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What is a sole proprietorship?
A sole proprietorship is a common corporate structure that is often chosen by small business owners. It is a form of business in which you as the owner are the same as the company - that is, you have full personal responsibility for the debts and obligations of the company. The advantages of a sole proprietorship include a simple and quick registration process, as well as full control over the enterprise and its revenues. There is also flexibility when it comes to accounting and taxation, and you can even use your private bank account for corporate transactions if you wish.
Differences between different types of company structures
Now that we understand what a sole proprietorship is, how do the other common forms of corporation work?
Limited liability company (AS): A limited liability company (AS) is a separate legal entity from its owner and offers limited personal liability. That means that you, as the owner, are not personally liable for the debts of the company. On the other hand, an AS requires more complex accounting and has higher registration costs.
Stakeholder (I/S): A stakeholder (I/S) is a corporate structure used when two or more people join together to run a business together. The owners have shared responsibility and share both profits and losses - just like a sole proprietorship, stakeholding has easier accounting and is cost effective to start, but the owners are personally liable for the company's debts.
Are you unsure whether to start a sole proprietorship or a limited liability company? Consider the advantages and disadvantages that come with all three types and decide on what best suits your needs.
Step by step: how to start sole proprietorship
Step 1: Register your sole proprietorship
Start by registering your business with altinn.no - through this portal all relevant authorities can access your registration. Registering your sole proprietorship means officially creating your business and giving it a legal identity.
Step 2: Get Approved for F-Tax
The next step is to apply for an F tax slip. F-tax is a prerequisite for running a business and means you can bill your customers and pay taxes on your income. There is also a requirement for VAT registration.
Step 3: Apply for VAT reporting
If annual turnover exceeds a certain threshold value, you will need to register your business for VAT. This means that you will charge VAT on your invoices and then report the amount of VAT you have collected. VAT registration entails an additional administrative burden, but it can also be beneficial depending on the nature of the business and customer base.
Step 4: Secure company names and insurance policies
Finally, choose an appropriate business name that is unique and is not already being used by anyone else. Also check that your business name is registered and does not violate any trademark rights. In addition, you can consider taking out insurance policies that are relevant to your business, such as liability insurance and corporate insurance.
How much does it cost to start a sole proprietorship?
Starting sole proprietorships can be cost-effective compared to other company structures. There is no requirement for start-up capital, and the registration fee is usually low. In addition to other minor costs, you can also budget for any consulting fees, such as accountant or legal advice, as well as any start-up capital to cover the initial costs of your business.
Here's how to create a realistic budget for your business:
Inventory costs: Identify all your company's costs, including salaries, rent, operating costs and marketing, and more.
Plan income: Estimate your company's revenue based on sales forecasts and customer expectations.
Long-term perspective: Think about long-term investments and save for future growth and unforeseen expenses. A realistic budget is key to keeping your business financially on track.
Grow your individual business with a business loan from Qred
With a business loan from Qred, your new business can invest in new equipment, increase marketing and hire more qualified employees. At Qred we offer business loans of between 10 000 and 5 million NOK, and with a simple application process you can access capital quickly and easily - if everything looks good, you can even get the money in the account on the same day!
Frequently asked questions about starting sole proprietorships
How much does it cost to register sole proprietorships?
The cost of registering sole proprietorships varies, but it is generally much lower than for other forms of company, as there is no minimum start-up capital requirement.
What is required to start a sole proprietorship?
To start sole proprietorships, you need to register your business, apply for an F-tax certificate and optionally register for VAT if your annual turnover exceeds the threshold value.
Is it worth starting a sole proprietorship?
Oh, absolutely! If it fits your business model and you're willing to take on the personal responsibility for your company's debts, it may be worth starting sole proprietorships - especially if you have simple financial needs.
How much can one earn in sole proprietorships?
There is no specific income limit for sole proprietorships. Your income depends on the nature and scope of your business, as well as tax laws. You pay taxes on your income according to the applicable tax rates.
