Sole proprietorship

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

1. 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.
2. 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?

1. 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.
2. 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.

You have to pay a fee for the registration in the Central Coordinating Register for Legal Entities and the Register of Business Enterprises.

The fee for registration in the Central Coordinating Register for Legal Entities will be reduced when the initial registration is done at the same time as the registration in the Register of Business Enterprises.

Here you can find information about when a sole proprietorship must be registered in the Register of Business Enterprises

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 can apply for registration in the Tax Administration’s service for registration in the VAT Register.

If your enterprise changes its business address or postal address, you must register the new address by submitting the Coordinated register notification in Altinn.

New business address

The business address is the same as the visiting address of the enterprise. You must provide a Norwegian address, with street or road name or place name if any. House number, letter and housing unit number must be stated if it exists.

New postal address

If you wish the post sent to an address that is different from the business address, you can report 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 possible for a sole proprietorship to change owner, only in a case where a spouse retains undivided possession of an estate.

You cannot directly register a change from sole proprietorship to limited company. You must therefore

1. register the new limited company
2. 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 an accounting obligation. The accounting obligation begins only when

• it has assets with a value exceeding NOK 20 million, or
• the average number of employees amounts to more than 20 full-time equivalents

The accounting obligation enters into force when the limit is passed for two consecutive years.

Sole proprietorships that are subject to supervision are liable to be audited.

When is the accounting obligation no longer a requirement?

For the accounting obligation to cease, the sole proprietorships must fall beneath the limit for two consecutive years. The accounting obligation then ceases to apply from the third year onwards.

Normally, small sole proprietorships do not have auditing obligations. An auditing obligation begins only when

• the turnover exceeds NOK 7 million,
• the balance sheet total is NOK 27 million or more, or
• the average number of employees amount 10 full-time equivalents or more

The auditing obligation enters into force the year after the business is liable to be audited.

Some industries have an auditing obligation through special regulations, such as law practices. Sole proprietorships that are subject to supervision from the Financial Supervisory Authority are liable to be audited, as well.

When is audit no longer a requirement?

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.