Frequently asked questions about sole proprietorships
Last updated: 25 April 2018 .
A sole proprietorship is an independent commercial activity that is run under the full personal responsibility of a person. In order to register a sole proprietorship, you must operate a commercial activity. This is an activity that has a certain scope and duration.
In assessing whether a sole proprietorship operates independent commercial activity, emphasis is placed on
- what activity the proprietorship operates and its scope
- how much time is spent in running the proprietorship
- the amount of work devoted to it
- how large the financial turnover is
Activities that are considered to be purely one-off events or hobbies are not defined as commercial activity and cannot therefore be registered as sole proprietorships.
Examples of hobbies
- Peter works full time as a teacher and makes bird cages in his spare time. He wishes to sell these at the town’s annual Christmas market to cover the cost of the bird cages. This is considered to be a hobby and not a commercial activity.
- Liv is a hobby photographer who sometimes takes on some small jobs to provide a little income. She has no intention of starting a company, but has a hobby that she can earn a little money from.
When does this become a commercial activity?
- The sale of bird cages was a success and Peter has received many enquiries from near and far. He makes them all year and spends most of his spare time making bird cages. He now wants to sell them at several Christmas markets, and he sees the opportunity of using this as a source of extra income. He wishes to continue with this activity for a number of consecutive years and perhaps expand into other products. The long-term plan is to do this full time.
- Because Liv is a good photographer, she receives many enquiries from individuals and companies. The time taken in photography and administration of the jobs increases substantially. Liv now sees the possibility of concentrating on photography as her main source of income.
If you only wish to register the sole proprietorship in the Central Coordinationg Register for Legal Entities, this is free of charge. If you wish to register in the Register of Business Enterprises, there will be a charge. See the overview of fees.
Registration in the VAT Register is part of the Coordinated register notification. When you have sold goods or services for more than NOK 50,000 in the course of a 12 month period, you must register the sole proprietorship in the VAT Register. You do this via the Coordinated register notificatio.
This form is also used for changes, termination, closure or transfer of commercial activities that are liable for VAT.
If your enterprise changes its business address or postal address, you must register the new address by submitting the Coordinated register notification.
New business address
The business address is the same as the visiting address of the enterprise. You must state the Norwegian address, with road or street name and town.
New postal address
If you wish post to be sent to an address that is different from the business address you can give this as the postal address.
A sole proprietorship cannot be transferred from one proprietor to another. The reason is that the proprietor is identified through his or her proprietorship and has full personal responsibility for its debts and obligations.
It is only through undivided possession of an estate that a sole proprietorship can change proprietor.
You cannot directly register a change from sole proprietorship to limited company. You must therefore.
- register the new limited company
- delete the sole proprietorship
For the conversion to be free of tax, the limited company must be formed and the Register of Business Enterprises informed of this during the period between 1 January and the end of June in the year of income, and tax deductions and employer’s contribution calculated no later than from 1 July. Read more about tax free conversion under Starting and running a company in Altinn.
Normally small sole proprietorships do not have auditing obligations. An auditing obligation begins only when the turnover exceeds NOK 5 million kroner and
- the balance sheet shows assets of more than 20 million, or
- the average number of employees exceed 20 full-time equivalents
The auditing obligation enters into force the year after the business is liable to be audited.
If the business is subject to be audited, the operating revenues must be beneath the limit for two consecutive years before the auditing obligation expires. The auditing obligation ceases to apply from the third year.