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Choose the right type of business

Modified: Oct. 1 2021

Choosing a type of business is key to determining what your rights and obligations, liability, risk and taxation will be in the future. It also determines your company’s formal management and leadership style. For example, how do you go about establishing a joint stock company?

You have a lot of possibilities when starting up a business. If you’re alone, you can choose between starting up as a freelancer or establishing a sole proprietorship, joint stock company or a Norwegian Registered Foreign Company (an NUF). For example, having a joint stock company allows you to work for yourself. It reduces personal risk and gives you advantages as an employee, too.

There are also other ways of running a business, you’ll see in the descriptions below.

Starting as a freelancer

A freelancer is an independent employee who has several employers, submitting a tax card and getting paid a regular salary from each one. A freelancer is an independent contractor, or so-called ‘non-employed employee’.

A freelancer doesn’t have the same rights as regular employees with regard to sickness benefits or employment-related pension plans. But freelancers can sign up for voluntary supplementary insurance through the Norwegian Labour and Welfare Administration (NAV) to receive sickness benefits in the same way that sole proprietors do.

On Altinn’s website (altinn.no) you’ll find a checklist that may be used to determine whether you should start up as a freelancer or sole proprietor. 

Sole proprietorship

... is run by one individual and is the type of business that’s easiest to start. As the owner, you’re personally responsible for all operations and any debt that the business incurs.

There are two conditions: 1) You must be of legal age to establish a sole proprietorship, and 2) you mustn’t be in bankruptcy proceedings.

All companies are responsible for maintaining their accounts in a legal manner and should therefore be registered in the Central Coordinating Register for Legal Entities in Brønnøysund. This is a free service, and upon registration you’ll receive a company registration number that suppliers, banks and insurance companies often require you to submit.

Sole proprietorships are regulated by the Partnership Act of 1985 section 1-1 nr. 3. There are no deposit requirements, and registration in the Register of Business Enterprises is required only if you import goods or employ more than five people. The formal requirements for running a sole proprietorship are easier than for a limited stock company. For instance, you don’t have to have a board of directors or general meeting.

As an independent business owner through having a sole proprietorship, you have less social security coverage in the form of sickness and unemployment benefits when not working. However, you can sign up for insurance through the Norwegian Labour and Welfare Administration (NAV). On Altinn’s website (altinn.no) you’ll find further information on sickness benefits for the self-employed. On NAV’s website (nav.no) you’ll also find an application form for applying for insurance as an independent business owner.

While you can receive a salary from another job and run a sole proprietorship at the same time, you must inform the tax authorities that you have both salary and business-related income. You must also determine the amount of what you should pay in advance tax. In addition to your salary income, any net profit made from your business is also considered taxable income. You are personally responsible for all of your company’s obligations, including its liquidation. It’s easy to transform a sole proprietorship into a limited stock company if you at some point want to make this transition.

Limited stock company

… is the most common type of business in Norway. Here the owners are liable only for the capital that has been invested in the company; however, if the company’s debt/loan becomes too large in relation to its share capital, banks will often require more collateral, for example in the form of a personal guarantee or real estate mortgage.

Share capital

According to the Limited Liability Companies Act, a limited stock company must have a minimum of NOK 30,000 in share capital. The company must be registered in the Register of Business Enterprises in Brønnøysund. A registered or state authorized auditor must confirm that he/she will perform audits, that the entire amount of share capital has been paid, and that the company’s opening balance satisfies the Act’s requirements.


A limited stock company that has a total operating income of under NOK 5 million, a balance under NOK 20 million and fewer than 10 employees on average, can opt out of being audited. Any motion to opt out of this requirement must be adopted by the General Assembly and reported to the Register of Business Enterprises well in advance of the end of the year. If you use a licensed accountant, while it might be tempting to avoid having to pay the added expense of an auditor, using either a qualified accountant or auditor provides extra security and saves you several hours of work. This is time you could perhaps spend in a better way by completing other company-related work.


The Register of Business Enterprises charges a registration fee. These fees and any other startup expenses, for example payments made to an auditor or attorney, can’t be withdrawn from the share capital. They must either be paid by the founders directly or by the company on the condition that the founders pay the premiums. When registering a joint stock company, the following information must be provided:

  • Company statutes
  • Date for a constituent general meeting
  • Company municipality and address
  • Amount of share capital and amount of paid-up share capital
  • Board director, board members and any substitute board members
  • The type of business that will be conducted
  • Chief Executive Officer
  • External representative/other individuals who perform company duties

A limited stock company is required to maintain and audit its accounts and must submit its annual accounts to the Register of Company Accounts in Brønnøysund by the end of July.

Shareholders’ agreement

In addition to the formal statutes, which are required by the Brønnøysund authorities and which clarify the relationship between a company and the outside world, it is a good idea to also make a shareholders’ agreement. While there are no formal requirements regarding this document, it should clarify the relationship between the participants, their goals for the company, distribution of tasks and responsibility, guidelines for any sale of shares, etc. A shareholders’ agreement is especially useful to have if your collaboration starts to fall apart.

Norwegian Registered Foreign Company (NUF)

… is a type of company that awards the same rights as a limited stock company, but in this case there is no NOK 30,000 minimum requirement in share capital to start up, and the fee paid to the Register of Business Enterprises in Brønnøysund is lower. You can work for yourself and have access to all social welfare benefits. Further, transforming an NUF company into a limited stock company is tax-free. However, NUF companies must operate in accordance with the foreign laws of the country in which they are registered. The English company registry has imposed fines on several NUF companies because of their lack of reporting, and several companies have also been deleted from the register for this same reason. Norwegian banks have expressed skepticism about the NUF format and are hesitant to extend credit to these companies. You can find more about NUF at Altinn.

Other types of companies

There are several other types of companies, including General Partnerships (ANS or DA), which occurs when two or more owners operate a business together.

Co-operatives (SA) are a self-governed group of individuals who have joined together to fulfill their joint needs. The company is jointly owned and administered, and the individual’s responsibility is limited to whatever their share is in the co-operative.

Limited partnership (KS) is a type of company where one partner has unlimited liability (the komplementar) and the other partners have limited liability (the kommandittister).

Foundation is a type of company without owners that is regulated in accordance with The Foundations Act. This organization includes European companies and others that operate across national borders in the EU/EEA regions.

On Altinn’s website (altinn.no) you’ll find an overview of these company types and the requirements associated with them.

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