Norway Company – AS (LLC)
When starting a business in Norway there are many considerations to take into account. Firstly, there should be a market for the services or goods you want to offer.
Benefits of registering and incorporating a company in Norway
When starting a business in Norway there are many considerations to take into account. Firstly, there should be a market for the services or goods you want to offer. Both the size of the customer group and the competition in the market are of great importance. If one wants to start a business in a small town it is particularly important to familiarize yourself with already existing businesses that might compete in the same market.
Furthermore, there can be many expenses in connection with the start-up of a business, such as renting a work-space or purchasing necessary equipment. Therefore, a loan will often be raised to finance the company during the start-up phase. When applying for a loan it is important to have a solid business plan including a realistic budget. This is also important for convincing any business partners. The business plan should also include a well-developed business idea. With a convincing idea, it could be possible to get investors already from the beginning.
Some companies might want to protect trademarks, the company name or technical inventions against competitors exploiting them. It may then be wise to apply for trademark registrations. When choosing a company name, one should also check the names of other, similar companies. One should also obtain a domain name for the company website. For technical inventions one might want to apply for a patent. It is also important to familiarize oneself with the General Data Protection Regulation (GDPR).
This article will in the following address some important options and legislation that applies to everyone wanting to start up a business in Norway. The article will take a closer look at different forms of incorporation, tax- and value added tax legislation, the obligation to register for EU/EEA citizens, and the Norwegian Working Environment Act (Arbeidsmiljøloven).
Private limited companies (AS)
In order to set up a private limited company you must have a share capital of at least NOK 30 000, -. The share capital will act as collateral for the company’s creditors. The risk associated with a private limited company is considered less than if you choose a sole proprietorship. This is due to the limited liability, which is limited to the share capital you have invested in the business. A private limited company is a separate legal person.
The supreme authority of the limited company is the general assembly. When a meeting is held, the company´s shareholders have the right to attend and vote. The general meeting shall elect a board of directors to the company, which must consist of at least one person. It is the board that is responsible for the management and running the company. At least half of the board members must reside in Norway or another EEA country. There must be a general assembly once a year.
The regulations for private limited companies are found in The Companies Act (aksjeloven). The legislation contains detailed regulations concerning running and managing the company, liability for compensation, the general assembly and distribution of profits and so on.
If you want investors to invest in the company, a private limited company is a smart solution. The shares can easily be traded, and the organizational structure gives the owners flexibility.
Unlike a sole proprietorship company, the owner of the business can be an employee in the company. This means that you have equal rights as other employees. If you are registered as an owner and employed, you will receive sick-pay with a 100 % coverage from the first day. One can also work for the company without being an employee. In this case, the payments will take place in the form of dividends. Please note that you will not accrue social security rights on the dividends that are paid, including sick-pay.
The profits generated by a limited company are taxed at 22 % (in 2019). The tax for 2019 is to be paid in two installments the following year. If dividends are paid to shareholders, the tax rate is at 31.68 %. If a company holds shares in another company, the dividend is virtually tax-free. If the company sells goods and services, and has a turnover of more than NOK 50 000, – within a 12-month period, the company must register in the Value added tax Register.
A private limited company has an accounting obligation. The company must submit annual accounts to the Register of Company Accounts (regnskapsregisteret) each year. It is important to retain documentation of the company´s income and expenses, as the company also normally has a bookkeeping obligation.
Norwegian branch of a foreign company (NUF)
If you have a company abroad, and want to do business in Norway, you must obtain a Norwegian organization number. This applies regardless of whether it is a permanent solution or an individual assignment. In order to obtain a Norwegian organization number, one must establish a branch in Norway or a separate Norwegian company. Foreign companies engaged in business activities in Norway are obliged to register with the Norwegian Register of Business Enterprises (Foretaksregisteret). It is the foreign company which is responsible for the activities of the Norwegian branch, and the branch must comply to Norwegian rules and legislation. The rules are essentially the same as for limited liability companies, but no equity is required to establish a NUF.
There are no requirements considering the type of foreign companies that can be registered in Norway. This means that both companies with limited liability and companies without limited liability can be registered. You may want to familiarize yourself with the Business Register Act (foretaksregistreringsloven) to find out how to register. Registration is done via Coordinated Register Notification (Samordnet registermelding).
There must be a designates contact person in the Norwegian branch. There is a requirement that this person has a Norwegian national ID number or a D number, but it is not required that the contact person resides in Norway. One can submit an application for a D-number with the Coordinated register notification registration form to the Brønnøysund Register Center (Brønnøysundregistrene). If several people are to have a formal role in the Norwegian, everyone must apply for a D-number. This is also done in connection with the registration of the company.
If the company only intends to do one assignment with limited duration, it can in many cases be more practical to establish a sole proprietorship.
The Norwegian branch can establish a board of directors, that will be responsible for the management of the business in Norway. The board members must have a Norwegian national ID number or a D-number. The board can choose to hire a general manager who is responsible for the day-to-day management of the branch.
All employees working for the company in Norway must be registered here. The employees have the same social rights as other employees in Norway. This means that you can claim unemployment benefit from NAV in case of unemployment, sick-pay in case of illness, and pension rights.
The construction industry requires that all employees have an HSE card (HMS-kort). The HSE card shows who you are working for.
NUF companies must comply with the rules for value added tax. This means that if the company has a vatable turnover of more than 50 000, – over a 12-month period, the company needs to register in the Value added tax Register on the Norwegian Tax Administration´s website. The registration is necessary regardless of whether the company intends activities over a longer or shorter period. For enterprises from Poland, it is not necessary to register a VAT-representative in Norway.
When it comes to tax, a specific assessment must be made for each company undertaking whether they are liable to tax in Norway. If the entire business is managed and operated in Norway, one will normally have tax affiliation to Norway. If the board and management of the company take place abroad and the company is domiciled there, the Norwegian department will only be liable to tax in Norway for the part of the business that is run through a permanent establishment in Norway. The amount of tax to be paid depends on the type of organization the foreign company has. If the foreign company has limited liability (similar to a private limited company), tax must be calculated at the rate of 22 % of the profit in Norway.
In order to calculate the tax, the NUF must submit the form «RF-1097 Søknad om endring av eller krav om forskuddsskatt – upersonlig skatteyter»» (Application for new or changed claim advance tax – non-personal taxpayer» via Altinn.
A NUF has an accounting obligation. The company must submit annual accounts to the Register of Company Accounts each year if the company is obliged to pay tax in Norway. If the branch is not liable to tax in Norway, it is possible to apply for exemption from the submission of annual accounts. If the Norwegian branch has a turnover of more than NOK 5 million a year, the branch is also subject to the audit obligation.
Previously, it was very convenient to choose NUF as an organizational structure, because one got the same conditions as a private limited company, while creating a NUF was a much simpler process. As mentioned, there is also no requirement for equity/share capital to create a NUF.
In recent years, the rules on starting up a private limited company have been simplified, meaning that the process of creating AS has become easier. Therefore, the main difference between a NUF and an AS is the requirement for share capital in a private limited company. A practical important disadvantage of the NUF is, however, that the company structure has got a worse reputation. When equity/share capital is not required, it is easy for rogue players to establish such companies. This makes it more difficult to get financial help when starting up the business, and suppliers can be more sceptical about entering into cooperation with a NUF,
Incorporate your Norway Company Now