Limited liability companies

A limited liability company is a company in which the partners (the shareholders) are not normally personally liable for the company’s debts. Starting up a limited liability company requires a capital investment.

A limited liability company can be owned by one or more partners. This type of company is a separate legal entity and pays income tax on any profits in the company as well as employer’s social security contributions on salaries paid. In addition, the partner pays income tax on salaries received. The accounts of smaller limited liability companies do not have to be audited by a certified public accountant or an authorised auditor.

You need initial share capital

A limited liability company must be registered with the Swedish Companies Registration Office (Bolagsverket). When you start a limited liability company, you must have at least SEK 25,000 in share capital. This capital can consist of cash or property that is useful for the business.

Note: An accountant must value the property in order for you to use it as share capital.

Your personal liability is limited

There is a clear distinction between you as the owner of the company and the company itself. Your personal liability as the owner of the company is limited, and the only thing you can generally lose is the share capital you invested. As a shareholder, it is possible to receive dividends on your shares.

You must prepare an annual report

A limited liability company requires more administration than a sole trader company. All limited liability companies must prepare an annual report each year and submit it to the Swedish Companies Registration Office.

Salaries, taxes and social security are similar to employment

As a working owner of the company, you are employed in your limited liability company and can take out a salary. When you receive a salary from your company, it is considered an employment in terms of both taxes and compensation from the Swedish Social Insurance Agency (Försäkringskassan), such as for sickness and parental benefits.

With a limited liability company, there are rarely any tax surprises because the company deducts preliminary tax when you take out your salary and pay it to the Swedish Tax Agency (Skatteverket). This means that the social security system has simple, clear rules to follow when it comes to rights to benefits and support if you fall ill, become a parent or retire. You are also entitled to healthcare through your limited liability company.