Selskabsskatteloven / Virksomhedsskatteloven: Valg af virksomhedsform ved etablering af virksomhed

Rasmus Riber Hansen

Student thesis: Master thesis

Abstract

Many new enterprises are established every year in Denmark, either as a proprietorship or a company with share capital (public or private limited company). The owners of the new enterprises have to choose the legal form of their business. To be able to make this choice the owners need information about the legal forms and the related rules that must be applied, for example corporate laws and tax legislation. When proprietorship is the legal form, the number of corporation laws, that the proprietorship must comply with is not comprehensive. There are no requirements concerning capital or Management structure, and only few requirements concerning bookkeeping and financial statements. The most characteristic of the proprietorship is that the owners are personally liable against the company’s creditors. The list of corporation laws that public and private limited companies must comply with is more comprehensive than that of the corporations laws that proprietorship must be in compliance with. The companies must be in compliance with the rules of “selskabsloven” which states requirements surrounding management structure, share capital, bookkeeping and financial statements. It is only the owner’s investment in the companies that is to be held liable towards the company’s creditors. A proprietorship is not an independent taxpayer, and is not a subject to tax. The income or loss from the proprietorship is subject to taxation on the owner’s taxable income. The owners of a proprietorship can apply the rules in “virksomhedsskatteloven” by using “virksomhedsordningen”. This allows the owners to divide their income between three types of income, which can lead to reduced tax payment. Furthermore, when the company generates high profits, the owners can achieve tax deduction in their income by making payments to premium capital pension. If the company is generating losses, these losses can be deducted from the owner’s and the owner’s spouses taxable income. This gives the opportunity to utilize the losses immediately. Public and private limited companies are independent taxpayers. The companies must be in compliance with the rules in “selskabsskatteloven”, which among other things states that the companies must pay 25 % tax of the taxable income. Losses must be carried forward and utilized in the company’s profit in the coming years. The owners of the public and private limited companies can receive salary and dividend from their companies. This is subject to taxation on the owner’s taxable income. To be able to compare the various tax consequences of the choice of legal form of the company, the tax consequences of both the public and private limited companies and of their owners must be assessed together. Two fictitious businesses have been created, and assessments of the legal form of the businesses have been made. The assessments included the owner’s specific requirements regarding the business and their personal conditions. The review of the corporation laws, tax legislation and the assessments of the two fictitious businesses gave rise to some conditions that would give advantage to one particular legal form rather than another. However these conditions are not to be seen as specific guidelines when choosing the legal form of a business. When choosing the legal form of a business, many conditions affects the choice and these conditions vary from each case because of different owners, their different independent requirements and their personal conditions.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2010
Number of pages104