Starting a business in Denmark – a guide for expatriates

Expatriates who want to start a business in Denmark will find an attractive business climate. The stable Danish economy and innovative industries makes it a top choice for international entrepreneurs. This statement is actually backed by surveys and studies of the topic. As described below, studies consistently rank Denmark among the best countries in the world to do business. The areas where the Danish business environment stands out is also explored. 

The rest of this article describes the steps for you as an expatriate when starting a business in Denmark. In the initial phase the business shall be registered with a company ID number. In this step an appropriate business type shall be chosen. Each of the possible business types has its benefits and backdraws. Also the steps for creating a business plan and handling taxes and finances is described. The last step for startups is marketing the business.

Denmark is among the best countries in the world to do business

This section describes the main findings from studies that measures and ranks countries on how good they are for doing business. This should give you an impression on how good it is to do business in Denmark compared to other countries around the world.

The studies of best countries for business.

The study from the World Bank (first column in the table below) ranks 190 countries as of 2020. It measures the ease of doing business measured by indicators such as ease of getting electricity, ease of getting construction permits, access to credit and loans, taxation of businesses, ease of trade across borders, enforcement of contracts etc. Study from the World Bank.  Denmark is ranked as the 4th best country to do business in the world in this study.

Another relevant study is made by US News (second column in the table below). Study from US News. The study measures and ranks 89 countries regarding manufacturing costs, business taxation, level of bureaucracy, government transparency and corruption. Denmark ranks as the 7th best country in this study. 

The study from CEO World Magazine (3th column in the table) focuses on startups specifically. Study from CEO World Magazine. It evaluates 62 countries across five categories, including human capital investment, research and development, entrepreneurial infrastructure, technical workforce, and policy dynamics. As the table shows, Denmark ranks as number 10 with the United States at the top.

Lastly, a study from The Economist Intelligence Unit (EIU) from 2023, assesses 91 indicators of business-friendliness to give a comprehensive measure of the attractiveness of doing business in 82 countries. Denmark is ranked as the second best country in the world to do business in. Singapore is at the top with the United States as number 3. In this link the report can be downloaded: Study from EIU. The summary report only shows the ranking for a small selection of the 82 countries covered. It is therefore not suitable to show in the table below. But the study is highly esteemed and therefore worth mentioning.

Denmark ranks at the high end in all studies

The studies use different indicators to measure the business environment and cover a varying number of countries. Therefore the country rankings differ somewhat between the studys. But Denmark consistently ranks in the high end in all studies. So doing business in Denmark is quite attractive for startups and entrepreneurs compared internationally. The table below summarizes the rankings of selected countries in the 3 first mentioned studies.

Table: Rankings of best countries for business in 3 studys

Certain factors makes it attractive to do business in Denmark

• Access to the European market. Denmark is a member of the European Union and companies have access to the internal market. This market constitutes 27 countries with 447 mill citizens with only minor limitations on trade and movement of labor and capital.
• A high level of trust and minimal corruption means that less control efforts are necessary in business transactions. This contributes to an attractive business environment and attracts foreign investments. This is described further in this article: Is Denmark socialist? Or what is it instead?
• A stable political environment. Companies generally value stable regulation and frameworks that enable long term planning and investment decisions.
• Access to a well educated workforce. Danish workers engage in training and education throughout their career. The level of performance and productivity is relatively high. New companies get access to highly skilled workers through recruitment.  And focus on flexibility and efficiency in the work culture can also contribute to the profitability of the business. This is described further in this article: Work-Life Balance in Denmark
• A high level of digitalization. Denmark is one of the most digitalized countries in the world. You can read more about this in this article: Danish companies – great places to work. Companies use their digital capabilities as a strategic parameter to be competitive. Many internal processes get easier and cheaper for companies. And marketing and sales activities are largely digital which is more efficient in many ways. Also contacts with public authorities such as tax reporting and applying for different types of permits is highly digitalized and made easier by digitalization.
  
• Well functioning capital markets give companies and startups access to financing at high standards. For start up companies this can be crucial especially in the initial phase. Types of funding available for startups include bank loans, venture capital and in some cases also government grants.
• A well developed infrastructure regarding energy, transportation and the digital area. The supply of energy and electricity is stable and well functioning. Transport infrastructure (roads, railways, airports etc. ) is also at relatively high standards. In the digital area, fast and stable broadband connections and the 5G mobile network is rolled out throughout the country. Startups have access to these infrastructures, which is very important for operational purposes. Compared to other western countries – where public infrastructure in many cases are underfinanced and in bad state – Denmark is known for prioritizing and investing in infrastructure projects.
  
• Government policies and regulation generally supports start-ups and provide help for navigating the new business landscape. As in many other western countries there are administrative burdens for companies and room for improvement from the perspective of companies. But contacts and transactions between companies and public authorities are made more smoothly through the high level of digitalization. And companies generally experience easy access to public authorities.
• Access to business ecosystems and knowledge in key industries.  In life science, renewable energy and information technology, Denmark has strong positions. Start up companies in these industries become part of these business ecosystems with access to valuable shared knowledge and the skill sets among workers through recruitment. For entrepreneurs considering in which country to place their business this can be an important parameter. 

