A private limited company (ApS) is one of the most popular forms of company in Denmark, especially among entrepreneurs and small businesses. An ApS is an independent legal entity that separates the owner’s private finances from the company’s finances, and it provides a good balance between liability and flexibility. In this blog post, we review everything you need to know about private limited companies, including formation, requirements, tax rules and advantages and disadvantages.
Big news: Change in initial capital for private limited companies
Important update for 2025: As of January 2025, the requirements for establishing a limited liability company have changed. Previously, an ApS had to have a minimum initial capital of DKK 40,000 , but now it is possible to establish a limited liability company with DKK 20,000 in initial capital. This change makes it significantly easier for entrepreneurs and small business owners to get started with establishing their own company.
This change could have a significant impact on many who have previously been reluctant to start an ApS due to the higher capital cost. The lower initial capital opens up more opportunities for smaller businesses that want to protect their private finances, have a professional company structure and take advantage of the benefits of corporate tax.
What is a private limited company (ApS)?
A limited liability company is a form of company where the company is an independent legal entity, separate from the owners. This means that the company can enter into contracts, own assets and assume obligations in its own name. The owners of an ApS are called shareholders and are only liable for the company’s debts with their contributed capital. This protects the owners from personal financial liability.
Who is liable in a limited liability company?
In a limited liability company, the owners (shareholders) are only liable to the extent of their invested capital, and there is no personal liability for the company’s debts. This differs from a sole proprietorship , where the owner is personally and unlimitedly liable for the company’s obligations. The liability in an ApS is therefore limited, making the company form attractive to those who want to protect their private finances.
How do you set up a limited liability company?
Setting up a limited liability company requires a bit more work than starting a sole proprietorship , but it’s still a relatively simple process. Here are the basic steps:
- Start-up capital:
An ApS requires a minimum start-up capital of DKK 20,000. This change has come into effect from January 2025, making the company form much more accessible to entrepreneurs with limited funds. The start-up capital can be in the form of money or values (e.g. assets such as equipment or property), but it is important that the values are assessed by an auditor if they are included as part of the capital. - Memorandum and Articles of Association:
You must prepare a memorandum of association that describes the purpose of the company, and articles of association that determine the company’s rules and organization. - Registration with the Danish Business Authority:
ApS must be registered with the Danish Business Authority via Virk.dk , where you will be assigned a CVR number (central business register number). You must provide the company’s name, address, purpose and other relevant information. - Accountant (if necessary):
In the vast majority of cases, we recommend that you get an accountant who can handle your bookkeeping , based on your needs. Next, it is important that you can also get help with preparing annual accounts .
Requirements for a limited liability company
- Starting capital: Minimum DKK 20,000.
- Ownership structure: An ApS must have at least one shareholder. There is no upper limit to the number of shareholders.
- Registration: The company must be registered on Virk.dk, and you must provide information such as name, address and purpose.
- Management: An ApS must have management, which may consist of one or more directors and a board of directors (optional, depending on the size of the company).
Tax rules for private limited companies
- Corporate Tax
An ApS is subject to corporate tax at 22% of the company’s profits. This is a fixed tax rate, which provides predictability and stability for the owners. The profits are only taxed when they are generated in the company. The company can choose to retain the profits in the company and pay the lower corporate tax, or they can pay them out as dividends to the owners, who are then taxed on the dividends. - Dividend taxation
When the owners (shareholders) receive dividends from the company, the dividends are taxed as capital income at a rate of 27% for dividends up to DKK 56,500 and 42% for dividends above DKK 56,500 (for 2025). - Salary
If shareholders work actively in the company and receive a salary, this salary is taxed as personal income.
VAT and taxes
- VAT registration: If the company has an annual turnover of more than DKK 50,000, it must be VAT registered.
- VAT reporting: VAT must be reported quarterly or semi-annually, depending on the company’s turnover.
- Fees: Depending on the industry, there may be additional fees.
Advantages of a private limited company
- Limited liability: The owners are only liable with their invested capital and protect their private assets.
- Tax advantages: With lower corporate tax of 22% and opportunities to save profits in the company.
- Professional: An ApS is often considered a more professional business form, which can be an advantage when collaborating with larger companies or attracting investors.
- Flexibility in management: Possibility to choose a board of directors and have multiple owners.
Disadvantages of a limited liability company
- Increased costs: There are more administrative requirements and costs associated with establishing and operating an ApS, including accounting and possibly an auditor.
- Accounting obligation: ApSs have an accounting obligation and must submit annual accounts to the Danish Business Authority.
Is a limited liability company the right choice for you?
A limited liability company is ideal for entrepreneurs who want to protect their private assets and create a professional structure for their business. It is also a good solution for those who want to attract investors or have plans for growth. With the new lower starting capital of DKK 20,000, it has now become much easier to establish an ApS, and it opens up more opportunities for both established and new entrepreneurs.
Do you need help with starting up or advice on choosing a company form? Contact a professional advisor or accountant to get tailored advice for your situation.
