Are you thinking of starting a limited liability company? Then you came to the right place! In this article, we go through 5 simple steps that will take you through everything you need to think about when you plan to start a limited company. But before we go through the actual process of starting a limited company, let’s take a closer look at what a limited company is and how much it actually costs to start one.
What is a limited company?
A limited company is its own legal entity and can be run by one or more owners. The owner is called a shareholder and can be a natural or legal person (company). A common question about limited companies is how much they cost. Setting up a private limited company today costs 25,000 SEK in the capital. You don’t necessarily have to pay the full amount in cash. Without you, you can use so-called non-cash assets as payment or borrow money from the bank. Goods in kind must be useful to the company and must be disclosed by an authorized or certified auditor.
If you want to start a public limited company, where people can buy shares on the stock exchange, it instead costs SEK 50,000 Limited companies are a very advantageous form of the company because as the owner you are not personally responsible for the finances of the company. Thus, you will not be obligated to pay as a private person to pay the debts of the company. But there are exceptions when you become liable for payment if, for example, the accounting or the annual report has not been done correctly and you are the CEO or a member of the company’s board. This is very common in small companies where shareholders sit on the board of directors or where the CEO is themselves..
Bookkeeping obligations and requirements for auditors in limited companies
All legal entities are accountable, which includes limited companies. Bookkeeping must be done on an ongoing basis, and the financial year always ends with an annual report. Since 2010, there is no obligation to have an auditor in smaller limited companies. For a limited liability company to require an auditor, at least two of the following conditions must be met within the past two years:
- more than 3 employees on average
- balance sheet total of more than SEK 1.5 million
- net sales of more than SEK 3 million
This means that newly formed limited companies don’t need to retain an auditor for the first two years, regardless of turnover or size. Some types of limited liability company may not choose to hire an auditor, regardless of the size of the company. These are public limited companies, limited companies with special legislation that say they must have an auditor or limited companies with special restrictions on dividends.
Even if the limited company doesn’t meet the requirement to have an auditor, you can still choose to hire one. This can be useful if you are planning rapid growth or have a large number of stakeholders because it builds trust for the company. It can also be helpful if you plan to sell the company as the annual reports are audited and the auditor can also act as a sounding board and make recommendations.
How to start a limited company?
Below you can easily follow the 5 steps to set up a limited company. After the limited company registration application is approved, we examine where to apply and what the next step is.
Step 1: Decide to start a limited company
The first step is to decide on starting a limited company. As mentioned earlier, you can set up a limited liability company alone or with others. The person or persons who choose to establish a limited company are called founders. In connection with the decision, a so-called foundation certificate must also be drawn up The articles of incorporation should include the articles of association offerings (including job type and company name), cost per share, and information about salaried employees in the company.
Step 2: Open a company account for a limited liability company
The next step is to go to the bank and open a company account where you pay the 25,000 SEK capital. If you feel more than one, for example, 2 people owning 50% of each, you have to pay 12,500 SEK per person to the company account. Everyone who will buy a share in the company must sign the shared commitment and the number of shares must be stated in the articles of association. Then the bank must present a bank certificate showing that the capital has been paid. The certificate must then be sent to the Swedish Companies Registration Office and signed by a contact person at the bank.
Step 3: Register the limited company with the Swedish Companies Registration Office
All founders must sign the articles of association once the previous step is complete. When this is done, the limited liability company is formed and the registration of the limited company must be reported to the Swedish Companies Register Office. Notification to the Swedish Companies Registration Office must be made earlier than 6 months after the limited company has been formed. For online registration of limited companies, you register on the company’s website under “my pages”. If you don’t have access to the e-ID, you can also apply through the forms available on the website of the Swedish Companies Registration Office. The processing time for registration can be from a few days to several weeks.
The registration must state:
- business description
- business name
- contact information
- Board of Directors, who are Board members, deputies
- auditor if required
- who are the founders of the limited company
- the number of shares each shareholder shall hold
- how much does the stock cost
- accounting period
- Bank certificate showing that the capital has been paid
Step 4: Confirmation of the limited company
The Swedish Companies Registration Office will then review your application and, if everything is correct, approve the registration. Sometimes you get a no from the Swedish Companies Registration Office because the name you chose is already taken. Then you can choose a new one or complete the app with a different business name. Once the business name is approved, the name is protected throughout Sweden.
Step 5: After confirmation of the limited company
Once the limited company has been approved by the Swedish Companies Registration Office, the principal manager must be notified within 4 weeks. The real director is the person who has or has the most control over the company. You must also apply for F-tax and registered for VAT with the Swedish Tax Agency when the company is approved. When applying for the F-tax, you must fill in the expected profit in the company, which determines the temporary tax of the company.
If you have more questions about registering a limited company or want help with accounting, please just contact us. At Simons Accounting Agency, we have broad experience in accounting and annual accounts for limited companies. We also offer support and advice on various business issues you may encounter. Our goal is to help our customers maximize profits and reduce costs. Contact us by clicking on the button below.