Steps for expatriates starting a business in Denmark

Step 1: Registering your business in Denmark

This consists of 3 substeps: 1A: Choosing  a business type 1B: Choose an official name or title for your company and 1C: get a company registration number (called “CVR”-number in Danish). The CVR-number is required and used for taxation and accounting purposes and in almost all business activities. 

Step 1A: Choose a business type

There are three main types of business in Denmark: sole proprietorship, limited liability companies and corporations. Each suits different business needs and sizes. It is important to choose the right one as the business type impacts how the business is taxed and the government regulation in place. The right structure depends on your business size, growth plans and how much personal liability you are willing to take.

According to Statistics Denmark, 48% of new business in Denmark started as sole proprietorship. 44% is limited liability company (abbreviated as “ApS” in Danish language) and only 2% is a cooperation (abbreviated as “A/S”). This illustrates quite well that the business type of sole proprietorship and companies with limited liability is suitable for startup companies. Later on when the company has grown in size and number of employees, it can be appropriate to change the business type to a cooperation. 

Sole proprietorship

is ideal for small, one-person businesses. Most entrepreneurs choose this business type when starting a new business in Denmark. You are liable to pay VAT on sales and register for VAT when sales revenue exceeds 50000 DKK annually. In this structure, you are the sole owner and decision-maker. There is no legal distinction between you and your business. There are around 200.000 active companies in Denmark of this type.

Advantages

• Easy and free to set up.
• No requirements about start up capital.
• No requirements about annual financial reports to public authorities. But an annual income statement for taxation purposes is still required.
• an official board or management is not required. 

Disadvantages

• You are personally responsible for all debts and financial obligations.
• Your business income is taxed as personal income and the more favorable corporate tax rate at 22% can not be applied. With higher business income, you are liable to pay the top tax rate of personal income. This only applies for earnings you withdraw from the company. Profits from business that are kept in the company for investment purposes are taxed by corporate taxation rules. So whether this will be a burden in practice, depends on the specific individual circumstances.
• You cannot get new owners to the company.

It is possible to change the registered business type in the CVR-number if that is appropriate. So if as an example you need to get new owners to the company or personal income taxation is becoming too heavy due to higher business income, you can shift to one of the other business types described. Therefore this business type is still favorable for startups and small one-person businesses in the initial phases.

A similar business type is partnership (abbreviated as “I/S” in danish language). The same taxation and accounting rules apply. The difference is that there are more than one owner of this type of company.

Limited liability company (ApS)

can have more than one owner and a start capital of 40000 DKK is required. An official management or executive committee is required but creating a board is optional. Income from the business is taxed at the corporate tax rate of 22% and not as personal taxable income. Official founding documents and articles of association must be created. There are around 200.000 active companies registered with this business type so it is also very common.

Advantages

• You are not personnel responsible for debts in the company.
• Taxation can be more favorable than for sole proprietorships depending on the level of income from the business. The corporate tax rate of 22% is lower than the tax rate for personal income.

Disadvantages

• Official founding documents and articles of association must be created. 
• Less easy to set up than a sole proprietorship. A set up fee is charged. An official management board is required
• A startup capital of minimum 40.000 DKK is required. It is not possible to deduct deficits from personal taxable income.

A corporation (A/S)

 is suitable for larger businesses with higher risks and investment needs. A corporation is a separate legal entity with its own rights and responsibilities. A startup capital at 400.000 DK is required. There are 40.000 active corporations as of 2024. A board and executive committees shall be created as a requirement. The regulatory demands are more strict than in the other business types mentioned. An annual financial report shall be created and approved by an accountant as well as the general assembly held by the company. Furthermore the report shall be sent to The Danish Business Authority.

Advantages

• The owners (shareholders) are not personally liable for debts.
• Corporations are subject to corporate tax, which in many cases are more favorable than personal taxation.

Disadvantages

• More regulatory and reporting requirements.
• More complex to set up. An executive committee as a board is required.
• A fee is charged when applying for a CVR-number.

Step 1B: Choose a name for the business

Choosing the right name for your company is important in many aspects. The name shall be significantly different from other names in the CVR-register and must not be misleading regarding the business activity of the company. For limited liability companies (Aps) and cooperations (A/S) the business type shall always be part of the official company name. An example of this: “Jensens consulting company A/S”. The company name is used in many business situations so it is important to choose a name that represents your company and the business activities well. 

Step 1C: Apply for a CVR-number

When you have chosen the business type and company name, the next step is to apply for the CVR-number. Here is the link to the official website in english to apply digitally: Official website to apply for a CVR-number. For sole proprietorships it is free and without charges to apply. The application is processed within 14 days. For limited liability companies (ApS) and corporations (A/S) the case processing time is under 24 hours. Here there is a charge of 670 DKK to be paid. It is possible to change your chosen business type. You will then have to apply for a new CVR number.

