How do I start a new business?
Starting a new business is easier than you think. The most difficult thing is actually creating a unique selling point for your company and ensuring its business viability. Basically, the process for starting a company can be divided into several parts.
- Checking the viability of a new company and planning
- Deciding legal form of company and setting a framework
- Getting a personal identification number (kennitala)
- Funding
- The business itself
If you have an idea for a business or already have a business under your own identification number, there’s really nothing to stop you from setting up a company. Before taking the first steps, the following points must be kept in mind:
- You must have reached the age of 18
- You must not have requested or be undergoing reorganization bankruptcy
- Your estate must not be subject to bankruptcy
Is your idea viable?
If all the above points are clear, the next step is to check whether you have a viable business. You do this by researching the market and estimating the company's costs and income. The operating plan presents information about the product or service you intend to offer, at what price you will sell the product or service and what costs are associated with the business.
When you’ve determined that your business is viable, the next step is choosing the legal form that best suits your needs. The most common form of business in Iceland is a private limited company or “einkahlutafélag” (ehf.), although you can start a different kind of company. This article focuses on private limited companies but if you want to read more about different types of companies click here. If you want to read more about setting up a business using your own identification number click here. The main differences between various business forms lie in the liability and obligations of the company and its owners.
Next steps
Once you’ve decided which form suits your business, the next step is getting an identification number and starting the company itself. The process for establishing a private limited company has been simplified, and it’s easy to complete the process digitally on the website of the Icelandic Internal Revenue Office. The company can have more than one owner, but while registering the company, you must specify who the beneficial owners are and how the company's share capital is divided.
When setting up a private limited company, a minimum of ISK 500,000 is required for the company's share capital. This amount must be available when the company is set up, but the owners of the company decide themselves how the capital is to be used in the business. In addition, you have to pay the cost of the registration itself.
More information on registering a company and on the below documents can be seen here.
The following documents must also be submitted during registration:
- Notice of setting up a private limited company
- Memorandum of Association [Stofnsamningur]
- For one owner
- For more than one owner
- Articles of association [Samþykktir]
- Minutes of initial meeting [Stofnfundagerð]
Almost done
Once this has been completed, you are now the owner of a company with all the obligations that it involves. There’s nothing to stop you from starting the business, but it’s important to familiarize yourself with all the accounting and tax obligations involved in running it. You also have to inform the tax authorities of the new company, and this must be done eight days before operations begin. You do this by jointly notifying the VAT register and the employers’ register. The notification form can be found here. It’s also crucial to familiarize yourself with rules on accounting, fees and taxes.
One of the cornerstones of running a good business is having a good relationship with the company's retail bank. Corporate advisors at Arion Bank are always available to answer questions or provide advice on a range of financial issues, such as liquidity management, financing or cash flow. It’s easy to open a company account with us and begin a prosperous relationship for the future.
On this website, you can also learn more about various business-related matters, such as business financing, liquidity management, annual accounts, credit ratings and many other useful things.