If you’re setting up a limited liability company, a startup, or a holding company, there are a number of expenses associated with the incorporation process itself. We call these formation costs, and they are part of the foundation upon which the company is built. At Accountview, we help new business owners get a clear picture of what these costs are and how they are handled for accounting and tax purposes.
What are incorporation costs?
Incorporation costs are the expenses incurred when a new company is formed and registered. These are not operating expenses, but rather expenses related to the formation itself, and they are therefore distinguished from ordinary operating expenses for accounting purposes. Typically, they include:
- Fee payable to the Danish Business Authority for the registration of the company
- Drafting of the Articles of Incorporation and Bylaws
- Fees for an accountant or attorney for consulting services
- Valuation Report for a Contribution-in-Kind
- Any bank fees for opening a business account
The company’s capital itself is not an expense. It is classified as equity and remains in the company until it is used for operations or investments.
Typical amounts you can expect
Many people ask what a fixed estimate is, and it depends on your setup. For a cash incorporation of a standard ApS, the total incorporation costs typically range from 5,000 to 8,000 kroner, including both the registration fee and consulting services. If you choose a model involving a contribution in kind or a tax-free stock swap, the amount can rise to 12,000 to 18,000 kroner, because a valuation report and an opening balance sheet must be prepared.
At Accountview, we offer a fixed price for company formation, so you know exactly what to expect. We also partner with Lunar, which offers free bank account setup and a total incorporation fee of 670 kroner to the Danish Business Authority if you choose the starter package through us.
How to Account for Expenses in the Financial Statements
Incorporation costs cannot be deducted as operating expenses from the company’s taxable income. Instead, they are capitalized as goodwill or recognized in the company’s equity. This means that the expense does not result in a direct tax deduction but instead affects the company’s balance sheet at startup.
We will correctly record the incorporation costs in your accounting software so that they are clearly shown in the opening balance sheet and in the first annual report. This is especially important if the company is to be valued at a later date in connection with a sale, an investment, or a credit approval.
Our startup package has it all
We have incorporated hundreds of companies for both first-time founders and experienced business owners, and this package includes everything you need to get off to a good start.
You’ll get:
- Advice on Business Structures and Capital Contributions
- Articles of Incorporation and Bylaws
- List of Shareholders and Owner Registration
- Registration with the Danish Business Authority
- Setting Up Bookkeeping in Billy, Dinero, or e-conomic
- Preparation of the Opening Balance Sheet and Chart of Accounts
- Follow-up after the founding, including a document package for the archives
You’ll work with the same advisor throughout the entire process, and we’ll follow up after the company is incorporated with a brief review so you won’t have to search for documents when the bank or the tax authorities ask for them. We also offer a brief consultation after 90 days, during which we’ll discuss how the startup has gone and whether there’s anything that needs to be adjusted in your chart of accounts or VAT registration.
When the company is incorporated
Once the paperwork is in order, things often move quickly. You open a business account, link the bank to your accounting software, and send out your first invoices. We’ll follow up with a quarterly status report so you can see how the company is performing and what deadlines are coming up. This provides a solid foundation before the first VAT return and annual report are due.
Frequently Asked Questions
Can incorporation costs be paid by the company itself?
Yes, the company can pay the incorporation costs as soon as the business account is set up. Until then, the founder typically covers the costs out of pocket, and the amount is reimbursed as an expense once the account is open. We record this correctly in the books so that there is no doubt in the event of an audit.
Will I get a VAT refund on the incorporation costs?
If the company is registered for VAT, you can deduct the VAT on consulting fees and other expenses, as long as they are business-related. The registration fee itself, paid to the Danish Business Authority, is VAT-exempt. We’ll set up the VAT codes for you so you don’t have to do the math yourself.
What happens to the incorporation costs if the company closes shortly after it is formed?
If the company is wound up, the capitalized costs will be written down in connection with the liquidation and included in the calculation of the final result. This may reduce any liquidation proceeds. We will draw up a plan for the dissolution so that you are aware of the consequences before the decision is made.
Do you want transparent pricing and a clear understanding of the incorporation costs from the start? Let’s have a brief, no-obligation conversation about your plans.
