12 February 2020 Article

Sole trader or private limited company?

Since January 2020, the minimum permitted share capital required to start a private limited company is reduced to SEK 25,000. Should you continue running your business a sole trader or perhaps start a private limited company? Ulf Karnell, Head of Communications at the Swedish Companies Registration Office, knows what you ought to think about before you decide. 

Hi there, Ulf Karnell, Head of Communications at Bolagsverket (the Swedish Companies Registration Office). On November 28th, 2019, the Swedish Parliament decided to reduce the minimum permitted share capital in private limited companies to SEK 25,000. The change is effective as of January 2020. Have you seen any effects as a result of this change yet?

– In January the number of new private limited companies increased by 2.7 percent in our register. The recent changes in minimum permitted share capital might have had an effect, but on the other hand the number of new sole traders also increased. It’s too early to say for sure, you have to analyze the facts and figures for a longer period of time.

Besides the minimum permitted share capital sum of SEK 25,000, are there any other costs connected to starting a private limited company?

– Besides the registration fee, that depends on what type of business you’re in. If you need permits, if you need to hire professional advisors of any sort, if you want to register a trademark and so on. 

When starting a private limited company, 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, et cetera.

Running a private limited company differs from being a sole trader. One can presume that many sole traders now will change into a private limited company instead. What are the biggest differences one ought to be aware of before initiating such a change?

– A limited company can be started by one or more individuals. When starting a limited company, you must have at least SEK 25,000 in share capital, and personal responsibility for the company’s debts is in principle limited to the share capital. 

Sole trader may be appropriate if you are going to start a business on your own. As a sole trader you are personally responsible for all the company’s obligations, such as liabilities and agreements. You can read more about different business types here: https://www.verksamt.se/en/web/international/considering/business-types

Anything else you would like to add?

– Focus on your business idea, plan your start well and seek advice before you go on to the actual registration process. I would also recommend a visit to verksamt.se – with government services for businesses, and also some other websites for further information:

https://www.verksamt.se/en/web/international/home

https://bolagsverket.se/en/bus/business

https://www.verksamt.se/web/international/starting/moving-to-sweden-to-start-a-business/brochures

https://www.nyforetagarcentrum.com/enterprise-agenciesnyforetagarcentrum/about-swedish-jobs-and-society/

Thank you Ulf! 

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