Index:
1. Type of Business
2. Preconditions
3. Initial registration
4. How to register the business?
5. Initial considerations
6. VAT - who and when
7. Legal Basis
8. Employment
a. Registering the employee
b. The Employee Register
9. Taxation rules
10. Licenses
If you are at least 18 years old, not declared incapable and not under bankruptcy quarantine, you may establish an enterprise.
On the surface it seems uncomplicated to start your own business. Registration is achieved by submitting a single form to the authorities. But of course, there are a number of rules and regulations that affect both starting up and running your business. And it is your responsibility to know all aspects relevant to your business enterprise.
In addition to knowing the implications of the relevant legislation, you have to make some decisions that will influence both formal aspects such as accounting and auditing, and your status as businessman or woman. You may for instance be the owner of and work in a sole proprietorship or, you may be employed by a company that you in fact own. This guide somewhat voluminous is meant primarily for you who are on the brink of starting your own business, operating in Norway. Still, we cannot claim that we are able to give you the full picture here, but we hope it will serve as a satisfactory starting point. We wish you the best of luck with your plans.
Remember that if you need further information, the Narvik Business Hotline (800 33 840) is only a toll free phone call away.
You will always find the last updates of this information on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap1.shtml
Type of Business
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For you, about to start your own business, the choice of business entity is often the first question to arise.
Starting a new business, the alternatives are normally:
- Sole proprietorship / self-employed business (In Norwegian "enkeltpersonsforetak")
- A company of unlimited liability ("ansvarlig selskap" - ANS or "Delt ansvar" - DA). In this guide, we often refer to this type of entity as unlimited company
- A limited liability company ("aksjeselskap" - AS). In this guide mainly referred to as limited company
The choice has bearing on the responsibility you assume as owner of the business and your freedom to control the assets of the business.
The company category should match both the business sector and your financial situation.
The type of business entity affects:
- Your responsibility as owner
- The extent by which you may control the assets of the business
- Your personal responsibility for the business debts
The formal bodies of the business, i.e. general assembly, board or a business manager
The standard types of business enterprises are discussed in some detail later. Note that this guide cannot give specific advice on what type will suit your purposes. We will, however, try to cover the implications on income, taxation and possible debts associated with each type of business entity.
You will always find the last updates of this information on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap2.shtml
Preconditions
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For your actions to be regarded as business activities, they must involve transactions of an economic nature. What you do must show the potential of producing a profit. However, not necessarily immediately; - business resulting in losses over the first few years is still considered business as long as the activities may generate a profit in the future.
The tax authorities decide on how your activities will be regarded. They will consider the period over which the activities are carried out, as well as the extent of these activities when deciding on the nature, i.e. business or hobby.
Note that these conditions are not absolute – there are no definite thresholds that must be exceeded for the hobby to be regarded as business. However, in one case (business) all costs related to the activities are deductible on your tax return, in the other (hobby) they are not. It is therefore very important that you engage in a dialogue with the Local Tax Assessment Office at an early stage to prevent any surprises later on.
If several of the following points are true, you are most likely running a business:
- You have several principals on a regular basis, consecutively or at the same time
- You have your own office or workshop
- You provide the necessary raw materials yourself
- You use your own operating assets such as machines, transportation, computers
- Your turnover/revenue is generated by delivered goods or services rather than per time unit. However, as a consultant, you may very well be paid by the hour
- The work does not necessarily have to be carried out by you. Instead you may use someone employed by you
- The assignment is limited, both with respect to time and extent
- When the assignment is completed, you cannot demand another from the principal
- The principal has no professional nor managerial authority over you
- The principal may complain and seek compensation if not satisfied with the result
- The principal pays for the assignment as a whole, not for the individual elements such as materials, management, use of machinery etc.
The above list is not complete. Note that there is no single point that is considered decisive. In fact, you must expect the tax authorities to examine your business as a whole before a decision on business or hobby is reached.
You will find more information and the last updates of this topic on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap3.shtml
Register your business
Initial registration
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Central Coordinating Register for Legal Entities
In order to run a business enterprise you have to be registered in the Central Coordinating Register for Legal Entities (CCRLE). Following registration, you will receive a nine-digit organization number used in business documents and in your information exchange with the authorities. Unless you have a valid organization number, you cannot open a bank account on behalf of the enterprise. Furthermore, you cannot engage employees nor register in the Value Added Tax (VAT) Register.
How to register the business?
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Having considered the different aspects of becoming a businessman or -woman, you are now ready to take the next step - making your business a legal entity.
The authorities must be notified when you found a company, when employees are hired and when you start selling goods and/or services subject to VAT and other taxes. If at least one of the mentioned conditions applies, you must register the business with the CCRLE. The Combined Register Return will save you from reporting the different applicable issues to individual authorities.
