A general guide to the rules under Swedish commercial law
Types of company
In Sweden business activities are primarily conducted through three different types of company forms.
1. Limited companies
- The most common type of company
- Legal entity
- at least one partner
- At least SEK 50,000 (approx. 5,000 euro) in share capital, paid in connection with formation.
- No personal responsibility. Board members can be personally liable if the Swedish Companies Act is not complied with in insolvency situations
2. Trading partnership
- at least two partners
- legal entity
- personally liable
- less common since the accounting and tax rules became very complex for this type of company
3. Sole proprietorship
- only one owner
- not a separate legal entity, but is the same as the private individual
- full personal responsibility
- only appropriate for small businesses without major investments
Forming companies
1. Trading partnership
Since trading partnerships are no longer formed in practice, this will not be discussed here.
2. Limited company
Limited companies are formed by:
- establishing a deed of foundation
- establishing articles of association
- payment of share capital
All documents must be registered with the Swedish Companies Registration Office together with a receipt for the paid-up share capital and minutes from the Annual General Meeting in which the Company appointed a Board of Directors. The Board of Directors must also be registered with the Swedish Companies Registration Office.
The entire process can be carried out online using the Swedish Companies Registration Office’s e-services and is not particularly complex.
It is also possible to purchase a shelf company which is a fully formed company that has not conducted any business, and can be acquired the same day, allowing you to avoid the administration involved in drawing up all the original documents.
Although it is easy to form this company, you may need legal guidance to “package” the company into an appropriate condition for the activities to be conducted. For example, with reference to the Board of Directors, financing and share capital.
If you intend to run the company together with other owners, it is also advisable to establish a shareholder agreement to govern how you will cooperate within the company, what happens if someone wants to sell their shares, dies or the agreement’s objective can no longer be reached.
3. Sole proprietorship
– Only requires registration with the Swedish Tax Agency.
All types of company forms need to be registered for income tax and VAT with the Swedish Tax Agency in order for the latter to be deductible.
Labour law
Swedish labour law is regulated by law and through collective agreements. The main rules can be found in the Swedish Codetermination in the Workplace Act and the Employment Protection Act. The former governs rights and the information to which employees are entitled in the event of operational changes. The latter governs the rights an employee has when given notice of termination and the reasons for which you can be given notice or fired.
Labour law is primarily governed through the collective agreements established between employers and the various employee organisations. Different industries have their own organisations, which negotiate agreements in different areas including working hours and benefits among other things. In general, it can be said that an employee has a high degree of protection under Swedish legislation.
Income tax and VAT
Corporate tax in Sweden is currently 22%.
The VAT rate in Sweden varies depending on the product or service placed on the market. The currently applicable VAT rates are 25%, 12% and 6%. The construction industry is also subject to what is known as reverse VAT, which means that some contractors in the construction industry do not need to issue invoices with VAT. The system was created as an obstacle to money laundering and unreported income.
Publisher: Sylwan och Fenger-Krog