There are many advantages to choosing a sole proprietorship as a form of the company when starting your own business. It is easier to start up, keep accounts, and use the profit, among other things.
Sole proprietorships, also called ENK or sole proprietorships, are among the most popular forms of company in Norway.
If you choose ENK, you will notice that it is quick to get started and easy to operate.
We review the benefits of starting a sole proprietorship.
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Quick and easy to register sole proprietorships
Many sole proprietorships only need to register in the Central Coordinating Register for Legal Entities. There are no fees from the Brønnøysund Register Center in contrast to the establishment of AS.
Some ENKs also must register in the Register of Business Enterprises. Others choose to register because the Register of Business Enterprises gives exclusive rights to the company name and a company certificate, but note that it costs money. Read more about the difference between the Register of Legal Entities and the Register of Business Enterprises.
It is not a requirement that you have share capital to start a sole proprietorship, nor do you need to submit attachments such as minutes or articles of association.
All you need is an approved company name, a description of what you will do, and a Norwegian address.
Fill out the simple form on einnpersonforetak.no, and we will arrange everything for you! Then you also get to try the simple invoicing and accounting program from Conta.
How long it takes to register the company entirely depends on the processing time at the Brønnøysund registries, but submitting the form on privatpersonforetak.no only takes you a few minutes.
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Easier to operate ENK
A person who runs a sole proprietorship is often called a self-employed person. This means that there is no difference between the holder and the ENK, and you tax the company’s profit on your tax return.
Therefore, you can withdraw money for your use at any time, without it being considered a salary or dividend.
There are also fewer formalities in sole proprietorships.
The reason AS needs share capital, a board, founding meetings, general meetings, and so on is that the limited company is responsible for settling for itself. These safety nets should ensure that the company can do so.
When you run ENK, you are the owner who is responsible, which means that you do not have to:
- have start-up capital
- submit annual accounts
- hire an accountant
- hold board meetings and general meetings
- submit shareholder register statement, and so on
One of several advantages of sole proprietorships is, therefore, that there is a short distance from idea to execution.
You avoid annual accounts and audits.
All ENK that earn more than NOK 50,000 a year must keep accounts by the Accounting Act and take care of invoices, receipts and contracts for 5 years. This is called bookkeeping.
When you have an accounting obligation, you choose whether you want to keep accounts yourself or whether you want to outsource the work to an accountant.
But very few sole proprietorships need to submit annual accounts to the Brønnøysund registers. It saves you around 5,000 kroner a year.
The exception is if you have an accounting obligation and, in addition, have assets worth more than twenty million kroner or employees who make up more than 20 person-years.
ENK also does not need an auditor unless they have an income of more than NOK 5 million a year.
You only submit one tax return.
You and the company are considered the same taxable person and only submit one tax return (tax return). Along with it, you usually have to submit Business Task 1.
You tax the company’s entire profit, but you can get a tax deduction on most of the costs you have in operation.
This includes:
- purchase of start-up and operating assets
- home office if the room is only used for work purposes
- costs you incur in daily operations, such as mobile subscriptions, board and lodging and the use of a car
Employer’s contribution, holiday pay and sick pay
Since you are not considered an employee of your sole proprietorship, you do not pay the employer’s contribution (usually 14.1 per cent of the wage cost) on the money you take out of the company.
In an ENK, your profits can be distributed between yourself and your spouse without you having to pay either the employer’s contribution or holiday pay.
But it also means that you are not entitled to the same benefits as a person employed in a company or your own AS. Sickness benefits, unemployment benefits, care benefits and the like are only given to employees. This is because they are primarily financed by the employer’s contribution paid to employees’ salaries.
In a sole proprietorship, you are entitled to a 75 per cent sickness benefit from the 17th day, but for the first 16 days, you are responsible. You can take out your insurance to improve your coverage.
It is entirely possible to have employees in the company.
The benefits of sole proprietorships are briefly summarized.
It is easier to start and run a sole proprietorship. ENK entails fewer formalities than an AS so that you can more easily manage the company and use the profits as you wish.
But remember that you have personal financial responsibility and that ENK, therefore, often pays best when you start a business next to a permanent job or do not have to go in with a lot of money or have many employees.
You have an accounting obligation in sole proprietorships and limited companies, but you usually do not need to submit annual accounts or have an auditor in an ENK.
You have better conditions in an AS than in an ENK regarding sickness benefits, unemployment benefits, and social security. Still, there you must also pay the employer’s contribution to your salary, in addition to any employees.
Note that it is always possible to change from ENK to AS later if your company grows.
Ready to get started? Read this guide to starting and running a sole proprietorship.
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