Prepare the Combined Register Return
Obtain the form ”Combined Register Return”. Use the form's part 1 (main form), which can be downloaded from http://www.brreg.no/ or ordered from the Narvik Business Hotline 800 33 840 or Brønnøysund Register Centre by telephone, +47 75 00 75 00.
In the process of entering the data, it will normally become clear if your entity must be registered as a business enterprise, if you are an employer and if you are eligible to pay VAT on the goods and/or services you sell.
Obtain the form Combined Register Return ("Samordnet registermelding") from:
• The Brønnøysund Register Centre
• The Norwegian Labour and Welfare Organization (NAV)
• The County Tax Assessment Office
or the Narvik Business Hotline, tel. 800 33 840
These offices may also provide the form and help you fill it in.
More information on how to register and the last updates on this topic at Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap4.shtml
Choice of business entity
Initial considerations
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One of the first questions arising when a new business entity is formed, is what type of enterprise will offer the most benefits for the kind of business one intends to establish. Unfortunately, there is no singe, definite answer to that question. You will have to consider the pros and contras, and perhaps seek advice from someone who has been in the same position, or from accountants, auditors, lawyers or other professionals before the final choice is made.
When you start a new and probably small company, you normally face the following alternatives:
- Sole proprietorship (self-employed business)
- Unlimited liability company (ANS and DA)
- Limited liability company (AS)
- Cooperative or part ownership (BA)
Other types of company
Sole Proprietorship (Self-employed Business)
The sole proprietorship is a type of organization where a single and real person is responsible for the business. As indicated by the term identifying the type of business, such a company will have just one owner.
In such a company you have extensive financial freedom. You are, however, also financially responsible for all debts and obligations incurred by the company. Note that there is no distinction between personal and enterprise liabilities: You are personally responsible for the company's debts, even with your personal wealth and possessions.
Business with Unlimited Liability
In a company with unlimited liability there are two or more owners, often referred to as companions (partners). In such a company the owners have a personal responsibility for the overall liability of the company, in full or in part, however, in a way that collectively covers the debt of the company.
In practical terms we distinguish between two main types of unlimited companies:
ANS (responsible company):
In this kind of unlimited liability company each owner has a personal responsibility for all debts (solidarity responsibility). The amount of debt one owner is unable to cover, may be charged each one of the other owners.
DA (Collective responsibility):
In this kind of unlimited liability company the owners are collectively responsible for all debts. However, each owner is responsible only for a part corresponding to his/her part of the ownership.
Business with Limited Liability
Limited liability companies - identified by AS - or public limited liability companies - identified by ASA - are enterprises where none of the participants are personally liable for the company's obligations.
The founding and operation of a limited liability company is governed by Act no. 44 from 1997, “The Limited Liability Company Act” (In Norwegian: Aksjeloven).
In a limited liability company, none of the owners is responsible for more than the sum paid as share capital. You may, however, be required to secure the company loans by a personal guarantee, collateral or some other surety. In case of bankruptcy, your liability is then the share capital plus the surety.
Cooperatives/Part Ownership (BA)
This type of company is used when the purpose is either to promote the owners’ interests as consumers or professionals or to employ the owners.
The company is established by an initial assembly where the founders decide on company articles and elect members of the board and an auditor. To register the company as a BA, the company articles must state that the partners, in addition to owning the company, intend to use it – known as the principle of correspondence between owner and company.
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Other types of enterprises
Associations and Societies
There are types of organizations which are not regulated by specific acts, but nonetheless, are subjected to certain rules and conditions. Such organizations may be societies, associations and for instance charity organizations (often referred to as NGOs - non-governmental organizations).
If you want to register a society in the Central Coordinating Register for Legal Enterprises, you have to certify that the organization is founded and currently exists. Hence, you need to submit both the Articles of association and the founding document in order to register..
When you:
- establish a company…
- hire employees or…
- sell goods and services liable to VAT and other taxes…
… the authorities must be notified
You will find more details and the last updates on business entities on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap5.shtml
VAT - who and when
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The County Tax Collection Office maintains records of businesses that are obliged to pay VAT (the VAT Register), and has the responsibility for administration and control of VAT.
The part 2 of the Combined Register Return is dedicated to companies that are affected by the VAT regulations, and it is your duty to register. If the business, after the initial registration, is changed so that goods and services that are VAT eligible are included, the mentioned part 2 is submitted separately.
All people running businesses that sell goods or VAT eligible services are obliged to register in the VAT register when the turnover exceeds 50 000 NOK over a period of 12 months.
If you are registered in the VAT register, you are allowed to deduct VAT from the cost of the goods and services used in your own VAT eligible business.
