Types of business companies in Sweden
- Rules, regulations and formalities are clear and well-established.
- Restrictions have been eliminated on foreign ownership of corporations and property.
Swedish company registration office
The Swedish Companies Registration Office – Bolagsverket – chiefly deals with the registration of new companies and registration changes for existing companies, receives annual reports, registers corporate mortgages and takes decisions on liquidations.
Types of entities
There are five basic legal forms for companies in Sweden:
- Sole Trader
- Trading Partnership
- Limited Partnership
- Limited Company
- Branch of a Foreign Company
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.
Trading Partnerships – Handelsbolag, HB
A trading partnership – “handelsbolag” – is created through an agreement between two or more legal entities (companies) or persons. These need not be Swedish citizens or residents. Trading partnerships, governed by the Trading Partnership Act, become a legal entity when registered by the Patent and Registration Office.
Trading partnerships have no minimum capital requirements. All partners are liable for debts. A trading partnership must keep running accounting records. If there are more than 10 employees or if assets exceed 1,000 basic amounts, annual accounts must be drawn up and an authorized auditor’s report must be attached to the annual report. If there are more than 200 employees and assets exceed 1,000 basic amounts, the annual accounts must be filed with the Patent and Registration Office. The accounts are then part of the public record and open to public inspection.
Limited Partnership – Kommanditbolag or KB
A limited partnership – “kommanditbolag” – operates under the same general rules and regulations as a trading partnership. The main difference is that one or more of the partners can limit their liability to the amount of their investment in the company. However, at least one partner must have complete responsibility for debts. A partner with private limited liability is called a limited partner and a partner with full responsibility is called a general partner.
Limited Company – Aktiebolag or AB
A limited company can be started by one or more natural persons or legal entities. When starting a limited company, you must have at least SEK 25,000 in share capital. Personal responsibility for the company’s debts is in principle limited to the share capital. However, members of the board of directors may be personally liable if they mismanage their assignments. A limited company is represented by a board and in certain cases by a managing director (MD). If the board members are fewer than three, there must also be at least one deputy member appointed.
Taxes and contributions
A limited company pays corporate tax at the rate of 20,6% on the company’s profit for the year. In a limited company, profits are distributed to the shareholders through dividends. Dividends are taxed in shareholders’ tax returns as income from capital. Special rules apply to close companies (which most private limited companies are). Shareholders who work in the company are employed and their salary is taxed in the same way as for employees with no shares.
There are two types of limited companies: private and public
A private company must have capital stock of at least SEK 25,000, and a public company must have a share capital of at least SEK 500,000. The major difference between the two, besides the amount of capital, is that a private company cannot invite the general public to subscribe to or acquire the company’s shares or other securities.
In the early 1990s, Sweden abolished legislation that limited foreign ownership of Swedish shares. Today, Swedish shares can be held without restrictions by foreigners. This, plus the growth of major companies and the strong performance of the Stockholm Stock Exchange, has increased foreign ownership of Swedish stock. About 35 percent of the market value of publicly traded stock is held by foreigners. However, the possibility of stocks having different voting rights still remains.A private limited company may be founded by an individual who is resident in the European Union or in the other countries of the European Economic Area, EEA (Liechtenstein, Norway and Iceland), by a Swedish legal entity, or by a legal entity which has its head office in an EEA country.
Individuals or legal entities in any country outside the EEA need a special permit issued by the Companies Department of the Patent and Registration Office unless half of the members of the board as well as half of the alternate members of the board are residents of an EEA country.
A fully registered dormant private limited company may be purchased for a nominal sum from specialist companies or through attorneys. These “off-the-shelf” companies can be useful when there is a need to start business quickly.
Private limited company
Public limited company
|Can sell shares to the public||No||Yes|
|Minimum share capital||SEK 25,000||SEK 500,000|
|Minimum amount of board members||1||3|
|Board of directors and managing director||Optional||Mandatory|
|Auditor||Recommended and sometimes mandatory||Mandatory|
Branches of Foreign Companies
Branches of foreign companies are a relatively new business form in Sweden, and have been established mainly by banks and financial institutions, according to the Branches of Foreign Companies Act. A branch has neither share capital nor a board of directors. It is not regarded as an independent legal entity but as part of the foreign company that owns it. A foreign company may have only one branch in Sweden. The branch is subject to Swedish law and rulings by Swedish authorities.
The branch must maintain its own accounts, which are examined by a Swedish certified public accountant. The managing director is responsible for filing annual copies of the company’s accounts and auditors’ report, for both the branch and the foreign company, with Bolagsverket. Accounts for the foreign company need be submitted only if these are public documents in the company’s country of origin. A branch of a foreign company pays tax on profits in Sweden. There is no tax in Sweden on profits sent to the foreign parent company.
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