Limited company or sole trader?

Three business forms in brief

A sole trader business is run by you alone as a private individual, and you are personally liable for its debts. A trading partnership has at least two partners who are personally, jointly and severally liable. A limited company is a legal entity, and its shareholders have no personal liability for the company's obligations. A limited company can have a single owner.

Liability and capital

As a sole trader or in a trading partnership, your private money is at stake if the business's money is not enough. In a limited company the liability stays with the company, but you need share capital of at least SEK 25 000. Registration with the Companies Registration Office costs SEK 2 400 via the e-service, compared with SEK 1 800 for a sole trader or trading partnership.

How you are taxed

As a sole trader or in a trading partnership, the profit is taxed with the owners as business income, with self-employment contributions (egenavgifter) (28.97 per cent in 2026 for those born in 1959 or later).

A limited company pays corporation tax on its profit, 20.6 per cent in 2026. As the owner, you take money out as salary or dividends. If you own a close company (fåmansbolag), the 3:12 rules apply: dividends up to the threshold amount are taxed at 20 per cent as capital income, and anything above that is generally taxed as salary. The rules have changed from the 2026 income year.

Administration and credibility

A limited company involves the most paperwork: an annual report to the Companies Registration Office every year, an annual general meeting and a board. An auditor is required if, for two years in a row, the company exceeds more than one of the following thresholds: more than 3 employees, SEK 1.5 million in total assets and SEK 3 million in net turnover. Sole traders and most trading partnerships can manage with annual accounts that are not submitted. The public annual report also makes the limited company's finances visible to banks, suppliers and customers, which can carry a lot of weight when doing business with larger clients.

Which should you choose?

These are rules of thumb, not definitive answers. The right choice depends on your situation and can change over time.

• Sole trader suits you when you want to test an idea or run a small-scale, low-risk business, and want as little administration as possible.
• Trading partnership suits you when there are two or more of you, you trust each other completely and the business is low risk. In practice, a written partnership agreement is a must.
• Limited company suits you when your assignments involve financial risk, when profits are to stay in the business, when more co-owners are coming in or when your customers prefer to do business with a company.

If you have decided on a limited company, read about how to start a limited company. If you would like to talk through your situation, we will go through it with you, see starting a business and our prices.