For charity and public institutions and organizations, the registration limit is 140 000 NOK.
Registration in the VAT Register
Both foreign and Norwegian businesses supplying goods and services in Norway, shall register in the VAT register when their sales or withdrawals of such goods and services exceed 50 000 NOK over a period of 12 months. A written notice of the business activities shall be sent to The Central Coordinating Register for Legal Entities (CCRLE) or to the County Tax Office where the foreigner (or his representative) has his place of business/residence. The written notice shall be given by filling in the registration form "Combined Register Return" part 1 and 2. If the business is already registered in CCRLE and has given all the necessary information to this register, only part 2 of the registration form shall be filled in.
Registration by the use of a representative
A foreign non-established business with taxable supplies in Norway, must register for VAT through a representative. When registered through the use of a representative, the foreigner gets the same rights and obligations as those that follow a normal VAT registration.
The only requirement the representative must satisfy is that he or his business is resident in Norway. For instance, it is not required that the representative is a qualified auditor or accountant etc.
Both the foreign business and the representative shall sign the registration form.
The foreign business must keep a complete account for its taxable activity in Norway. The representative shall keep a separate complete account for the supplies in Norway (purchases and supplies) by the foreign business.
You will more information and the last updates on VAT on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap6.shtml
Legal Basis
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Accounting and bookkeeping obligations are determined by two separate acts, the Accounting Act and the Bookkeeping Act. In simple terms the former states the types of business entities that are required to produce annual accounts and the obligatory contents of these accounts. The latter states the bookkeeping duties and records. All business entities regulated by the Accounting Act are also obliged to bookkeeping pursuant to the Bookkeeping Act. In fact, all legal entities carrying out business activities or participating in such activities in Norway are obliged to bookkeeping.
Accounting
The Accounting Act states that foreign enterprises carrying out business activities or participating in such activities in Norway, and who are subject to Norwegian taxation according to domestic legislation, are obliged to keep accounts pursuant to the Accounting Act. This implies, among other things, that enterprises must register transactions that are of importance to the size and composition of their assets, liabilities, income and expenses in an accounting system.
The registration must comprise all information that is of importance to the preparation of the annual accounts and other financial reports that are required by acts and regulations (statutory reporting).
The accounting system must itemise all registered information that forms the basis for the amounts stated in statutory reporting.
Accounting records, including annual accounts, the board of directors' report, auditor's report, vouchers, time sheets, business agreements, correspondence etc. must be stored for either 10 or 3.5 years, depending on the nature of the document.
Auditing
You are obliged to appoint a Norwegian auditor if the operating income from your business entity's overall activities in Norway exceed 5 millions NOK. If the annual accounts show operating income exceeding this threshold, the obligation to appoint a Norwegian auditor comes into effect for the subsequent accounting year. If the operating income in the following two accounting years falls below this threshold, the obligation to appoint a Norwegian auditor ceases from and including the third accounting year.
Sole proprietorships and unlimited liability companies with up to five employees that are required to follow the Accounting Act are exempted from the obligation to appoint an auditor if the annual turnover is NOK 5 million or less.
Limited liability companies must always appoint auditors.
You will always find the last updates of this information on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap7.shtml
Employment
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An employer in a private enterprise may employ whom he/she wants. Nevertheless, the Employees Act has some rules that must be obeyed.
The employer cannot demand the applicant to give information concerning political, religious or cultural questions or if he/she is a member of any employees' organizations. As a general rule, questions concerning sexual orientation or partnership are prohibited. However, if such information is related to the nature of the occupation and of importance for the work, the applicant may be asked to give information about this.
If a trial period is agreed upon, this agreement must be written and the trial period shall not last longer than 6 months.
For work in a public limited liability enterprise, the Administrative Act applies in addition to the Working Environment Act. For employees of the national authorities, the Civil Servants Act may also apply. The Equal Status Act also contains regulation concerning appointments.
The main rule is that the employee shall be permanently appointed.
Temporarily appointed working agreements are agreements that are valid for a stated period of time or a stated work that is of an incidental nature. If someone is appointed temporarily, it is a premise that the conditions for temporarily appointed working agreements are present.
Registering the employee
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If, at the time of registration in the Central Coordinating Register for Legal Entities or the Register of Business Enterprises, you know you will employ people, you mark the ”yes” (”ja”) box of the Combined Register Return.
The local office of the Norwegian Labour and Welfare Organization (NAV) will then contact you. Later on, you just send a new notification whenever an employment starts or ends.
Remember that you have to register yourself if you work in your own limited liability company.
Note also that you have to establish work hazards insurance for all the employees.
The Employee Register
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The forms used for registration in the employers’ and employees’ registers are obtained from the Norwegian Labour and Welfare Organization (NAV). Alternatively, you may submit the form via www.altinn.no (in Norwegian).
