Responsible Company and Shared Responsibility
A general partnership (ANS) is a form of company in which two or more participants conduct business together with unlimited joint and several liability . This means that each participant can be held liable for the entire debts and obligations of the company, not just their own share.
What is a Responsible Company?
A limited liability company differs fundamentally from a limited liability company in that its participants have unlimited personal liability . The company form is regulated by the Companies Act and is common in professional services such as law firms, accounting firms and consulting companies.
Characteristics of Responsible Company
Unlimited Joint and Several Liability
The most important feature of an ANS is that all participants have unlimited joint and several liability . This means:
- Each participant can be held liable for the entire company's debts
- Creditors can demand full payment from any participant
- The participants' private assets can be used to cover the company's obligations.
- Liability also applies to the actions of the co-partners on behalf of the company.
Minimum Two Participants
- An ANS must have a minimum of two participants.
- Participants can be both natural and legal persons.
- All participants have the right to represent the company externally
No Share Capital Requirement
Unlike limited companies, ANS has no minimum capital contribution requirements.
Shared Responsibility - Different Forms of Responsibility
The term shared liability refers to how liability is distributed between the participants in a company. There are several forms of liability in Norwegian corporate law:
Joint and several liability
In the case of joint and several liability, each participant may be held liable for the entire debt:
- Creditors may demand full payment from one participant
- The person who pays can later claim recourse from the other participants.
- Common in limited liability companies and some other forms of company
Pro Rata Liability
In the case of pro rata liability, each participant is only liable for his share:
- Responsibility is divided according to ownership share or agreed distribution.
- Less common in Norwegian company forms
- Requires specific agreement between the parties
Limited Liability
In the case of limited liability, the participants' liability is limited to their investment:
- Common in limited liability companies and public limited companies
- Protects participants' private assets
- Requires minimum capital investment
| Company type | Liability type | Minimum Capital | Number of Participants |
|---|---|---|---|
| Responsible Company (ANS) | Unlimited joint and several liability | No | Minimum 2 |
| Limited liability company (AS) | Limited | 30,000 kr | Minimum 1 |
| Limited partnership (LP) | Mixed | No | Minimum 2 |
| Sole proprietorship | Unlimited personal | No | 1 |
Benefits of Responsible Company
Easy Creation and Operation
- No capital contribution: Does not require minimum share capital as AS
- Flexible structure: Fewer formal requirements than limited companies
- Quick Start: Easier Registration Process
Tax Benefits
- Pass-through tax: Profits are taxed directly to the participants
- Deduction: Losses can be deducted from the participants' other income.
- Flexible profit distribution: Can agree on a distribution other than ownership shares
Credit access
- Personal liability: Can provide better access to credit as participants' private assets serve as collateral
- Solidity: Creditors have greater security through unlimited liability
Disadvantages and Risks
Unlimited Personal Liability
The biggest disadvantage is the unlimited personal liability :
- Participants' private assets are used as collateral
- Risk of personal bankruptcy in case of large losses
- Responsibility for the participants' actions
Joint and several liability
- Full liability: May have to pay all of the company's debts alone
- Dependence on co-participants: Risk related to the financial situation of other participants
- Recourse claim: Must demand reimbursement from co-participants afterwards
Limited Flexibility
- Unanimity: Important decisions often require unanimity
- Exit: Complicated to leave the company
- Transfer: Difficult to transfer ownership shares
Limited Partnership - A Hybrid
A limited partnership (KS) is a variant where liability is divided between two types of participants:
Complementary partners
- Has unlimited joint and several liability
- Can represent the company externally
- Responsible for the day-to-day operations
Limited partners
- Has limited liability to its capital contribution
- Cannot participate in day-to-day operations
- Act as passive investors
| Participant | Responsibility | Operational responsibility | Right of representation |
|---|---|---|---|
| Complementary | Unlimited joint and several liability | Yes | Yes |
| Limited partner | Limited to deposits | No | No |
Practical Advice for Responsible Companies
Before Creation
- Consider the risk: Are you comfortable with unlimited personal liability?
