When you start a business, one of the first choices you'll face is what form of business to run. There is really no right or wrong when it comes to choosing a business form, but the form you choose will affect things like start-up capital, taxes and legal liability. To make it easier for you to know which legal form would suit your business, we've put together information on each legal form, what makes them different and which one is suitable in which situations.

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Sole proprietorship
A sole proprietorship is a form of business where one person owns and runs the business in their own name. It is easy to set up and requires no initial capital to get started. One of the main advantages of a sole proprietorship is that it is simple and has less administrative requirements. As it does not require you as the owner to put in any capital, a sole proprietorship also has minimal start-up costs. As the owner of a sole proprietorship, you have full control over the business and all decisions, but you are also personally liable for all debts and contracts. A sole proprietorship also makes no distinction between the business and the owner's finances. A sole proprietorship can have only one owner. It is basically a form of business where you, as the owner, are authorized to carry out business activities in your name and is suitable for sole traders, consultants and small-scale businesses that do not require large investments or employees. If you want to test a business idea without making large financial commitments from the start, a sole proprietorship can also be an easy way to get started, and then convert it into a limited company at a later stage.

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Aktiebolag
A limited company is the most common form of business in Sweden and requires a minimum start-up capital of SEK 25 000. Unlike a sole proprietorship, a limited company is a separate legal entity, which is one of the main advantages of a limited company. The fact that a limited liability company has its own legal personality means that the company is liable for contracts and debts entered into. Instead, the owners have limited liability. Their personal finances are protected from the debts and obligations of the company and they only risk the capital they have invested in the company. A limited liability company can also have several owners, which allows risks to be spread and responsibilities to be shared, and it can be transferred or sold. However, as a limited company has more extensive requirements in terms of administration and accounting, for example, it may be better suited to businesses that require greater investment, have multiple owners or employees.

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Partnership
A partnership is a form of business where two or more people run the business together. A partnership is a separate legal entity, but the partners are personally and jointly and severally liable for the company's debts and contracts. This means that each partner can be held responsible for the entire debt. One advantage of a partnership is that no initial capital is required to get started, making it easy to start. In addition, partners can spread the responsibility and benefit from each other's skills and limited companies can be partners in a partnership. The disadvantage is the personal liability, which may involve a financial risk for the partners. Partnerships are therefore best suited to smaller businesses where the partners know each other well and are willing to share both responsibilities and profits.

Limited partnership
Limited partnerships are similar to partnerships but have one important difference. There are two types of partners: general partners and limited partners. General partners have unlimited liability for the company's debts and contracts, while limited partners only risk their paid-up capital. This allows limited partnerships to attract investors who do not want to risk more than their invested capital. Like partnerships, limited partnerships do not require an initial capital investment and can be set up quickly. The disadvantage is that the general partner has unlimited liability, which always involves some risk. Limited partnerships are therefore suited to businesses that want to benefit from both active co-ownership and passive investors.

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Cooperative society
A cooperative society is a form of enterprise in which members cooperate and carry out activities to promote their economic interests. It has its own legal personality and its members have limited liability, but it takes three or more legal persons to form an economic association. One of the advantages of an economic association is that it can have an unlimited number of members and is democratic, with one vote per member. However, it requires more extensive administration and accounting. An economic association is suitable for activities where members want to work together towards common economic goals, such as housing associations, cooperatives or member-owned businesses.

Non-profit organization
A non-profit organization is an association that is run on a non-profit basis and instead promotes the non-profit interests of its members. For example, culture, sport or social work. The association is a separate legal entity and its members have no personal liability for its debts or contracts. One of the main advantages of a non-profit organization is that it can operate without paying taxes on its income, as long as it is used to further its purpose. The disadvantage is that a non-profit association cannot operate for profit in the same way as other forms of business. A non-profit association is suitable for groups of people who want to work together to promote common interests without the aim of making a financial profit.

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Choosing the right business form
The right business form for you depends on several factors and is influenced by the size of the business, the number of owners, capital requirements and risk appetite. Many people think that a limited liability company is the obvious choice because of its limited liability, but for some businesses, it can cost more than it benefits. It is important to carefully consider your needs and objectives before deciding which form of business is right for you.

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Understanding the differences between the different types of businesses will help you make an informed choice and lay the foundations for a successful and sustainable business.

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