When starting a company, many entrepreneurs face a lot of barriers. One of them is the choice of company form. In Denmark there is as ground rule no limitation or rules for which legal form a company shall be established and run in. Thereby it is up to the owner to establish the company for example as a sole proprietorship or as a company with share capital. There is a line of factors an entrepreneur should consider in connection with choosing company form. Factors such as risk-profile, exit-plan and target group. It is important that the choice of company form is based on multiple parameters. The subject of this thesis is about which company form is optimal, when the whole lifecycle of the company is taken into consideration. The thesis includes examination of the legal and tax factors and accounting related requirements for certain company forms – Sole proprietorships and companies with share capital with a holding structure. By using the theory, four company forms are examined with the purpose of assessing which company form is optimal for the exact phase of the company. In addition, the market has been examined to show how much entrepreneurs actually know about the theory behind and which parameters to consider in the decision-making of the company form. In the end, the thesis tries to assess if there are company forms that combines the best of both forms in the attempt to create the optimal company form. The review of the fundamental requirements gave few relevant conclusions. The self-employed are personally liable with all their personal assets, while the shareholders only are liable of their invested capital. The freedom of contract makes the formation of sole proprietorships more accommodative due to the rules of companies with share capital are more strict and need more capital, which is due to protection of creditors. From a tax point of view the sole proprietorships are by far the most beneficial due to the options of planning the tax. The reviewing showed that the optimal choice of company form in most of the selected phases was the sole proprietorship. The only situations that showed it to be most beneficial with a company with share capital were if the company received extern capital and if the company in the long term was to be sold. The examination of the market showed a tendency of entrepreneurs not knowing the essence of the different company forms, which can result in serious economic effect to the entrepreneurs. In the end it is concluded that the partnership company form makes it possible to combine the best of two worlds, both the limited liability and the use of advantageous tax rules in sole proprietorships.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||123|