Starting a Business in Sweden, whether you are a local resident or a foreign national, may seem like a daunting task. This holds especially true for foreign nationals who may think it is impossible to establish a business in Sweden. However, that is not the case.
A simple internet search will reveal that locals and foreign nationals are equally welcome to start their ventures in the Swedish land. All you need to do is find your business idea and look up the relevant regulations in Compliance, Tax, Registration, and other legal formalities required to start your venture. The only difference is that starting a business in Sweden as a foreigner requires completing some additional legalities for immigration and a work permit.
Sweden provides many opportunities for up-and-coming businesses by virtue of its location, infrastructure, amenities, and local laws. Business owners and investors stand to achieve a lot of success and growth in their venture if they follow all the protocols wholly and correctly.
Without further ado, let’s look at the various policies, regulations, and laws applicable in Sweden, which all business owners and investors must know before establishing their business. Including all these in your business plan would ensure a hassle-free work experience.
The first step in establishing a business in any country is to find out about the country itself. Some basic facts about Sweden, the local languages, the marketplace, demand for things are essential details. Once you have established a marketable idea for the Swedish consumer, you need to look into regulations.
There may be different regulations affecting different businesses, which every person involved with the organization needs to take care of. For example, starting a food business in Sweden would require owners and investors to comply with food and hygiene-related policies, which may not be applicable in other enterprises.
Process of setting up a business in Sweden
Before starting your venture, you must know whether there is a market for your product in Sweden. If so, is there any competition, and can you provide better quality or product price to the consumers to attract them towards you? Once you have a marketable idea, it is essential to create a plan with milestones and goals you want to achieve.
Before you start a business, you need to ponder over the following details:
- Type of Business: There are six basic types of businesses recognized in Sweden. Every business owner and the investor must first understand the kind of business they want to establish. The six types of recognized companies in Sweden are:
- Sole Trader: As the name suggests, a Sole trader company is one in which the owner is the only one responsible for all of the company’s obligations. When starting a small business in Sweden, many entrepreneurs choose this company type.
- Limited Liability Company: A limited liability company is one in which one or more people come together as limited partners. They are allotted a certain amount of share capital upon which obligation liability is decided. However, an individual can be held obligated for any defaults in some instances. To form a Limited company, every person forming part of it must have SEK 25,000 in share capital.
- Trading Partnership: This one differs from a limited company as there have to be at least two individuals or entities that want to come together to form a company. Additionally, there is no need for share capital or any other monetary investment by all partners to be a part of the alliance. Obligation liability in a trader partnership applies individually, jointly, and severally to every partner.
- Community Association: This association is created to take up works intended for the benefit of the community. It is a legal entity that can take up projects like building parks, maintaining stairwells, etc.
- Economic Association: This kind of company requires at least three members. All members need to invest some amount upon which their liability is determined. This company is created to promote the economic interests of its members.
- Non-Profit Association: As is clear from the name, a non-profit association can be created for the benefit of members or people at large, but not for the company’s profit.
- Registration: Once you have decided which kind of company you want to establish, you need to develop an exciting name that may be clever but indicates what the business is about. After that, you need to register your company with the proper authorities as soon as possible so that your name does not get snagged up.
- Find a location: You need to find where you will establish the premises or offices for your business. Finding the ideal place is critical whether you need a shop or an office space. This is where your customers will notice you in person. If you have a shop where you sell candles, for example, you need to find the best place where you will attract more traffic and footfall. This will act in your favor to increase business.
- Create a budget for your endeavor: It is crucial to plan a budget for your venture to avoid overspending and falling deep into debt. The cost of starting a business in Sweden can be pretty high. This includes what amount you would invest in establishing your business, your product price point, what portion you would reinvest in the industry, and how much you would want to maintain a profit.
- Get all the Permits: There are two types of permits that you need to be aware of, General Permits and Business Specific Permits. General permits are the joint permits that all new businesses must acquire to establish the business legally. Business-specific permits are those that concern a specific type of business. These could be related to the maintenance of special equipment or hazardous materials, food hygiene standards, worker welfare, environmental impact control, etc.
- Hire Employees: Before hiring employees, ensure that you know all the employee-related policies. These include hiring procedures, employee welfare schemes, working hours, working environment, wages, leave, etc. It is also imperative to understand your needs and budget and only hire as many employees as you need and can afford, especially in the beginning. As your business grows, you can hire additional employees. With the help of an experienced partner like Zimyo, you can efficiently manage all your HR requirements.
Hiring Employees in Sweden
Hiring Employees is one of the most important parts of starting a business in Sweden. All business owners need to familiarize themselves with the employee hiring procedures and policies. All employers must be registered with the Swedish Tax Agency (Skatteverket), wherein they need to actively deduct taxes for their employees and make employers’ social security contributions as required.
When looking at how to hire employees, Business owners must look over the Swedish Employment Protection Act, which covers many details in employee hiring.
- Trial Period/Probation Period: The maximum duration of a probationary period or trial period can be six months in Sweden. If the employer wants to dismiss the employment before the end of the
probationary period, he needs to provide advance notice and the reason for termination to the employee. This applies to permanent employees that the business may hire. If the employer fails to issue a notice of dismissal, the employment will be considered a permanent job upon completion of 6 months duration.
- Leave and Holidays: As per the employment laws in Sweden, only full-time employees are entitled to receive holidays from a particular company. Independent contractors are not allowed any statutory leave and holidays. Independent contractors are seen as their entities who work on a project-to-project basis and can work for multiple clients. A minimum of 25 days of paid vacation is mandatory to be allowed by all employers to all employees.
