Virksomhedsomdannelse: Skattepligtig vs skattefri

Rasmus Fugl Olsen & Mikkel Emil Schütt Schmidtke

Student thesis: Diploma thesis

Abstract

The following assignment will be giving a shortlist of the pros and cons of being an entrepreneur with a personal business and a company. A lot of startups in Denmark are started as personally owned because the demands and capital requirements are lower than starting a company. For example, a personal business does not require a start-capital unlike a company which requires a minimum start-capital of DKK 40.000 which is one of the significant factors why startups start as personally owned. In addition, the most common differences among having a personal business and having a company is the liability that is provided being an owner. In a personal business the owner is liable for the entire debt of the company which in some line of industries is a high risk to take. A company is only liable for the paid-up capital. As an owner of a personal business, it is possible to convert into a company which can be done in two ways. A taxable and a tax-free are the two methods which are possible to convert through. A transformation of the personal business can be for several reasons as; the business has grown fast and wants a better starting point, more attractive to investors and no longer wants the responsibility of being liable for the debt. The taxable method is based on a valuation and sale of the personal business as if it were a sale to an independent third party where the taxation of the profit takes place immediately. This method requires that the owner of the personal business has a larger amount of liquidity to pay the taxes of the profit. The tax-free method is based on the company who buys the personal business enters the previous company tax position also called tax succession. Therefore, by using this method the tax of the profit is postponed during the converting of the company until the director of the company sells his shares. In addition, the valuations of the personal business assets in the tax free are identical to the taxable method. For comparison with the taxable method this method does not require a larger amount of liquidity initially. After having provided an insight into the pros and cons of a personal business versus a company as well as a taxable and tax-free method of transformation, the assignment will use a business case to exemplify how it should be done in practice including a valuation of the assets within the company.

EducationsGraduate Diploma in Accounting and Financial Management, (Diploma Programme) Final Thesis
LanguageDanish
Publication date2021
Number of pages81
SupervisorsMaria Wriedt Keller