is in principle limited to the share capital. However, there are situations where you personally can be held responsible for unpaid taxes and contributions, etc. 

  • Limited liability company is a legal entity.
  • When you start a limited company you must have at least 50,000 SEK in share capital. The share capital corresponds to a number of shares (equities) that the shareholders have as proof of their ownership in the company. The share capital may consist of cash or property that is beneficial to the business. Property which in Swedish is called apportegendom (for example an apartment or a car) should be valued by the an auditor before you can use it as starting investment.
  • The company is represented by a Board and, in some cases, an Executive Director (CEO). The Board may consist of one or two members with at least one deputy member OR three members with or without deputies. Keep in mind that it may be good for the company to have a board of experienced people with different knowledge and business contacts.
  • The CEO is selected by the Board.
  • Shareholders' ability to control and have influence in company is done by selecting the company's board members and the auditor during the Annual General Meeting and drawing up the guidelines for the business.
  • Small limited companies may choose not to have an accountant. However, regardless of whether the company has an accountant or not, you should revise the accounts once a year. The auditor shall also examine the company's accounts, as well as the board of directors and the CEO. 

 

3. Trading Partnership (in Swedish Handelsbolag):

A trading partnership is an alternative if at least two individuals or legal entities wish to start a business together. There is no requirement to invest capital, although the partners are personally, jointly and severally liable for the company's debts.

  • Trading partnership company is a legal entity.
  • In a partnership are the partners are always personally and jointly liable to third parties and it can never be excluded. Personal responsibility means that corporate executives are responsible for the company's debts and entered agreements through their private economy. Joint liability means that each of the partners in person can be forced to pay all the debts. The person who has paid may in turn require the other members' shares for their debt.
  • It is not a requirement but, it is good to sign a Partnership Agreement. In the partnership agreement you write down everything that you have agreed. The partnership agreement can, for example, regulate how to distribute the profits or how to do if a partner wants to leave the company.
  • A trading company can have employees. When hiring someone in a trading company, you accept certain obligations and therefore it may be useful to think a little bit more of personal responsibility. The shareholders are not counted as employees.
  • Trading companies need in most cases not to have an accountant but all trading companies are subject to accounting.

 

 

4. Economic Association (in Swedish Ekonomisk Förening):

Creating an economic association is an option if you are at least three people who want to run business together. An economic association shall promote members' financial interests. This means that members will receive a financial exchange of participation in the association. For example, it may be an employment, a better price or a lower cost. The association can also promote interests other than purely economic, as long as the economic interest dominates. Housing associations and cooperatives are examples of economic associations.

  • Both legal entities and individuals may be members of an economic association and at least three members are required.
  • An important principle is open membership. Members pay membership and decide on basic rules that will apply to the association. The amount of the payment for each member may vary from 1 SEK to upwards. The membership fee is decided and set by the association.
  • In the Statute (in Swedish stadgar), open membership policy can be restricted. Acceptable restrictions are, for example, employees of the association, certain occupational group, consumer of a particular service, resident in a particular area or other geographical constraint.
  • An economic association must have statutes. The statutes are the basic rules of the association. It is the Annual General Meeting (AGM) that decides on the statutes. They should include information about the association's name, purpose and activities. The statutes also contain rules relating to the AGM, when it is to be held and what matters are to be recorded at the AGM.
  • Every year, the Annual General Meeting is held. At the meeting, members decide on the affairs of the association. At the AGM, each member has one vote, irrespective of the amount of investment but exceptions may be made in the statute of the association. At this meeting, members also appoint the board and the auditor.
  • The association's board of directors, consisting of at least three people, represents the association and is responsible for its ongoing activities. The Board may, in turn, designate other persons, such as an Executive Director, who may represent the financial association. As a director and representative, you are liable for damage which you intentionally or negligently cause the association.

 

5. Non-profit Association (in Swedish Ideell Förening):

A nonprofit organisation is formed by at least three people determining purpose and name. It is for nonprofit purposes or pursues non-profit activities like working for members' rights, interests or for public purposes such as counteract poverty. An non-profit association must not have the purpose of promoting members' financial interests by pursuing business activities. An non-profit association is always open for new members who share the association's goals. They do not need to contribute to a capital or investment but, it is common for a membership fee to be charged.

 

Please note that these are just some important parameters in a few different types of companies which you can register in Sweden. To read about all types of companies with all the details, you need to visit the Company Registration Agency of Sweden (Bolagsverket) in www.bolagsverket.se

 

 

Quick Overview: Click here to see a quick overview table including main parameters and differences between different types of companies in Sweden as a PDF file (opens in new window). 

 

 

 

 

 
(Extracted from multiple resources. Last updated on 2018-04-10)
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