Additionally, employees are entitled to get 14 days of paid sick leaves wherein they are paid 80% of their regular salary. Employees who need more than 14 sick leaves need to contact the social insurance agency to discuss benefits.
- Maternity Leave: As per the policies in Sweden, pregnant employees are entitled to a 14-week paid maternity leave. This starts 7 weeks before their child is born and lasts for 7 weeks after the child is born. Spouses of the pregnant workers are entitled to receive 10 days of parental leave.
In addition to this, the parents of a child share 480 days of paid leave between them until the child turns 8 years old. Out of these 480 days, both parents are allowed 60 days each, which cannot be transferred to the other parent. Parents are also allowed to choose part-time work until the child turns 9 years old.
- Termination of Services: The employer must provide a month-long notice to the employee for dismissal. The employee also has to provide a one-month notice to the employer if he wants to resign. If the employee has worked for two years or more but less than 4 years, the employer needs to provide a two-month notice period.
This increase of one month keeps increasing for every two-year bracket. That is to say that the employer has to provide: 3 months’ notice for employment lasting between 4-6 years, 4 months for 6-8 years, 5 months for 8-10 years, and 6 months for 10 years or more.
- Pension: In Sweden, employees can work till 69 years. Retirement starts at the end of the month in which the employee turns 69 years old. There is a three-pronged pension system in Sweden.
- The first is the National Public Pension which is from the government. This is calculated based on your payment throughout your lifetime and the taxes that you pay. It is calculated by the Swedish Pension Agency and consists of several parts. The National Public Pension is paid throughout the lifetime of the individual.
- The second is the occupational pension provided by your employer and would be mentioned in your employee contract. Various factors determine the percentage of pension that is received.
- Lastly, there are an individual’s savings which he can use after retirement.
Individuals who also depend on their partner’s pensions for livelihood are eligible to receive a survivor’s pension on account of the loss of their partner.
- Work Hour Norms: Sweden is one of the top-ranking countries maintaining work-life balance. In keeping with this, employees are employed to work for 40 hours per week. This has been set following the Working Hours Act. This time has been set for those employees who do not have overtime options and can work for a maximum of 48 hours per week.
With a team of experienced consultants, Zimyo, the leading HR management agency in Sweden, is fully equipped to professionally handle your HR-related requirements.
How easy is it to conduct business in Sweden?
Here are some of the essential aspects of operating a business in Sweden: –
- Starting a Business: When starting a business, owners need to take care of many things. Firstly, non-residents need to receive a green card provided after they have stayed in Sweden for at least 3 months. This would enable you to receive a Swedish Identity number. After this, they can get a work permit to establish a business. You need to register your company with the Swedish Companies Registration Office or Bolagsverket and the Swedish Tax Agency.
- Managing Permits: Find all the kinds of permits required for your business. Do not hesitate to ask for help, as some of the forms for permits may be completely in Swedish. Foreigners who are not fluent in the language are advised to take help to avoid any discrepancies.
- Getting Electricity: Electricity is a basic necessity for all businesses. Upon starting your business and finding your premises, you need to contact the electricity board to get your office or shop powered. Gauge the amount of electrical load you will be needing. Businesses using heavy machinery often require bigger electricity loads than usual and may need to apply for special authorizations or permits.
- Getting Credit: Getting credit in the early stages of starting a business in Sweden would require a considerable amount of work. You need to have solid business plans to convince banks and other credit authorities of your legitimacy.
- Managing Payroll: It is important to establish HR policies in your company and perhaps even hire a dedicated department. This department would take care of all the hiring formalities and payroll procedures while ensuring a safe and likable work environment for all employees. They would also maintain the employee record wherein all the wages, leave, holidays, etc., would be contained. Creating a holistic HR policy manual can greatly help streamline all of these processes.
- Paying Taxes: All companies need to register with the Swedish Tax Agency. As part of their function, they need to deduct taxes from their employee’s salaries regularly as part of the payroll audit procedures.
- Enforcing Contracts: Contracts are a big part of this process. Every business needs to create a variety of contracts, but most importantly, they need to create strongly implementable and written contracts for hiring employees. These contracts must mention everything from hiring, probation period, and type of employment to causes for termination, termination procedures, retirement, and pension.
- Resolving Insolvency: Resolving Insolvency can be done by the following three methods:
1. Liquidation and Deregistration: If your business is not working as expected and you are running out of business, liquidating assets is the primary way to resolve insolvency. If the business has enough assets to pay off debts, that should be done first. You may also need to deregister yourself as a company for certain kinds of companies. This includes Limited companies, Trader Partnership, and Sole Trader companies.
2. Bankruptcy: This should be used as a last resort and concerns mostly when the company has no money, and the business owner has no money left to pay off debts. The company is declared bankrupt by the district court’s decision in the case of a limited company or a trade partnership.
3. Selling: Selling off your company to another individual or company willing to take up and repay the debt that you owe can also be done to resolve bankruptcy.
With the abundance of rules and regulations, entrepreneurs may initially find it
overwhelming to start a business in Sweden. However, with a little patience and perhaps professional help, anyone can efficiently learn to start a business in Sweden.
Navigating through the various regulations and getting all registrations and checks approved and completed can be time-consuming, but it will be worth the effort when your business is up and running.
Being a leading HR services provider in Sweden, Zimyo offers a comprehensive range of services to manage your employees effectively, be it payroll management or availing advance against salary. This helps you focus on the business’s core operations and let the experts handle the human resources.