The forms must be returned no later than the Friday following the start or termination of the employment.
A notification of employment must be sent when the work relation is expected to last more than six days and consist of on average at least three hours of work per week.
Working agreement in written form
There shall always be a written working agreement, regardless of the time limitations of the work. The Norwegian Labour Inspection Authority can give advice and information regarding rules and regulation.
More information about employment and the last updates of this page on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap9.shtml
Taxation
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Sole proprietorship (Self-employed business)
The owner of a sole proprietorship is responsible for the obligations of the business. He/she is taxed for the valuables as well as the profit of the business enterprise.
A profit from the business activities is transferred to the owner's personal tax return and is added to other income if such income exists. Also the value of the enterprise’s possessions is transferred to the wealth part of the tax return. If the enterprise suffers a loss, the amount is deductible from the income.
The personal income of the owner of the sole proprietorship is calculated independently of his/her direct contribution to the result of the business enterprise. The personal income forms the basis for calculation of the social security contribution and possibly additional tax if the income exceeds the level fixed for the year in question.
The owner of a sole proprietorship is subject to payment of advance tax. The tax is paid in four terms to the tax collector. The tax authorities in the municipality determine the advance tax based on the income from previous years. New sole proprietors must contact the Local Tax Assessment Office (Ligningskontoret) in order to determine the advance tax.
Taxation of unlimited companies (ANS or DA)
Unlimited liability companies are not subjected to tax themselves. The owners/partners will be taxed for their part of the profit, or, if a loss is suffered, may deduct the loss from their income.
Partners working in the company pay ordinary income tax on their income. Such income reduces the profit of the company. The profit is subjected to a tax rate of 28 per cent. Withdrawals of any kind are subjected to the same tax rate (28 per cent).
Before the additional tax on withdrawals is calculated, the tax that results from the company’s profit and a so called shielding deduction is subtracted from the withdrawals. The shielding deduction is defined as the shielding interest multiplied by the shielding basis. The shielding interest is fixed for each year by the Ministry of Finance.
Taxation of limited companies and shareholders
Limited companies are defined as legal entities and as such subjected to taxation in the form of company tax. Profit is taxed as "ordinary income" and the tax rate is a fixed 28 per cent. Ordinary income is defined as gross profit minus all expenses related to the business activities, including depreciation for tax purposes.
A limited liability company pays the tax the year after the profit is generated.
As shareholder in the company you may be subjected to taxation in two forms:
1. You are employed by the company and receive normal compensation (wage/salary):
Your wage plus social security expenses are treated as expenses in the company's profit and loss statement. You yourself are regarded as a tax payer according to the current regulations.
2. Taxation of the share dividends from the company, i.e. the part of the earnings paid to the shareholders.
More information about taxation and the last updates of this page on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap10.shtml
Mandatory licences etc.
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Some types of businesses require special licences.
Authorization
Some types of businesses require that the owner or responsible person has the required authorization. Such authorization is required for:
- Driving instructors
- Doctors
- Physiotherapists
- Auditors
- Accountants
- Lawyers
- Stock brokers
- Bond brokers
- Real estate brokers
More information about mandatory licenses and the last updates of this page on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap11.shtml
Before you start
You are contemplating starting your own business. In that case, there are a number of considerations to be made before the enterprise is a reality.
Imagine you are about to start on a sailing trip and there are many islands and rocks in the area. If so, it is vital that you know where you are, where your destination is and how to navigate to get there. Also, you must consider what equipment you need for the trip.
In the business community such “travel documents” are denoted a business plan. Thus, the business plan is a document that describes your business idea and how you intend to run your business.
- The Business Plan outlines the business idea and how to achieve your goals
All experienced entrepreneurs agree that the process leading up to as well as the actual writing of the business plan is the best method to reach a decision on actual starting up, and to succeed if she does. The plan is your tool in dialogue with banks, investors, cooperation partners and possibly public support organizations such as Innovation Norway. The plan includes all that is necessary for others to decide if it is worth while to support your activities towards your own enterprise. Do not copy from others. This is your plan, - your ideas should be reflected.
Further advice
- Write correctly! Use a language that is easily understood and have someone proof reading the plan. If you have to include difficult or not commonly used terms, explain the meaning, for instance in footnotes.
- Make sure the business plan is well-structured and easy to navigate.
- Do not include too many details. Detailed market analyses, budgets etc. may be given as appendices.
- Refer to sources and documentation where relevant. This is particularly important when you argue the market and economic potentials.
More information about how to make a business plan and the last updates of this page on Bedin: http://www.bedin.no/cwobjekter/Guide_starting-engelsk-kap13.shtml