Starting your own business – it is the dream of many people in Norway. About 500 000 Norwegians say they want to establish a business.
A study done on behalf of DnB a few years ago shows that about 500 000 Norwegians wanted to start their own business. 50 000 of them had specific plans.
Around 60 000 new companies have been established every single year in the last few years, which corresponds well with DnBs study.
There are other options as well. Examples of these are co-operatives and general partnerships.
Starting your own business in Norway – sole proprietorship
In a sole proprietorship (SP) you as a proprietor are one with the company. This status means that you are personally responsible for the economic duties.
In short, this means that if you owe a provider or creditor money, you risk having to sell personal property to cover what you owe.
Having to sell your house because of debt piled up by a sole proprietorship is not pleasant.
It is also well known that your rights for sickness benefit are worse if you only have business income (and not a salary). However, there were some improvements in fall 2017 and fall 2019:
- Firstly, an increase of a right for 75% of the basis for sickness benefit from the 17th sick leave day (2017), and later the
- percentage was increased to 80% of the basis for sickness benefit (2019).
It can also insure you via NAV, to get better sick leave rights.
An SP is suitable for you if you want to start a business with low risk.
Sole proprietorships are often chosen by people within so-called free professions, in which there are low investment costs and high possibilities for early income.
Here are some tips for an easier workday in an SP.
Starting your own business in Norway – private limited liability company
If you choose to start a private limited liability company, you are only responsible for paid share capital. The minimum requirement for share capital is 30 000 NOK, including establishment expenses.
You can spend some of the share capital to pay the costs of registering the LLC in the Register of Business Enterprises, which leaves you with about 24 000 NOK.
Not a lot for running a business.
You should absolutely consider this form of company if you have significant investments. If you do, you most likely need to have more than 30 000 NOK in share capital. It’s easy to underestimate the need for capital until the company is earning money.
A private limited liability company is also the most natural choice if you plan to hire others or to take considerable risks in other ways.
With this form of company, the creditors can’t come for your residence or other personal properties if your company is unable to pay the checks.
NB! The Limited Liability Companies Act is expressive that you ought to have a liquidity (available money) and an equity that is justifiable based on the degree and type of the enterprise.
An LLC is suitable for you if you plan on starting a business with high risk.
For instance, entrepreneurial businesses that:
- have to wait for a long time for the income,
- that hire others than the owner(s) in the beginning
- take other types of risks.
You can read the entire act at Lovdata (in Norwegian).
Other forms of organization
A few people also choose other ways to organize their business. Here are some of them:
- General partnerships
- A Norwegian branch of a foreign company (NUF). This form is very rarely used after the requirement for share capital in LLC got reduced to 30 000 NOK.
A co-operative is a little known possibility for smaller businesses but can be relevant for creative groups that don’t plan on selling the business. It’s about membership (like you know it from large traders like Coop).
NUFs have become less usual in the last few years since the law of shares has made it easier and more reasonable to start up an LLC. It is also mostly a form of company that is meant for large foreign businesses that want a branch in Norway.
General partnerships are also chosen by very few people today. Much of the cause here is also that LLCs have become more popular.
The hunt for money
To start a business, you need money. How much you need depends on how long it takes before you get an income, and how significant of investments you are up for in the beginning.
Money doesn’t grow on trees, but here are some of the potential sources:
- Start-up grants or other types of support/loans from Innovation Norway.
- Loans in banks.
- Your own fundings.
- Investors (not applicable if you’re starting a sole proprietorship).
- Legacies and regional industrial development.
You could, without a doubt, have an advantage of having a rich and generous aunt as well. And it is, naturally, also possible to combine some of the above points.
You may be an establisher with the possibility to earn money from day one. This possibility could apply to you if you’re selling your time, skills and knowledge – and if you have potential costumers that you can contact from day one.
If you were to develop something entirely new, either new products or new ways to produce, you have to keep in mind that it will probably take a longer time for you to earn money from your business.
In this case, you need to have a plan, because you need to expect it to take longer than you imagined.
Gain acceptance from your friends and family
Yes, starting your own business is tough and demanding. You will make many mistakes, and you will probably have to adjust both your expectaions and your plans many times along the way.
That’s just how it it is.
Because of this, you should also make sure to have acceptance and understanding from your closest friends and family that the business dream might look like a nightmare some days.
Not to scare you, but most businesses that start up this year will be gone in five years. Around 70% of them, to be more specific.
In order to have your business be among the 30% that survive the first five years, it is crucial that you allow for it to take longer than you thought before your business starts earning you money.
If you don’t have heavy investors that got your back (and very few people do), you need to make sure that you have a plan for how you are going to fund your life and your business until it is profiting.
How will you earn money starting your own business?
The last thing I want to mention in this walkthrough is how you think about your business model. Here are some points you should thoroughly consider. This is the short version.
- Demand on the market
Do you have something that the market needs or wants to buy?
Which resources are required to produce it?
Which channels are you going to use to reach out to the market?
- Price level
Which prices do you have to set to make sure you make a profit long term?
What will this cost until you start to get an income that exceeds your expences?