Limited Partnerships in Denmark (K/S)
- 3 minute read
- Legal and Corporate Law
It is crucial to understand the different company types when establishing a new company, restructuring, or initiating operations in a new country. Especially as the regulations, benefits, and limitations of each company type vary, despite perhaps having similarities to other local or foreign company types.
In this post, we will walk you through the company type ‘limited partnership (K/S)’ in Denmark (‘Kommanditselskaber’).
The limited partnership (K/S).
The limited partnership (K/S) is also known as a ‘hybrid’, as it can be seen as a mix of other company types.
The primary characteristics of the limited partnership as a company type are that:
It is regulated by the Certain Business Enterprises Act, unlike many other normal company types in Denmark.
It has two types of shareholders or partners: The limited partner (‘kommanditist’) and the general partner (‘komplementar’).
At least one of each partner type must be present in a limited partnership.
The Limited Partner ('kommanditist').
The limited partner is only liable for their contribution. There can be one or more limited partners in a limited partnership (K/S), and these partners can be both natural persons or legal persons / companies. Either way, these partners are only liable for their contribution, in the same way as they are in limited liability companies. The limited partners are considered the legal owners of the limited partnership.
The General Partner ('komplementar').
The general partner is, contrary to the limited partner, personally liable without limitations for the obligations of the limited partnership. If the partnership has more than one general partner, then the general partners are jointly and severally liable for the limited partnership’s obligations.
A general partner is not seen as the legal owner of the partnership and is therefore not required to have any ownership or shares in the partnership – instead, the general partner has managerial and financial power over the partnership due to personal liability. Because of this, it is often the case that the general partner is registered as the management of the company with The Danish Business Authorities.
To limit the general partner’s actual liability, it is often seen that the registered general partner is a limited liability company. Because in limited liability companies, shareholders are only liable for their contribution. This is a way of capturing the liability of the partnership by using the set-up of the limited liability company. Because even though the general partner is personally and unlimitedly liable for the obligations of the partnership, the shareholders of the company that constitute the general partner are only liable for their own contribution to this general partner company, where the minimum capital requirement is 40,000.
Regulations of limited partnerships (K/S).
We have previously explained how limited liability companies, which are a very normal company type in Denmark, are covered by The Danish Companies Act. This does not apply to limited partnerships, as these are instead regulated by the law of Certain Business Enterprises together with the partnership’s articles of association (AoA).
And whereas The Danish Companies Act has certain format requirements for the articles of association, the law of Certain Business Enterprises does not have such format requirements for the articles of association. However, they would normally mimic the format and structure described in The Danish Companies Act.
Taxation of limited partnerships (K/S).
A limited partnership is not considered to be an independent tax subject in Danish tax regulation and is therefore seen as a tax-transparent entity.
In practice, this means that no corporate income taxes are paid in the partnership as a company. Instead, the taxable income of the partnership is included in the taxable income of the limited partners. So, if there is more than one limited partner in the partnership, they pay tax on their share of the partnership.
Want to know more?
Did you gain some insight into how limited partnerships work in Denmark? Do not hesitate to reach out, if you want more information about managing the different company types in Denmark.
At Mighty Admins, we can assist you with:
Company formations and A-Z compliance assistance.
Creating annual wheels for you, so you never miss a filing or payment deadline.
Domiciliation and registered address at up to 25% discount compared to other providers.
… And much more!
Refund of VAT Paid Abroad
6 ways outsourcing benefits small businesses
APV: Mandatory company risk assessment
New rules for vehicle users in Denmark
Voluntarily closing a limited liability company in Denmark
New VAT Requirement: Partial deduction rate 2024
