Choosing from business types in Sweden from all offered options is a challenge. Each legal form comes with its own advantages and disadvantages. This decision will impact everything from taxes and liability to how you raise capital. Here’s a breakdown of the five main types.
Business types in Sweden
First of all, business types in Sweden are rather similar to legal forms available in other countries. They may have different names but general operational rules should be unchanged. So, if you are entrepreneur in your home country, this decision should be a bit easier.
There are many business types in Sweden but today I’ll focus on those that are most popular: sole trader, trading partnership, limited partnership, limited company and economic association.
Sole Trader – Enskild Näringsverksamhet
It’s the simplest option to run your own business. It doesn’t have own legal entity and you’re fully responsible for company’s finances, agreements and possible debts. There can only be 1 owner who is also the only representative.
To register company in this legal form, you don’t need any starting capital. During registration process you can also register company’s name that will be protected within each län (county) of your choice. Name protection costs SEK 1200 for each county. If you don’t want to register and protect company’s name (use just your full name as company’s name), you don’t pay anything for starting your business.
| Pros | Cons |
|---|---|
| Easy and not expensive to start. | You have unlimited liability, meaning your personal assets are on the hook for business debts. |
| Minimal administrative burden. | Raising capital can be difficult. |
| You keep all the profits after taxes. | Limited growth potential. |
Trading Partnership – Handelsbolag
Trading partnerships have their own legal entity and must consist of minimum of two people or enterprises. Partnership itself can enter agreements and partners are responsible for any debts. Partners are also formal representatives. There is no capital requirement to start this form of business.
Registering trading partnership costs SEK 1200 and is paid to Bolagsverket. You also choose company’s name that is protected within a chosen county/counties – changes in this area cost SEK 1000.
| Pros | Cons |
|---|---|
| Relatively simple to set up. | All partners have unlimited liability for business debts. |
| Can be more flexible than a limited company. | Profits are taxed as part of each partner’s individual income. |
| Shared decision-making and workload. | Disagreements between partners can be disruptive. |
Limited Partnership – Kommanditbolag
Limited partnership has own legal entitty and consists of minimum of two partners where minimum one is general partner with unlimited liability and others are partners with limited liability to what they have invested into the company. Company’s representative is general partner, limited partners have also restricted rights on deciding how company is managed.
General partner has no starting capital requirements, limited partners must invest minimum of SEK 1. During registration process, a fee of SEK 1200 is paid to Bolagsverket. Company’s name is protected within chosen county/counties.
| Pros | Cons |
|---|---|
| Offers limited liability for limited partners. | More complex to set up and manage than a trading partnership. |
| Can attract capital from investors who want to be passive. | General partners have unlimited liability. |
| Flexible profit-sharing arrangements. | Limited partners have limited involvement in management. |
Limited Company – Aktiebolag
This is probably the most popular of all business types in Sweden. Owned by at least one person or enterprise with starting capital of SEK 25.000 (aktiekapital). Company has legal entity, can enter agreements and is liable for its debts. The board of directors is formal representative.
Registration of company costs SEK 1900 in Bolagsverket, you need to add costs of name registration (SEK 1400). In this business legal form name is protected in the whole country.
Owners may get their salary or share profits in form of dividend.
| Pros | Cons |
|---|---|
| Limited liability protection for shareholders. | More complex and expensive to set up and maintain. |
| Easier to raise capital through issuing shares. | Greater administrative burden with stricter regulations. |
| More professional image and credibility. | Profits are taxed twice: once as corporate income tax and again as dividends for shareholders (with some exceptions). |
Economic Association – Ekonomisk Förening
Economic Association offers a unique structure for businesses with a focus on member ownership and shared goals. It is owned and controlled by its members with limited liability – their personal assets are generally protected from the association’s debts. This provides financial security while promoting member participation.
Economic Associations are not designed to maximize profits for individual owners. Instead, they cater to cooperatives, housing associations, and member-driven businesses where shared goals and community take center stage.
| Pros | Cons |
|---|---|
| Democratic ownership and control by members. | Can be more complex to set up and manage than other business structures. |
| Limited liability for members. | Decision-making can be slow and cumbersome. |
| Access to tax benefits and exemptions. | Less flexibility in raising capital. |
Summary
Choosing the right business structure depends on several factors, including the number of owners, desired level of liability protection, growth expectations, and access to capital.
- For simple, individual ventures, a sole trader might be perfect.
- If you’re partnering up, a trading partnership offers flexibility.
- Limited companies provide the most structure and growth potential, but come with added complexity.
- Limited partnerships offer a mix of limited liability and flexibility, but can be complex to manage.
- Economic associations are ideal for non-profit businesses with a strong member-ownership focus.
For a more in-depth look at each structure and considerations specific to your business, visit verksamt.se that is a source of all information regarding running own business (with many articles available in English). Seeking professional advice from an accountant or lawyer can be invaluable when making this important decision.
