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Comparing the company forms – how to choose the best company form for your business?

Choosing a suitable company form is one of the key decisions when starting a business.

You should consider your choice based on your business idea: how well do the different company forms support it? To sum up, private trader is a good choice for entrepreneurs who are selling their own expertise. Limited liability company is the best fit for companies targeting growth. Light entrepreneurship, on the other hand, is the easiest way to start as a new entrepreneur. 

1. Light Entrepreneurship

OP Light Entrepreneurship provides the easiest option for starting a business. Different routines, such as accounting, invoicing and many tax-related matters, can be managed directly in the OP Light Entrepreneurship service.

Light entrepreneurship is suitable for both part-time and full-time entrepreneurs. Entrepreneurs who sell their own expertise gain the most from the service and the tax benefits it involves.

What does the OP Light Entrepreneurship service include?

  • Starting a business free of charge (own Business ID)
  • Invoicing service
  • Automatic accounting
  • Digital accounting firm for private traders (incl. tax returns as well as tax charges and payments)
  • No fixed charges

The only fee charged for the light entrepreneurship is a 5% service fee charged for the invoices paid by customers. If the revenue in a calendar year exceeds EUR 30,000, the rest of the year is free. The service is perfect for new and existing private traders, regardless of their banking customer relationship. The service makes it possible to order a pension policy for self-employed persons as well as voluntary insurance policies. 

A light entrepreneur is a real entrepreneur

  • You can deduct all of your business-related expenses in taxation, such as a computer or phone 
  • You do not have to pay employer contributions for your invoices 
  • You will benefit from a lower VAT limit relief 
  • You will get 5% of your income tax-free thanks to the entrepreneur deduction

Thinking of becoming a light entrepreneur? Read more and become an OP Light Entrepreneur >

2. Toiminimi

Private trader is the second most popular company form in Finland, after limited liability company. Sometimes also referred to as sole trader. Private trader is particularly suitable for small service sector companies selling their own expertise, such as hairdressers or barbershops.

Private trader is also a good option for:

  • Businesses selling their own expertise
  • Small businesses that do not target significant growth
The good and bad sides of being a private trader

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Less red tape. The company’s income is the entrepreneur’s direct personal income. The entrepreneur is personally liable for the business operations.
Simple accounting. It may be difficult to estimate the income tax in advance.
Relatively easy to wind down.      

 

Read more about operating as a private trader >

Open a corporate account online >

3. Limited liability company

Limited liability company (Plc or Ltd) is the most popular company form in Finland. It separates the company’s finances from the entrepreneur’s finances. In a limited liability company, the financial liability is transferred from the entrepreneur to the company. The entrepreneur is only liable for the business operations with the capital invested in shares. 

Limited liability company is a good choice for high-risk sectors. In a limited liability company, the entrepreneur pays themself a salary, which is taxed as earned income.

You can found a limited liability company on your own. However, it is a legal obligation to have at least one deputy member. It is not as simple to wind down a limited liability company compared to, for example, a private trader. It can be dismantled if the company is divided or merged with another company. Other methods of dismantling a company include liquidation and bankruptcy.

Limited liability company is a good option for:

  • High-risk sectors
  • Companies with several founders or employees
  • Companies targeting growth with a greater need for financing
The good and bad sides of a limited liability company

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A good option for growth companies from the aspect of taxation. More red tape: board activities, double-entry bookkeeping.
A credible and respectable company form. It is difficult to wind down the operations.


Read more about operating as a limited liability company >

4. Other possible company forms

Limited partnership

A limited partnership or general partnership requires strong mutual trust between the founders. These company forms may be well-suited to starting a small family company, for example. A limited partnership requires at least two partners: an active partner and a so-called sleeping partner. 

The only thing required of a sleeping partner is financial investment in the company. A limited partnership is particularly suitable for a situation where the entrepreneur involves their spouse in the business, for instance.

General partnership

General partnership is very similar to a limited partnership but it involves two active partners who both have the right to independently manage the company’s affairs. 

Both of them are also liable for the company’s liabilities, such as joint and several debts. In a general partnership the risks are higher, as the partners are liable for the operations with their personal assets.

Cooperative

Cooperative is a company form that provides experts in different fields with a safe framework within which to provide their services. The purpose of a cooperative is to support its members’ management of finances and business activities. A cooperative may also have another purpose, provided that the rules of the cooperative specifically state it.

A cooperative does not have fixed initial capital; the cooperative capital depends on the members of the cooperative. The cooperative model resembles a limited liability company.

Its members are not personally liable for the cooperative’s liabilities. Instead, they are only liable for debts, for example, according to their invested cooperative capital.