- October 15, 2017
- Posted by: Anas Mokayad
- Category: Articles
Common company types and characteristics
There are many legal forms for companies in Sweden. They may share some features, but each one has its own characteristics, and advantages. Business owners will look for the best legal format, that suits their business nature and activities.
It’s useful to write a bit about the most used legal forms, and advantages. Owners of existing companies, or even people who wish to start a new business in Sweden, can find it interesting.
Keep in mind that, It’s always good to consult, and ask the specialists about legal forms characteristics, before registering your business at companies registration office “Bolagsverket”.
In this article we will focus on the most common companies in Sweden. What are the legal forms available? What are their names and characteristics?
1- Individual company and personal company
“Enskild Firma / Enskild näringsidkare” Are the simplest types of companies, which are linked directly to the owner personal name. The owner of the company is the company, and the company is the owner. This type of companies don’t have any legal form or legal personality without the owner. It’s difficult to distinguish and separate between them. The owner is personally responsible for the company’s obligation like debts and bills. He/she should solve the company issues and debts, even if it forced him to sell his personal properties.
Personal companies are the simplest types of companies and the cheapest form in both administrative, and financial aspects. It doesn’t require a special board of directors, as the owner can manage all of the business activities by himself. He can also hire someone to do different tasks within the company.
2- Persons company
“Handelsbolag” is company owned by more than one person, they serve management as a partners, and share together the responsibility of its debts. Some partners may be limited by their shares with the company capital. What define this! is the contract of incorporation “AVTAL”, which must be handed over to the registration office “bolagdsverket”. It is important in this contract that partners mention everything, related to the company, from the proportions, profits distribution, shares and administrative responsibilities, etc… It will be the main reference for the partners.
Contract of incorporation “AVTAL”
Legally, the contract of incorporation is the main reference on which the judiciary depends on to resolve any dispute between the partners. Therefore, we would like to emphasize that partners should mention everything they agree with in this contract, in order to guarantee the rights of everyone involved. They should not to rely on verbal or non-mentioned agreements in the contract of incorporation.
Many owners of this type of companies disregard the company’s founding contract, and don’t write it, or even avoid it permanently. They inform the companies registration office “Bolagsverket” that there is no special contract for their company.
They can start business without this contract. After a period of time, work begins, and problems begins too. A lot of variances between partners that goes to courts, but without finding a reference contract, courts will not be able to resolve the disputes. Rights will be lost.
We would like to say, that many of the problems can be avoided, if the partners are committed to what was agreed upon in the company’s founding contract. It is therefore necessary to discuss everything and write it with the contract of incorporation, partner termination, capital increase and a lot of more things.
In companies of persons, persons are jointly held liable for the debts and obligations of the company, unless the partnership contract say different things.
3- Limited Liability Company
“Aktiebolag ِAB” Is a company with an independent legal personality. Owners of the company are normal persons who are completely separated from the legal personality of the company.
The establishment of a limited company requires at least two persons. Such a company is managed by the board of directors (chairman, and a vice chairman). The board of directors can be from the owners of the company, and they have their shares.
The liability of the Company towards third parties is limited to the limits of its capital only. In other words, in the case of bankruptcy, the creditors do not exceed the private funds of the owners of the company, but the company loses the capital allocated and declared in this company.
This type of companies is more expensive in terms of financial and administrative than other types of companies, but we recommend it as it protects the owners of the company in the event of bankruptcy, the only loss is the capital.
Of course, there are more companies forms in Sweden, but we mentioned the most common type of them, that business owners usually use.