The CVR number is used in many business activities. Such as for identification purposes when the company contacts public authorities as “SKAT” (The Danish tax authority). But also  when sending invoices to customers. Furthermore the CVR-number signals professionalism and trustworthiness in business relations.

Step 2: Create a business plan and a budget for your business in Denmark

Create a business plan

A business plan is a document that outlines a company’s goals and the strategies to achieve them. It shall describe how you can make a profitable business. There is no specific requirements for the format, but it is recommended that these elements are included:

• Products and services delivered by the company. Description of product pricing  and production processes. And also information about patents and R&D activity.
• Market analysis: What are the conditions in relevant markets? Who are potential customers? How will the company position itself in the market?
• Marketing strategy: Description of advertising and marketing campaigns. Description of distribution channels and digital marketing strategy.
• Financial plans and projections of financial targets and estimates for the first few years. Description of external financing requests.

Create a budget

To be able to manage finances properly a financial budget is needed. The financial plans laid out in the business plan can be the foundation for the budget. The budget shall forecast sales revenues, operating costs, cash flows, and operational income on a yearly – and in some cases also monthly – basis. This will help assess the profitability of the company and what adjustments and corrective actions are needed.

The business plan and the budget are required documents to obtain external financing such as applying for bank loans. So it is quite important to create these documents at high quality. There are many options available in the market to buy professional assistance for this task. 

Step 3: Finding the right funding of the business

The business plan and the budget will give some guidance about the need for external financing. And It is important to find the right funding of the business. financing costs such as interest payments on bank loans will impact the operational cost and thereby the profitability of the business. In Denmark, there are several options for funding. 

• Bank loans. This is a common choice. To achieve this type of funding, a solid business plan is required.
• Government grants are great and can be an option for innovative projects or certain industries. From a financial perspective, grants are of course more favorable than a loan. But there are also specific criteria that the project or business must fulfill to be eligible. So in practice must startup businesses can not rely entirely on this type of funding.
• Venture capital is especially relevant for startups with high-growth potential.

Researching available funding options is often needed. And networking can also open doors to funding opportunities.

Step 4: Handling taxes and accounting

Understanding Danish tax laws is essential. As described above, the tax rates and taxation rules applied depend on your chosen business type for CVR-registration. It is also important to keep accurate records of all transactions. This helps in calculating and paying the correct amount of tax.

Additionally, keeping up with accounting standards is necessary. This includes recording all income and expenses. You must also prepare annual financial statements. The requirements for this again depend on business type. For expatriates, it might be helpful to hire an accountant or use accounting software. There are many digital accounting solutions available in the market at low fees to be paid.

Step 5: Marketing your business

Marketing your business in Denmark effectively is key to obtaining these crucial customers and sales revenues. So consumer behaviour must be analyzed. Danish consumers generally value quality and sustainability of products.

Digital marketing is crucial at present time. This includes establishing a website and a webshop for your business. And using online advertising. Utilizing platforms like Facebook, Instagram, and LinkedIn helps reach a wider audience.

But traditional methods that are not digital such as networking events, flyers and local newspapers still work in this digital age.

Expatriates can benefit from learning the danish business culture

Some main points about the danish business culture are listed below. Learning about the culture can help you become integrated in the business environment. And thereby help you to succeed when doing business in Denmark.

• Straightforward communication without much formality is preferred by Danes. In meetings, it is common to go straight to the point. Being on time for meetings is highly valued and shows respect for everyone’s time. 
• Dress code in Danish business settings is generally smart but not overly formal. 
• Teamwork and equality are central practices for doing business in Denmark. Decisions are often made through consensus. This means everyone’s opinion is considered.
• In negotiations, fairness and honesty is valued. Danes prefer negotiations where both parties benefit. Aggressive sales tactics or hard bargaining are not well-received.
• Work and personal life is separated by preference. Work-life balance is important for Danish employees. So avoid scheduling meetings outside regular working hours unless absolutely necessary.
• Language obstacles can be a potential problem when starting a business in a new country. But nearly all Danes are fluent in the English language and willing to communicate in English when necessary. So mastering the danish language – which for many newcomers can be quite difficult – is not a prerequisite. Also information at websites etc. is often available in the English version. So in practice newcomers will not experience this as an obstacle for doing business in Denmark.

Conclusion

Denmark offers great business opportunities for startups and entrepreneurs. For expatriates the business environment is quite attractive. This is actually confirmed in several studies ranking countries across the world regarding how good they are for doing business. Denmark is consistently in the high end of these rankings. The Danish business environment stands out in certain areas, which contributes to this favorable position.

When starting a business in Denmark there are some initial practical steps for expatriates. Such as registering the company and getting a CVR-number. This step involves finding the right business type for the company. The different types to choose from and their respective advantages and disadvantages is described above. Also creating a business plan and handling finances, taxes and accounting is needed. Lastly, marketing your business is needed to obtain these crucial sales and customers. With this complete guide for expatriates, the steps to start a business in Denmark are described, and you are ready to start the process.

Steen Andersen

Content writer - specialized in the areas business, finance and working in Denmark.

See Full Bio