As a foreigner or an ex-pat, there are a few things that you need to know before starting a business. Denmark is a good place to start a business as it encourages entrepreneurship as well as innovation. However, remember that you should have a work permit to be able to do business in Denmark. Therefore, the article explains the process of starting a business in Denmark as an expat.
Permission to Work
As I said earlier, a work permit is needed to run a business in Denmark. The EU/EEA, Swiss, and Nordic citizens are exempted from this reason. The reason is, that they are allowed to study and work in Denmark according to the EU regulations regarding freedom of movement. Although you do not need a visitor’s visa as a member of these countries, you have to get an EU residence document.
In case you are not among the above-mentioned nations, then you will need a work permit. Also, you have to get permission from Danish Agency for Labour Retention and International Recruitment in starting a business. If you already have a residence permit such as an accompanying spouse, then you have the right of working or studying in Denmark.
The Kinds of Companies that can be Established in Denmark.
The main types of businesses that can be established in Denmark include a small to medium-sized limited liability company, A/S, ApS, and a limited company. A/S refers to a limited liability firm. It is the only one that may be listed on the Copenhagen Stock Exchange. It is good for the people starting up large or even medium companies. For such a company, the minimum investment required is DKK 500,000. Also, 25% has to be paid during formation. Lastly, the registration fee is DKK 670.
On the other hand, ApS refers to a small to medium-sized limited liability company. This company requires a minimum investment of about DKK 80,000. 25% of the money should be paid during formation. For Aktieselskab (A/S) one may need to involve a lawyer in setting up the agreement of the shareholders.
Private Limited Company (ApS) or Anpartsselskab kind of company is available with a lower capital requirement. It is relevant for people with one or even more owners. This kind of limited company is distinct from the owners. However, in most cases, banks need the owners to guarantee repayment of any loans given to the firms. Through this, the owners are made liable.
The following are the important steps
- Registering your business at virk. dk. Unfortunately, the site is in Danish. Thus, you can enable ‘Google Translate’ to help you translate into your desired language. In case you are starting a sole proprietorship then you may log in using MiTID or NemID.
- Fill your projected profit and loss in your preliminary income assessment.
- Get your business registration certificate. After filling out and completing the registration process, you will get a Central Business Registration Number (CVR Number)
- Opening a business account with your bank. After getting a confirmation that your business has been registered and you get the CVR, you can open a bank account.
- In case a change takes place in your business, you have to register the changes at virk.dk
The Advantages of Doing Business in Denmark as a Foreigner
In 2016, Forbes listed Denmark as the 6th best nation for doing business out of 129. As a foreigner, you should be very proud to do business in Denmark. Some of the benefits of doing business in Denmark include investor protection, corruption, trade freedom, property rights, and tax burden.
Ease of Doing Business
Denmark ranks highly in the “Ease of Doing Business Index” of the world bank. The nation is the easiest place to do business across the globe and in Europe. Investing firms enjoy things such as a business-friendly environment, transparency, and a stable political system as well as economy. Besides, the government has developed cost-effective and efficient business processes.
The international trade policy in Denmark works towards ensuring that there is free trade globally. The country believes the global economy including those in developing nations benefits from an increase in international trade. Besides, its international trade is conducted in close cooperation with European member states.
As a business owner, you will highly benefit from this free trade. The reason being the nation promotes free trade globally as well as secures market openings with important trade partners. As a business owner, you are able to do business with people from other parts of the world.
Denmark is among the top nations that are least corrupt. Denmark, Finland, and New Zealand are in the first position in the Corruption Perceptions Index. As you know, corruption undermines honest business in any country.
As a foreigner doing business, you will find it smooth to do business in Denmark. You do not have to bribe anyone to get anything done. Every person in any government office in Denmark is transparent. Because of this, there are high chances that the business will do well. You will have everything done the right way by the right individuals. Also, when there is no corruption, you will work with clear contracts. In return as a trader, you have to prepare your customs clearance carefully.
For any business, technology is important in increasing the efficiency of products, services, and systems. Denmark is among the most digitalized nations across the globe. Denmark also offers a great Information Technology infrastructure.
Apart from Denmark offering a world-class Information infrastructure to its consumers, it enhances faster and more efficient communication. This makes it easy for the people doing business in the country. It is easy in that you can streamline and track processes, manage employee records and contacts, and maintain data flow. Besides, the fact that it has good technology, enhances security. Recently, there have been increased issues of cybercrime, and companies in Denmark have done their best in preventing them.
Personal freedom enables you to live as you are. Through it, you do what you want and even spend time with the people who you like. Freedom is a powerful concept in business. It is defined in terms of customers, employees, and partners.
For the employees, they should access the data of the company for free, regardless of their position. This is the democratization of data. When people are allowed to access the company’s data, they can improve their performance. Also, free access to data offers them insights into making informed decisions.
As an entrepreneur, freedom is not only about being your own boss. It comes with thinking beyond your work freedom. When you have freedom, you can execute new ideas, bring innovation in making things more efficient, and defy the standard protocols.
The strength of investor protection is measured on a scale of 0 to 10. In 2016, it was measured at 7.2% by World Bank. Denmark has a liberal policy regarding investments as well as trade. The investment protection treaties mainly rely on similar standards covering the obligation of the host to ensure:
- Most favoured nation treatment as well as non-discrimination
- Security and full protection
- Equitable and fair treatment
- Free transfer of funds
- Compensation for loss due to insurrections and war
- Effective and prompt compensation in case of expropriation
The Danes have a history of innovation. In the past, the Danish Vikings were great engineers and innovators. Because of this, the innovation spirit still lives in Denmark. The country is producing the world’s leading discoveries in varied areas including biomedicine, pharmaceuticals, environmental science, agriculture, and food.
As a business owner, you should encourage team building. Also, the nation has great public and private collaboration in relation to research and development. Also, the nation’s strength is in engineering and machinery. Besides, the strong educational system has helped it thrive in the robotics industry.
The Disadvantages of Doing business in Denmark
Getting a bank account is the number one challenge. After getting your CVR, you may find it difficult to open a bank account. To understand how the banking system work, you can read the article on Banking in Denmark. Most banks turn business owners down when they need a business account. I believe it is difficult for everyone including the Danes. Generally, it is challenging to open a bank account for new companies. The main reason is because of the anti-money laundering regulations that banks should comply with. Even though you might help a bank prepare a budget as well as a business plan, it might not be enough.
The other risk is business culture. As a business owner, you have to consider cultural differences. For instance, the Danish business environment is relaxed and informal. Also, there are no hierarchies among the colleagues. They mainly work in teamwork which is highly prized. Also, in such a hierarchy, maintaining order and process in the workplace is difficult.
The process is another challenge. As a first-time business owner, you may find it difficult to understand the steps and processes for complying with local rules. In Denmark, a preference for structure and order means that in case you miss any of the plans then you may set business plans back.