Entrepreneurship requires an idea you truly want to implement and you believe will succeed. Once the business idea is ready, it is time to choose the right form of enterprise to help carry out that idea. More on entrepreneurship and running your own business in Finland log on to My Enterprise Finland -site.
There are five different business forms in Finland: a private sole trader (business name), a limited company, a limited partnership, a general partnership and a cooperative. Furthermore, there are self-employed people who provide for themselves without an employment relationship.
Entrepreneurship vs. paid employment
Like any work, entrepreneurship encompasses both good and challenging sides. Entrepreneur’s income is based on the result and may vary greatly on a monthly basis. A wage-earner, however, receives the amount agreed in the work contract, e.g. per working hour or month.
On the other hand, entrepreneurs can decide over their work. They can determine the working hours, pricing and the work itself. This is something a wage-earner cannot decide, those decisions are made by his or her employer.
A full-time entrepreneur is usually not entitled to an unemployment benefit, even if the income received from the business were small or ended altogether. A part-time entrepreneur, however, is usually entitled to unemployment benefits. A wage-earner is entitled to unemployment benefit when the work is ended, unless they caused the termination of work themselves.
Entrepreneurs pay their social security and pension fees themselves. The employer will pay a significant part of these for a wage-earner.
Forms of enterprise in Finland
Business name a.k.a. sole trader
A private i.e. business name is the simplest form of enterprise. In one-man companies, entrepreneurs are not separate from their enterprise, they are responsible for all debts and obligations. A personal entrepreneur is taxed with earned income taxation, whereas other types of companies are primarily taxed by capital taxation.
The ownership base of a limited company is based on shares that can be purchased and sold. The ownership base can therefore be quite dispersed. Shareholders are responsible for the debts and liabilities of the company with the worth of their shares, not with their personal assets. A limited company can also collect funding by selling its shares.
A general partnership must have at least two founders. All founders are responsible for the liabilities and debts of the company. There is no requirement for a starting capital.
A limited partnership has at least one general partner who is responsible for the debts and commitments and at least one limited partner who only acts as an investor. A limited partnership is then largely like a general partnership, but with at least one founder as a limited partner.
A cooperative is a form of enterprise that serves its members and aims at offering them benefit instead of financial profit. Cooperatives are common especially in the commercial sector and primary production.
A light entrepreneurship is not an official form of enterprise, it is typically used to describe sole traders who have assigned an invoicing service to take care of their financial transactions. A light entrepreneur does not have to have a business registration number. They receive their income as pay through an invoicing service.
Light entrepreneurship is not an official term and in legal terms light entrepreneurs are entrepreneurs, too. What this means in practice is that they are treated as entrepreneurs in matters relating to social security. In taxation they are treated as wage-earners, if they receive their income through an invoicing service as earned income.
Freelancer refers to professionals who accept assignments under a business registration number and earn their income by invoicing their customers for the work performed. A freelancer is typically not employed at the same time, instead those combining employment and entrepreneurship are called multi-workers.
A self-employed person is a sole entrepreneur who supports himself with his or her own work without an employment relationship. They can carry out several assignments to different companies at the same time. Self-employment is typical e.g. in media, creative industries and construction. Light entrepreneurs and freelancers are self-employed.
Forced entrepreneurship is a situation in which the worker is driven to self-employment out of necessity. This may happen if the employer starts to assign work as commission instead of paid employment.
Platform work means that a person accepts assignments through an electric platform. Platform work is common e.g. in food deliveries, Wolt being one example.
There have been legal and political discussions in many countries on whether platform workers should be considered wage-earners. In Finland their current status is entrepreneur, although they lack the determination over their work that is specific to entrepreneurs, such as deciding on pricing.