Are you planning to start your own business and are wondering which company to choose? Here you can read about the most practical forms of economic activity available and their advantages and disadvantages.
Basically, it is difficult to say which organizational form will be most suitable for a given person. The choice of organizational form should be carefully considered by the entrepreneur before opening the company. The choice will be important both in terms of liability, business risk, tax issues, and the rights and obligations of the owner(s).
The most common form of running a business is a sole proprietorship economic activity/ Enkeltpersonforetak (ENK) and a joint-stock company / aksjonærselskap (AS), in turn, we choose a civil partnership / ansvarlig selskap (ANS) or dels ansvar (DA) less often.
There are advantages and disadvantages to running each of the above-mentioned forms. Below are the basic differences.
ENK is a one-person organizational form in which one person acts at his own expense and risk. Consequently, it leads to full personal financial responsibility for the debts and obligations of the company.
benefits:
- No requirements for own capital.
- Less paperwork than in AS.
- One a person decides everything in the company.
Disadvantages:
- Personal liability for debts and obligations.
- The excess is taxable and the loss is deductible along with the owner's other income such as salary income.
In the company AS i.e. with limited liability, the individual participant / owners are not personally liable for the company's obligations. This person is only responsible for the capital invested in the company. The minimum capital as of today is NOK 30.
benefits
- Responsibility for debt only up to the amount contributed capital.
- Taxation of profits only income tax from legal entities.
- Flexibility in acquiring new capital and new owners.
- Possibility to rent premises in your own home for a company
Disadvantages
- More formalities than in ENK or ANS / DA.
- Employee contributions must be paid both for your own salary and for other employed persons.
- Freezing of share capital
- Employee tax on remuneration and payments to shareholders
members civil partnerships ANS and DA, have collective or individual unlimited personal liability for the debt of the company. In practice, two main forms of civil law partnership are relevant. ANS in which all participants are personally responsible for the entire debt (joint and several liability). And a DA in which the participants are personally responsible for the entire debt of the company, but each participant can only be charged up to the amount of their ownership interest.
benefits
- Lack requirements regarding equity capital.
- Less paperwork than in AS.
- Possibility to withdraw funds from the company without paying tax employee.
Inconveniences
- Personal liability for debt.
- Payers taxes on profits are the owners companies.
- Allowance/salary remuneration for work reduces profit calculation.
When choosing your type of business, you should take into account all factors. Such as number of participants and responsibilities, need for funding, personal financial situation of participants, type of activity, etc. If in doubt, you should seek competent advice. The characteristics listed above should not be used as the sole basis for choosing the form of a company, but is only intended as a general advice. Contact us if you need a more detailed analysis and help in setting up a business, we will be happy to help. MMG CONSULTING
