Incorporation Services in Sweden
Types of Business Entities
Establishing a business company in Sweden is characterised by its simplicity and well-established procedures.
Swedish Company Registration Office
The primary responsibility of the Swedish Companies Registration Office, local Registrar of Companies, known as Bolagsverket, revolves around the registration of new businesses, processing registration updates for existing companies, receiving and reviewing annual reports, recording corporate mortgages, and making determinations regarding company liquidations.
Types of Business Entities
The following are various types of business entities in Sweden:
- Sole Trader
- Trading Partnership
- Limited Partnership
- Limited Company
- Branch of a Foreign Company
Opting for a sole trader business structure is suitable for those looking to initiate a business on their own. As a sole trader, one assumes full personal responsibility for all company obligations, including liabilities and agreements.
Trading Partnerships (Handelsbolag, HB)
Trading partnerships, or “handelsbolag,” are formed through agreements between two or more legal entities or individuals. These entities or individuals do not have to be Swedish residents. Trading partnerships operate as legal entities upon registration with the Patent and Registration Office. These entities have no minimum capital requirements, and all partners are liable for debts. Accounting records must be maintained, and if specific criteria are met, annual accounts and auditor’s reports must be submitted. Partners share profits and report their respective shares in their income tax declarations.
Limited Partnership (Kommanditbolag or KB)
Limited partnerships follow similar rules and regulations to trading partnerships. The key distinction is that some partners have the option to limit their liability to their invested capital, while at least one partner retains full responsibility for debts. A partner with limited liability is termed a “limited partner,” and a partner with full responsibility is referred to as a “general partner.”
Limited Company (Aktiebolag or AB)
A limited company can be established by one or more natural persons or legal entities. A minimum share capital of SEK 25,000 is required when starting a limited company. Typically, personal liability for the company’s debts is limited to the share capital. However, board members may face personal liability for mismanagement. A limited company is governed by a board, and in specific cases, a managing director may be appointed. Taxation for a limited company involves a corporate tax rate of 20.6% on annual profits. Profits are distributed to shareholders as dividends and are taxed as income from capital. Distinct regulations apply to close companies. Two categories of limited companies exist: private and public, with varying minimum share capital requirements.
Taxes and Financial Obligations
In the case of a limited company, a corporate tax rate of 20.6% is applied to the company’s annual profits. Profits in a limited company are distributed to shareholders in the form of dividends, and these dividends are subjected to taxation in the shareholders’ personal tax returns, categorizing them as income from capital. It’s important to note that specific regulations are in place for close companies, which is the classification that most private limited companies fall under. Shareholders who are actively engaged in the company’s operations are considered employees, and their salaries are subject to taxation in a manner akin to regular employees without shares.
Swedish Limited Companies
Different types of Limited Companies
Private and Public
A private limited company is required to have a minimum capital stock of at least SEK 25,000, whereas a public company must possess a share capital of at least SEK 500,000. The primary distinction between these two types lies not only in the capital requirement but also in their ability to issue shares or other securities to the general public. A private company cannot solicit the general public to subscribe to or purchase the company’s shares or other financial instruments.
During the early 1990s, Sweden eliminated legislation that previously restricted foreign ownership of Swedish shares. As a result, foreign investors can now hold Swedish shares without encountering significant limitations. This, combined with the impressive performance of the Stockholm Stock Exchange and the growth of major companies, has led to an increase in foreign ownership of publicly traded Swedish stocks. Approximately 35% of the market value of publicly traded stock is now in the hands of foreign investors. Nevertheless, it’s important to note that certain shares may still have varying voting rights.
Formation of a Private Limited Company A private limited company can be established by an individual residing in the European Union or other countries within the European Economic Area (EEA), which includes Liechtenstein, Norway, and Iceland. Additionally, a Swedish legal entity or an entity headquartered within an EEA country can establish a private limited company. However, individuals or legal entities located outside the EEA are required to obtain a special permit from the Companies Department of the Patent and Registration Office, unless at least half of the board members and half of the alternate board members are residents of an EEA country.
For those who need to launch a business promptly, it’s worth noting that fully registered dormant private limited companies are available for purchase at a nominal cost through specialized companies or legal representatives. These “off-the-shelf” companies can be a convenient solution when expediency is a top priority.
- Private companies require a minimum capital stock of SEK 25,000, while public companies need at least SEK 500,000.
- In the early 1990s, Sweden removed restrictions on foreign ownership of Swedish shares, enabling foreigners to own Swedish shares without limitations. However, the possibility of shares with different voting rights persists.
- Foreign individuals or entities outside the European Economic Area (EEA) require a special permit from the Companies Department of the Patent and Registration Office, except when at least half of the board members and alternate members are EEA residents.
- “Off-the-shelf” dormant private limited companies can be purchased for quick business establishment.
Private limited company
Public limited company
|Can sell shares to the public
|Minimum share capital
|Minimum amount of board members
|Board of directors and managing director
|Recommended and sometimes mandatory
Branch of a Foreign Company
Branches of foreign companies represent a relatively recent business structure in Sweden, predominantly established by banks and financial institutions, in accordance with the Branches of Foreign Companies Act. Notably, a branch operates without share capital and lacks a board of directors. It is not treated as an independent legal entity but rather an integral part of the foreign company that owns it. It’s important to note that a foreign company can establish only one branch in Sweden, subject to Swedish laws and regulations.
To initiate the registration process for a branch, an application must be submitted to Bolagsverket, the Swedish Companies Registration Office. This application includes essential details about the branch’s operations, address, managing director, accountants, and more. Additionally, information about the foreign company is required, such as the name of the executive supervising the branch, share capital, foreign registration, copies of articles of association or charter, annual reports from the past two financial years, evidence of solvency, and a power of attorney for the managing director. The branch cannot commence business until the registration is completed.
The branch is under the management of a managing director who possesses extensive authority to act on behalf of the foreign company within Sweden. It is also possible to appoint a deputy managing director. Importantly, both the managing director and deputy managing director must reside in the European Economic Area (EEA). If the managing director is not a resident of Sweden, the foreign company must designate a Swedish resident to accept service on its behalf. This appointed individual is registered with Bolagsverket.
Maintaining its own accounts, the branch’s financial records are subject to examination by a Swedish certified public accountant. The managing director is responsible for submitting annual copies of the company’s accounts and the auditors’ report for both the branch and the foreign company to Bolagsverket. Accounts for the foreign company only need to be submitted if they are public documents in the company’s home country. Profit earned by a branch of a foreign company in Sweden is subject to taxation. However, there is no tax levied in Sweden on profits repatriated to the foreign parent company.
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