Private limited company (ApS): a guide to everything you need to know

Private limited company (ApS): everything you need to know

A private limited company (anpartsselskab, ApS) is one of the most popular company forms in Denmark, especially among entrepreneurs and smaller businesses. An ApS is an independent legal entity that separates the owner's private finances from the company's finances, offering a good balance between responsibility and flexibility. In this article, we cover everything you need to know about private limited companies, including formation, requirements, tax rules, and advantages and disadvantages.

Big news: Change in the share capital for private limited companies

Important update for 2025: From January 2025, the requirements for forming a private limited company have changed. Previously, an ApS required minimum share capital of DKK 40,000, but it is now possible to form a private limited company with DKK 20,000 in share capital. This change makes it significantly easier for entrepreneurs and small business owners to get started with their own company.

The change could make a big difference to the many who have previously held back from starting an ApS because of the higher capital outlay. The lower share capital opens up more opportunities for smaller businesses that want to protect their private finances, gain a professional corporate structure and benefit from corporation tax.

What is a private limited company (ApS)?

A private limited company is a company form in which the business is an independent legal entity, separate from its owners. This means the company can enter into contracts, own assets and take on obligations in its own name. The owners of an ApS are called shareholders (anpartshavere) and are liable for the company's debts only up to their contributed capital. This protects the owners against personal financial liability.

Who is liable in a private limited company?

In a private limited company, the owners (shareholders) are liable only for their contributed capital, and there is no personal liability for the company's debts. This differs from a sole proprietorship, where the owner is personally and fully liable for the business's obligations. Liability in an ApS is therefore limited, which makes the company form attractive to those who want to protect their private finances.

How do you set up a private limited company?

Setting up a private limited company requires a little more work than starting a sole proprietorship, but it is still a relatively simple process. Here are the basic steps:

1. Share capital:
   An ApS requires share capital of at least DKK 20,000. This change took effect in January 2025 and makes the company form far more accessible to entrepreneurs with limited funds. The share capital can take the form of cash or other assets (such as equipment or property), but it is important that such assets are valued by an auditor if they form part of the capital.
2. Memorandum and articles of association:
   You must prepare a memorandum of association describing the company's purpose, and articles of association setting out the company's rules and organisation.
3. Registration with the Danish Business Authority:
   The ApS must be registered with the Danish Business Authority (Erhvervsstyrelsen) via Virk.dk, where you are assigned a CVR number (the Central Business Register number). You must state the company's name, address, purpose and other relevant information.
4. Auditor (if required):
   In the vast majority of cases, we recommend that you engage a bookkeeper who can manage your bookkeeping according to your needs. It is also important that you can get help preparing your annual accounts.

Requirements for a private limited company

• Share capital: At least DKK 20,000.
• Ownership structure: An ApS must have at least one shareholder. There is no upper limit on the number of shareholders.
• Registration: The company must be registered on Virk.dk, and you must provide information such as name, address and purpose.
• Management: An ApS must have a management, which can consist of one or more directors and a board of directors (optional, depending on the company's size).

Tax rules for private limited companies

1. Corporation tax
   An ApS is subject to corporation tax of 22% on its profits. This is a flat rate, which gives owners predictability and stability. Profits are taxed only once they have been generated in the company. The company can choose to retain the profits in the business and pay the lower corporation tax, or distribute them as dividends to the owners, who are then taxed on the dividends.
2. Dividend taxation
   When the owners (shareholders) take dividends from the company, the dividends are taxed as share income at a rate of 27% for dividends up to DKK 56,500 and 42% for dividends above DKK 56,500 (for 2025).
3. Salary
   If shareholders work actively in the company and receive a salary, that salary is taxed as personal income.

VAT and duties

• VAT registration: If the company has an annual turnover above DKK 50,000, it must register for VAT.
• VAT reporting: VAT must be reported quarterly or half-yearly, depending on the company's turnover.
• Duties: Depending on the industry, additional duties may apply.

Advantages of a private limited company

• Limited liability: The owners are liable only for their contributed capital, which protects their private assets.
• Tax advantages: Lower corporation tax of 22% and the option to retain profits in the company.
• Professional image: An ApS is often regarded as a more professional business form, which can be an advantage when working with larger companies or attracting investors.
• Flexible management: The option to appoint a board of directors and have several owners.

Disadvantages of a private limited company

• Higher costs: There are more administrative requirements and costs associated with forming and running an ApS, including accounts and possibly an auditor.
• Reporting obligation: Private limited companies are required to prepare accounts and must submit an annual report to the Danish Business Authority.

Is a private limited company the right choice for you?

A private limited company is ideal for entrepreneurs who want to protect their private assets and create a professional structure for their business. It is also a good solution for those who want to attract investors or have plans for growth. With the new, lower share capital of DKK 20,000, it has become far easier to form an ApS, opening up more opportunities for both established and new entrepreneurs.

Need help getting started or advice on choosing a company form? Contact a professional adviser or auditor for advice tailored to your situation.