The purpose with this essay is to investigate whether the legal capital can be justified as creditor protection and whether the legal capital prevent entrepreneurship.

Historically the legal capital has been justified by means of creditor protection. Nowdays the development within EU rather reduces or abolish the legal capital. Sweden has recently, 1 of April 2010, reduced the legal capital from 100 000 Swedish crowns to 50 000 Swedish crowns. In the preparatory work it has been admitted that the legal capital does not in reality offer creditors much protection. Although the lawmaker decides to retain the legal capital and justifies the legal capitals existence with the argument that involuntary creditors has the need of the legal capital. It is also argued in the preparatory work that a reduction of the legal capital does not necessarily mean that new business creation will increase. Rather, the private limited liability company will instead be more available.

I will present different authors views on the legal capital doctrine. The views that are presented are critical to the legal capital doctrine. I will also present different statistics that compares countries legal environment and how it effects entrepreneurship

My conclusions are that legal capital can be questioned, especially on efficiency grounds. I also argue that legal capital in fact hinders entrepreneurship and I base my premise on the different statistics that has been presented.