How to Register a Business in the US from Denmark

Step 1: Benefits of starting your US business from Denmark

Starting a US business from Denmark presents a myriad of benefits, making it an attractive option for Danish entrepreneurs. One of the foremost advantages is the extensive market access available in the United States. As one of the largest consumer markets globally, the U.S. offers an array of opportunities for business growth and expansion that might be challenging to achieve solely within Denmark's borders. This expanded market access means greater potential for sales, partnerships, and profitability, which can significantly enhance the success rates of Danish businesses.

Another significant benefit is the favorable business environment in the US. The country is known for its robust legal framework that protects intellectual property, ensuring that Danish entrepreneurs can indeed safeguard their innovations and ideas. Furthermore, the U.S. has numerous investor networks and funding opportunities, from venture capital to angel investors, providing Danish startups with the capital needed to scale their operations. Also, the time zone difference can be leveraged to ensure that the business can operate nearly around-the-clock, offering unrivaled customer support and efficiency. The cultural diversity of the US market also means that Danish businesses can learn and adapt to new market trends, catering to a diverse consumer base, which can foster innovation and growth.

Step 2: How to start your US business from Denmark

Starting a US business from Denmark involves several steps and understanding the legal requirements for foreign entrepreneurs. First, you will need to choose the type of business entity you wish to establish, such as a Limited Liability Company (LLC) or a corporation. An LLC is often preferred by small businesses due to its flexible structure and limited liability protection. Research where you want to incorporate; Delaware, Wyoming, and Nevada are popular states for their business-friendly laws.

Next, you will need a registered agent in the state of incorporation who can accept official documents on behalf of your business. You can either appoint someone you know in the United States or pay for a registered agent service. Once your business is registered, obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), which is necessary for tax purposes, opening a US bank account, and hiring employees if needed. Lastly, familiarize yourself with any additional federal and state regulations related to your specific industry to ensure compliance. Many consultancies specialize in helping foreign entrepreneurs navigate these processes, which can be a valuable resource.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Denmark

Understanding Compliance Requirements for Running a US Business in Denmark

Expanding your US business to Denmark can be a lucrative move, but it is essential to understand the compliance requirements to ensure a smooth transition. Below are key considerations:

1. Business Registration

Before operating in Denmark, you must register your business with the Danish Business Authority (Erhvervsstyrelsen). This process includes:

• Choosing a business structure (e.g., private limited company, branch, or representative office)
• Applying for a Central Business Registration (CVR) number
• Complying with local corporate laws and regulations

2. Taxation

Understanding the tax system in Denmark is crucial. Key taxes include:

• Corporate Tax: The standard corporate tax rate is 22%.
• Value-Added Tax (VAT): The standard VAT rate is 25%.
• Employee Taxes: You must withhold income tax and social security contributions for employees.

3. Labor Laws

Danish labor laws generally favor employees and include regulations on:

• Employment contracts and terms
• Working hours and conditions
• Termination procedures
• Employee benefits, including vacation and parental leave

4. Data Protection and Privacy

Compliance with data protection regulations is mandatory, primarily under the General Data Protection Regulation (GDPR). Ensure:

• Proper data handling and security measures
• Transparent data policies and consent procedures
• Appointment of a Data Protection Officer (DPO) if required

5. Intellectual Property

Protecting your intellectual property in Denmark involves:

• Registering trademarks and patents with the Danish Patent and Trademark Office (DKPTO)
• Understanding local intellectual property laws

6. Banking and Financial Management

Opening a Danish bank account will be necessary to manage finances locally. Consider:

• Choosing a bank that meets your business needs
• Managing currency exchange and transfer fees

7. Legal Assistance

Hiring local legal experts can help navigate compliance requirements effectively. They assist with:

• Understanding Danish laws and regulations
• Handling legal documentation and contracts
• Resolving disputes and legal challenges

Expanding your business to Denmark requires a thorough understanding of these compliance requirements. By ensuring adherence to local laws and regulations, you can establish a successful and legally compliant presence in the Danish market.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Denmark

Understanding Tax Obligations for Running a US Business in Denmark

Running a US business in Denmark involves understanding and navigating both US and Danish tax systems. Here are some key considerations to help you manage your tax obligations effectively:

1. Double Taxation Agreements (DTAs)

Denmark and the United States have a tax treaty that helps to avoid double taxation. The treaty outlines which country has the right to tax different types of income, such as business profits, dividends, interest, and royalties. It ensures that you are not taxed twice on the same income and allows you to claim tax credits or exemptions.

2. Permanent Establishment (PE)

Determining whether your business constitutes a permanent establishment in Denmark is crucial. A permanent establishment is generally a fixed place of business through which the business of an enterprise is wholly or partly carried out. If your business is deemed to have a PE in Denmark, it will be subject to Danish corporate tax on income attributable to that PE.

3. Corporate Tax Rates

Denmark has a flat corporate tax rate of 22%. If your US business is taxable in Denmark, you will need to file annual tax returns and pay corporate taxes on the profits earned in Denmark. Additionally, Denmark does not have local or regional corporate taxes, simplifying the tax calculation process.

4. Value Added Tax (VAT)

Denmark imposes a Value Added Tax (VAT) of 25% on most goods and services. If your US business sells goods or services in Denmark, you may need to register for VAT, charge VAT on your sales, and remit the collected VAT to the Danish tax authorities. Make sure to understand the VAT rules and maintain proper records.

5. Employee Taxation

If your US business employs staff in Denmark, you are responsible for withholding Danish personal income taxes from their salaries. Denmark has a progressive income tax system, and employees are also subject to social security contributions. Familiarize yourself with Danish payroll tax requirements to ensure compliance.

6. Transfer Pricing

If your US business engages in transactions with related entities in Denmark, you must comply with Danish transfer pricing rules. These rules require that transactions between related parties are conducted at arm's length prices, meaning the prices should be comparable to those between unrelated parties. Proper documentation is essential to support your transfer pricing policies.

Understanding and managing your tax obligations when running a US business in Denmark can be challenging. It is advisable to consult with tax professionals who have expertise in both US and Danish tax laws to ensure compliance and optimize your tax position.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country