Good planning and a focus on the market will give you a better chance of successfully developing your idea into a future business.
If you are considering working with a business partner or applying for financing from a bank, for example, they will want you to demonstrate that you have established realistic plans and budgets before they consider working with you.
All relevant information concerning how you intend to realise your business concept should be summarised in your business model. The next step in the planning phase will be to create good start-up budgets and, where appropriate, draw up a business plan. It can be a good idea to seek advice and guidance along the way.
Regardless of which organisational form you choose for your new venture, sound financing is important to make your start-up easier and ensure you are able to fulfil your financial obligations. At the time of start-up, you must have a certain amount of equity. The amount you will need will depend on various factors, including the risk that you take on and the industry in which you are setting up your new venture.
The legal structure that will suit the business you intend to set up should be determined based on the anticipated scope of the business and the risks that are associated with your new venture. The amount of capital your business will need may also impact on the legal structure that you choose.
Because you are looking to set up a business alone, you can choose between the following legal structures.
In a sole proprietorship, there is one owner/proprietor. A sole proprietorship is an organisational form which makes it easy to get started in business, but with this organisational form, you will also be personally liable for your business's financial obligations, which entails financial risk. As an employee of your own limited company, you would have fewer social rights than you would have as the owner/proprietor of a sole proprietorship.
A sole proprietorship can be an appropriate organisational form when your venture entails little financial risk, when the scope of the business is expected to be limited and/or you do not intend to take on employees. This will for example be the case if your business does not require substantial investments or you intend to run the business alongside another job.
As the proprietor of a sole proprietorship, you are not an employee and you will therefore not receive a salary for the job you do. You decide what to do with your enterprise's profits and you can in principle take out as much or as little as you wish for your own private use (private withdrawals), but you must set aside money for taxes and other financial obligations.
Your spouse can work for your business and receive a share of the profits, but they cannot be taken on as an employee. If you employ anyone else, you become an employer and you will have to pay wages/salary and employer's National Insurance contributions.
As the owner of a sole proprietorship, you will have more limited rights than employees. Self-employed persons are entitled to sick-pay from the 17th day, with 80 % cover. This is in contrast to employees, who have 100 % cover from the first day. You can take out various insurance policies in order to improve your sick-pay rights.
You do not accrue entitlement to unemployment benefit on what you earn in your sole proprietorship. You are also not entitled to unemployment benefits in the event of layoff.
As the owner of a sole proprietorship, you earn a pension on your business income. You should be aware that most people will experience a substantial reduction in their income when they retire. Saving for your retirement is therefore important. You can also enter into private pension agreements.
As the proprietor of a sole proprietorship, you must pay tax on your business's profits, regardless of whether the profits are withdrawn or left untouched in the business's accounts. Tax must be paid in four instalments during the income year.
Commercial activity normally also triggers a bookkeeping obligation. This means that you must retain documentation of your incomes and expenses and arrange them in a system. If you do not know much about accounting, you should consider asking an accountant to do it for you.
You cannot change the organisational form of your business from a sole proprietorship to a private limited company. Subject to certain rules, you can establish and register a new private limited company and continue to run your sole proprietorship business through the new limited company. This means that the company will continue to operate under a new organisation number. If you meet certain conditions, you will be able to carry out a tax conversion.
Registration of a sole proprietorship is done via the Coordinated register notification in Altinn.
You will be assigned an organisation number when the registration has been approved.
Private limited companies can have one or more owners. The owners are not personally liable for the company's debts, except as regards share capital that is paid in. The share capital must be at least NOK 30,000.
A private limited company may be an appropriate organisational form when the venture entails significant financial risk. Examples of this are when the business requires substantial investments and/or needs to take on more employees.
The limited liability, flexibility and opportunities for buying and selling the company's shares make the limited company preferable as an organisational form if you are planning the new venture with several owners or if you want to be able to bring in external investors.
The general meeting is a private limited company's supreme authority. The company's shareholders have the right to attend and vote at these meetings.
The board of directors is appointed by the general meeting and must consist of at least one person of legal age. The board member cannot be under bankruptcy disqualification or be convicted to loss of rights. The board of directors meet when necessary.
The Board is responsible for the management and running of the company. The company can choose to have a general manager, employed by the board of directors. The general manager and at least 50 percent of the board members must reside in Norway, Switzerland, The United Kingdom, Northern Ireland or another EEA state.
In many private limited companies, the owner alone has all these roles. Note that these requirements apply regardless of the size of the company.
The Brønnøysund Register Centre on roles in a limited company (in Norwegian only)
The Limited Liability Companies Act on the residence requirement (in Norwegian only)
One of the advantages of establishing a limited company is that you as an owner can also be an employee of the company. As an employee of your own company, you have the same social security rights as other employees. The company will have employer responsibility for you, and you will receive a salary.
Owners of limited companies can opt not to be an employee even if they work for the company. Payments from limited companies to owners can also take place in the form of dividends. However, you will not accrue social security rights on the dividends that are paid.
As owner and employee, you will be entitled to 100 % sick-pay from the first day of sickness. However, you should note that Nav covers sick-pay from the 17th day. During the first 16 days, it is the company as employer that must pay sick-pay.
As owner and employee of the company, you accrue the right to unemployment benefit in the event of unemployment in the same way as other employees. Contact Nav to find out the conditions for receiving unemployment benefit.
As owner and employee of the company, you will accrue pension rights on what you receive in salary in the same way as other employees. If your company has other employees, it will normally be required to set up an occupational pension scheme for its employees. You should be aware that most people will experience a substantial reduction in their income when they retire.
Private limited companies and their owners are taxed in three ways:
The company pays tax in two instalments in the year after the income year.
Private limited companies and tax
Commercial activity normally also triggers a bookkeeping obligation. This means that you must retain documentation of your incomes and expenses and arrange them in a system. Private limited companies are also subject to the accounting obligation. This means that the company must submit annual accounts to the Register of Company Accounts every year. If you do not know much about accounting, you should consider asking an accountant to do it for you.
All private limited companies with a turnover of less than NOK 7 million can normally opt not to have their annual accounts audited.
Registration of a private limited company is done via the Coordinated register notification in Altinn.
After the registration has been processed, you will be assigned the company's organisation number.