- Choose your partners carefully: You will be responsible for their actions
- Get legal advice: Consult a lawyer about company agreements
- Consider insurance: Professional liability insurance can reduce risk
Company agreement
A good company agreement should regulate:
- Profit distribution: How profits and losses are distributed
- Decision-making processes: Who can make which decisions
- Exit: Procedures for leaving the company
- Resolution: How the company will be wound up
Ongoing Operations
- Regular communication: Keep stakeholders informed about the company's situation
- Financial control: Keep a close eye on the company's finances
- Insurance: Continuously assess the need for insurance coverage
- Legal follow-up: Keep the company agreement up to date
Responsibilities in Various Industries
Professional Services
Responsible companies are common in:
- Law firms: Traditionally organized as ANS
- Accounting firms: Many choose ANS for flexibility
- Consulting firms: Common for smaller consulting groups
- Architectural firms: Professional responsibility makes ANS natural
When ANS Is Not Suitable
ANS is less suitable for:
- Capital-intensive businesses: High risk makes limited liability desirable
- Many owners: Joint and several liability becomes complicated with many participants
- External financing: Investors often prefer limited liability
Limitation of Liability and Insurance
Professional liability insurance
- Covers professional malpractice: Protects against claims from clients
- Mandatory in some industries: Required for lawyers and accountants
- Reduces personal risk: Can cover large claims
General Liability Insurance
- Covers third-party claims: Protects against damage to others
- Product liability: Important for companies that produce goods
- Operational liability: Covers damages in connection with the business
Limitations in Insurance
- Deductible: Participants must cover amounts under deductible
- Exclusions: Certain types of damage are not covered
- Maximum coverage: The insurance has an upper limit
Comparison with Other Company Forms
ANS vs. Public limited company
| Aspect | Responsible Company | Joint stock company |
|---|---|---|
| Responsibility | Unlimited joint and several liability | Limited to share capital |
| Minimum capital | No | 30,000 kr |
| Treasure | Pass-through tax | Corporate tax + dividend tax |
| Formalities | Fewer requirements | Strict accounting requirements |
| Flexibility | High | Regulated by the Companies Act |
ANS vs. Sole proprietorship
| Aspect | Responsible Company | Sole proprietorship |
|---|---|---|
| Number of owners | Minimum 2 | 1 |
| Responsibility | Solidarity between participants | Personal for owner |
| Complexity | Medium | Low |
| Tax benefits | Flexible distribution | Limited |
Legal Aspects
Companies Act
Limited liability companies are regulated by the Companies Act, Chapter 2 :
- Rules for creation and registration
- Participants' rights and obligations
- Representation and decision-making processes
- Resolution and liquidation
Registration
- Business Register: Must be registered in the Brønnøysund Registers
- Company Agreement: Must be attached upon registration
- Power of attorney: Can give others the right to represent the company
Accounting obligation
ANS has the same accounting obligations as other companies:
- Must keep accounts in accordance with the Accounting Act
- Annual accounts must be submitted to the authorities
- Revision may be required depending on size
International Perspectives
Similar Company Forms
- Partnership (USA/UK): Equivalent unlimited liability
- Société en nom collectif (France): French variant of ANS
- Offene Handelsgesellschaft (Germany): German limited liability company
Limited Liability Partnership (LLP)
- Limited Liability: Protects against the mistakes of co-partners
- Professional responsibility: Retains responsibility for one's own actions
- Not available in Norway: Must use other company forms
Future Developments
Digitization
- Electronic signing: Simplifies company agreements
- Digital reporting: Automated financial reporting
- Online registration: Easier creation process
Regulatory Changes
- EU harmonization: May affect Norwegian rules
- Professional Regulation: Changes in Industry-Specific Requirements
- Tax legislation: May change tax benefits
Conclusion
A general partnership is a form of business that is well suited to professional services and smaller businesses where participants want flexibility and are comfortable with personal liability. The unlimited joint and several liability requires careful assessment of risk and selection of partners.
When ANS is the Right Choice
- Professional services with low capital intensity
- Few participants who know each other well
- Desire for tax flexibility
- Need for quick start-up without capital investment
When Other Company Forms Should Be Considered
- High risk or capital intensive businesses
- Many owners or external investors
- Desire for limited personal liability
- Plans for an IPO or sale
Regardless of the choice of company form, it is important to obtain professional advice and prepare a thorough company agreement that regulates the relationship between the participants and their responsibilities.
Related Concepts
To fully understand responsible company and shared responsibility, you should also familiarize yourself with:
- Joint stock company - Company form with limited liability
- The Companies Act - Regulates limited liability companies
- Share capital - Minimum capital in limited liability companies
- Accounting - Accounting obligation for all companies
- Shareholder loans - Financing options in limited companies
Responsible companies represent an important corporate form in Norwegian business that balances flexibility with responsibility, and which requires a thorough understanding of both opportunities and risks.