Lessons that I learnt after opening a business in Finland
According for Forbes, Finland has been one of the most startup friendly countries in the world. However, starting a business has never been easy and straight forward, especially when it’s your first business.
It took me quite a bit of learning and time in order to set up my business. Therefore, with my limited knowledge, I’m writing this article to share about the experiences and lessons I learnt which hopefully can help others do it right the first time.
What is your immigration status
For Finnish citizens, this section is less relevant. However, for me, as an immigrant, after having an idea of opening a business, this is one of the first things I need to verify in order to make sure I have proper right to open a company.
In general, according to migri (Finnish Immigration Service), you are required to have a residence permit for entrepreneur in order to start a business. However, there are some exceptions that are worth knowing:
- You are still allowed to work for another employer while holding a residence permit for entrepreneur as long as your primary living is earned from your business.
- If you are granted a residence permit on some other grounds, you can still start a business in Finland if the main purpose for staying in Finland is still the same as what stated in the ground (e.g. study, family).
- If you have a permanent residence permit, you will have unrestricted right to work.
It is noted that the regulations may change overtime. And therefore, it’s recommended to always verify with immigration officers before you start.
What is your current job situation and what support does the government offer
Finland is well-known for their support for entrepreneurs. If you are a new entrepreneur and you are about to open your first business, you surely don’t want to miss out this section.
I found the instructions from TE-palvelut really useful, especially for new entrepreneurs. There are 2 main topics that are worth checking:
- A startup grant supports a new entrepreneur.
- Training for new entrepreneurs.
Startup grant is a really great support program from the government. However, there are some important information that you need to know before opening your business in order to qualify for it. According to TE-palvelut, you maybe eligible for the grant if
- You are an unemployed jobseeker.
- You are not unemployed, but you are setting up as a full-time entrepreneur after a period in paid employment, education or domestic work- you are an unemployed jobseeker.
- You are part-time entrepreneur and you are planning to become full-time entrepreneur.
Most importantly, the business must only be started after the grant has been awarded. Therefore, make sure to contact TE office before you open the company if you are planning to apply for the grant.
Training for entrepreneurs also provides some in-depth knowledge about:
- Setting up a business.
- Various aspects of enterprising, including funding, marketing, communications, taxation and financial administration.
Check out this link for more useful information: https://www.te-palvelut.fi/en/employers/for-entrepreneurs/services-new-entrepreneurs/training-entrepreneurs
Which company form suits your business requirements
There are many factors that need to be taken into consideration when decide on which company form you want to set up. Each form has its pros and cons. I found this article about comparing the company forms particularly useful. In short, there are 3 main popular forms:
- Light entrepreneur.
- Private trader (Sole trader, or Toiminimi in Finnish).
- Limited liability.
- Light entrepreneurship provides the easiest option for starting a business. It is suitable for both part-time and full-time entrepreneurs.
- Toiminimi is the second most popular company form in Finland, after limited liability company. Toiminimi is a good option for small service sector companies selling their own expertise and do not target significant growth. The main difference between Toiminimi and Light entrepreneur is that under Toiminimi, a freelancer can be registered in the Trade Register as a sole trader, but a Light entrepreneur never is. Instead, a light entrepreneur usually uses some invoicing services for billing.
- Limited liability company (Osakeyhtiö in Finnish), is the most popular company form in Finland. The main differences compared to Toiminimi are the separation of the company’s finances from the entrepreneur’s finances and the paying of salary. Specifically, the financial liability is transferred from the entrepreneur to company. Also, unlike in Toiminimi in which the company’s income is the entrepreneur’s direct personal income, in limited liability company, the entrepreneur pays themself a salary. Compared to Toiminimi, a limited liability requires a board of directors and double-entry bookkeeping. Even if you found a limited liability on your own, you are still required to have at least one deputy member.
Filing a start-up notification
Depending the company form you chose, different steps and forms are required for filing a notification. Both Toiminimi and Limited liability company are required to file a start-up notification in the Trade Register. A good starting place is the YTJ service website. Generally, there are 2 different options for filing the notification: online or paper forms.
For a limited liability company, the following requirements must be met if you want to file a notification online:
- The share capital is zero euros.
- The subscription price of the shares is zero euros.
- Standard articles of association are sufficient for the company.
- All share subscribers and members of the board of directors are adult natural persons, and they and the managing director, if any, have a Finnish personal identity code and personal internet banking codes, a mobile certificate, or an electronic identity card (HST card).
- Auditors, holders of procuration and persons authorized to represent the company, if any, have a Finnish personal identity code.
If the requirements are not met, you will need to file your notification using paper forms.
Bookkeeping and taxation
As an entrepreneur, you are responsible for the company tax reports. Different company forms require different tax reports and set up. For example, for a Toiminimi, company’s income is considered as your income. However, for a limited liability company, the company is an independent entity, and the entrepreneur pays themself a salary. In general, it is recommended to hire an accounting firm for recording financial transactions and reporting tax activities.
More information can be found at vero.fi website.
As an entrepreneur, you are required to pay the pension insurance by yourself within 6 months since you start a business. However, the pension system for a self-employed person is different form the pension for employees. In short, if you are considered as a self-employed person, you have to take the YEL insurance. On the other hand, an employee is required to take the TyEL insurance.
The calculation of YEL is very different from TyEL, and therefore, it is recommended to do some research about the topic so that you can decide which provider you want to take and the amount of money you would like to contribute to your pension insurance.
You will probably receive a lot of phone calls for YEL insurance offers after opening the business, but just keep in mind that you have 6 months to decide :).
There are quite many other topics that the article cannot cover such as benefits of being an entrepreneur, or which associations that an entrepreneur should participate in. Nevertheless, hopefully, this article could help provide a big picture of what needs to be done in order to start a company in Finland.
Enjoy the entrepreneurship!
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