- No matter what industry one wishes to enter, starting a business presents the same initial conundrum: Which legal structure is best for the business you want to establish? Or, to put it another way, what kind of company should you start? The answer to these questions will ultimately rely on a number of things that the entrepreneur must first determine. The company’s size, the number of owners or shareholders, the starting capital, the allocation of responsibility and decision-making, as well as monetary and tax concerns, are a few of them.
- In Finland, like in other developed countries, there exist several legal structures that, depending on the circumstance, fit certain company types better or less. Starting as a private entrepreneur may be ideal for extremely small businesses or those who cannot yet afford to recruit people, but for medium-sized and large organizations, alternative choices exist, such as limited liability companies, public limited companies, or various types of partnerships. Each legal entity has its own set of benefits. Nonetheless, one of the most crucial considerations to make is whether your company will have a corporate or non-corporate personality since this will affect your obligation to the business.
- In this article, our team at Tetra Consultants has introduced the different types of companies in Finland so you can make a more informed decision on the corporate entity you would like to proceed with, once you decide to register company in Finland.
Types of companies in Finland
- This is the easiest, quickest, and most popular modality for starting a new company. With this option, there is no minimum capital needed and just one person is required to begin business operations under a company name. Another benefit is that starting a business online only costs 75 euros, and the founder is the only one who makes decisions.
- Private business ownership is a fascinating alternative for underemployed individuals who wish to start their own company or for part-time business owners. If they do it successfully and it gets sufficiently lucrative, it may eventually be transformed into another legal form. The fundamental drawback of this approach is that the entrepreneur bears unlimited accountability and complete obligation. This implies that in the event of bankruptcy, he/she will have to defend the financial obligations or debts undertaken with her/his own assets.
Limited Liability Company (Osakeyhtiö, OY)
- In Finland, the most prevalent company structure is the limited company. A limited company can be used for any type of commercial operation. A limited company can be formed either alone or with additional shareholders. The number of shares a shareholder owns determines their voting power, profit, and obligation.
- Under previous Finnish law, the owners were required to deposit a minimum of 2.500 euros as the limited company’s initial capital requirement. However, in July 2019, this minimal capital requirement was removed. The initial capital no longer has a minimum requirement. When the initial capital has been placed in a bank account and the company has been incorporated, its management may dispose of it for use in operations.
General Partnership (Avoin Yhtiö)
- A General Partnership must be formed by at least two individuals who sign a partnership agreement to form an entity. The advantages for the entrepreneurs in this arrangement are that there is no minimum amount of capital necessary and all partners enjoy equal status in all aspects of the company’s activities.
- The fundamental drawback is that each member of the partnership is individually and unlimitedly liable for the company’s duties, decisions, liabilities, and debts. While, a partnership has the benefit of being a flow-through business for tax purposes (that is, income flows through to the partners and is not taxed at the partnership level). This is among the factors that contribute to limited partnerships being the most prevalent structure for Finnish closed-end funds.
- Contrary to a general partnership, this legal structure has at least one limited partner, who often serves as an investor. As a result, a limited partnership requires a minimum of one general partner and one limited partner with monetary input.
- There is no required initial capital to establish a company. The company’s debts and responsibilities are owed by at least one of the members.
Public Limited Company / Corporation (Julkinen Osakeyhtio, OYJ)
- Another limited liability structure is a public limited company, although bigger businesses typically employ this. Under this form of entity structure, it is possible to trade publicly traded securities, such as business shares on a stock exchange. It is possible for a public limited company’s shares to be traded on the stock market in part only, or perhaps not at all, for certain of them. All Finnish listed companies are public limited liability companies.
- A Public Limited Company must have at least one partner and an initial share capital of €80,000 in order to be formed. It must have a CEO and a minimum of three board members. Also, the corporation is required to produce quarterly and yearly reports on its performance.
Cooperative association (Osuuskunta)
- A cooperative association is a venture that is owned by its members. Its primary distinguishing feature is the lack of a predetermined membership structure and share capital.
- This is a type of company whose goal is to help its members sustain their economic activity or way of life through the development of business ventures by cooperative members utilizing the resources offered by the Cooperative itself. A cooperative’s internal regulations may specify a specific objective for the company. It could involve, for instance, the shared pursuit of an ideological objective.
- While cooperatives lack a fixed or minimum capital requirement, they might be seen as a type of business partnership with regulations that are quite similar to those of limited liability companies. There must be at least three founders, who may be private individuals, businesses, nonprofits, foundations, or other types of legal entities. The founders choose the share price, and all participation shares must have equal worth. As a result, the total capital amount changes according to the number of members.
- In theory, anybody can join a cooperative, however, restrictions may apply and the company’s leaders must authorize any new members before they can join. Members of a cooperative have the same authority as shareholders in a limited liability company, but their liability is only for the share capital they have invested.
- A branch office allows a foreign company to establish itself and do business from a fixed location. Due to the fact that a branch office is viewed as an extension of its foreign parent entity rather than a separate legal entity, in addition to the capital invested, the foreign parent company is responsible for all debts and other liabilities of the branch. A branch office form’s rapid and simple setup and the elimination of the need for separate administration are two benefits.
Company registration process in Finland:
- By now you should have a decent understanding of what kind of legal entity you want to register in Finland. If you are a sole proprietor, you do not need to register as a legal entity in order to conduct business in Finland. Finland corporate law and specific legal entities clearly distinguish organizations such as causes, NGOs, and professional partnerships.
- There are several benefits to doing business in Finland, and Finnish legal companies are quite straightforward to incorporate provided you have all of the necessary paperwork. Finnish business legislation supports both domestic and international enterprises.