Sole trader or ApS? How to choose, without regretting it
The most important choice before you start is about liability, money and how many of you there are, not about what sounds most impressive.
Most people start by googling "ApS or sole trader" and end up in a table with twelve rows. You only need three questions.
1. Who is liable if it goes wrong?
In a sole trader business (enkeltmandsvirksomhed) you and the business are the same legal person. If the business goes bankrupt, you are personally liable, with your house, car and savings. In an ApS (private limited company) the company is liable with its own capital; as a rule you are only liable for what you have paid in (and for whatever you may have guaranteed at the bank).
If you sell your own time as a consultant, the risk is typically small. If you build houses, import goods or employ people, it is not.
2. How many of you are there?
If there are two or more owners, the answer is almost always ApS. A sole trader business can only have one owner; a general partnership (I/S) can have several, but everyone is personally and jointly liable, also for the others' mistakes.
3. What should happen to the profit?
In a sole trader business the profit is taxed as your personal income in the year it is earned. In an ApS the company is taxed on its profit, and you are taxed only when you take money out as salary or dividend. If you want to leave money in the company and invest it, the ApS is flexible. If you just want everything out every month, the difference is smaller than people think.
The practical part
- A sole trader business is registered at virk.dk with no start-up capital.
- An ApS requires share capital of DKK 40,000, paid in at incorporation, plus a memorandum of association and articles.
- Both get a CVR number, and both must register for VAT when turnover is expected to exceed DKK 50,000 over 12 months.
What LegaSum does
Tell LegaSum "I want to start a company" and the plan asks the three questions and suggests the form. The actual incorporation of an ApS happens with a partner; LegaSum keeps track of the documents and the numbers you get back. And if you cannot decide today: start as a sole trader. You can convert later.