Virksomhedsordningen versus Limited Liability Company

Oliver Wørts Simpson

Student thesis: Master thesis

Abstract

In Denmark, it is free for entrepreneurs to choose the business form when starting a company. The forms can basically be divided into personally owned companies and limited liability companies. The choice of business form relies on the type, the goals, regulatory and capital requirements, market, target group of the company; as well as the tax conditions. The present thesis discusses the two business taxation forms, called “virksomhedsordningen” and small limited liability company. Both forms, as well as how the taxable result is calculated are described. Upsides and downsides regarding taxation in both forms are highlighted and explained. Based on a fictitious case of a landscaper business, the taxable result and tax are calculated in both tax forms. The tax is a theoretical total calculated tax regarding the company’s lifetime of three years – from startup to liquidation. The taxable result and final tax calculation in both tax forms, are compared and differences are explained. The fictitious case is based on two models. One, where the landscaper business has no investments in operating equipment and only investments in employees. And one, where the landscaper business has investments in operating equipment and no investments in employees, except the owner. In the analysis of the tax calculations in both models, different numbers in the fictitious financial statements are increased, as well as decreased. This is done in order to see the effects on the taxable result and tax calculation in both tax forms, and to show if a form is more suitable than the other in different situations. Furthermore, the thesis includes two interviews. One interview with the manager and owner of a landscaper business, which started in the business taxation form “virksomhedsordningen” and later was converted to a small limited liability company. Thoughts regarding starting the company are discussed, as well as why he had chosen to convert his company. Another interview with a registered accountant of many years, about his thoughts regarding the two business taxations forms and in which situations he would recommend one of them. In both interviews, not only the pros and cons regarding business taxation is on focus, but also other upsides and downsides regarding both forms are discussed. The thesis concludes, that there are no major differences between the two business tax forms, and therefore other differences as well as advantages and disadvantages are highlighted and explained in the section regarding perspectivation.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages109