Understanding how to start a business in Finland involves navigating through a mix of market analysis, legal stipulations, and cultural nuances. This Nordic nation offers a progressive and innovative environment for entrepreneurs, underpinned by a stable economy and a penchant for high-tech and sustainable solutions. Whether you’re a local Finn or an international entrepreneur, the path to establishing a business in Finland is paved with specific steps, from choosing the right business structure to securing the necessary funding.
We break down the essential stages, ensuring you comply with Finnish regulations and integrate foreign companies seamlessly into the nation’s vibrant business ecosystem. With careful planning and an understanding of Finland’s economic landscape, starting a business here can be exciting and rewarding.
Considerations Before Starting a Business in Finland
The Finnish Market
When considering a business venture in Finland, it is important to understand the market dynamics. The Finnish economy is sophisticated, with services taking the lead at 72.7%, followed by manufacturing and refining. Electronics, machinery, and vehicles are key sectors.
Finland’s economy is tightly woven into the global market, with international trade making up a significant slice of the GDP. As part of the eurozone, Finland provides a stable financial environment for businesses. However, the market’s size might be a hurdle if you’re looking to scale up quickly, so it’s wise to adopt a global outlook immediately.
Legal Requirements for Startups
Staying on the right side of the law is critical when setting up a shop in Finland. Suppose you’re from the EU, Nordic countries, Liechtenstein, or Switzerland. In that case, you won’t need a residence permit, but you’ll still need to register your right of residence. If you’re from outside the EU, you’ll need a residence permit to set up as an entrepreneur.
You’ll need a solid business plan that outlines your operational strategies, customer and competitor analysis, and risk management, which includes insurance and financial planning. You’ll also have to choose the right company form for your business, like a proprietorship, partnership, company incorporation or limited company, and ensure you’ve got all the necessary operational permits.
If you need more time to establish a company, light entrepreneurship allows you to sell services and handle taxes through invoicing services.
No matter your business structure, once your income reaches a certain level, you’ll need self-employed pension insurance.
Cultural Norms and Business Etiquette
To thrive in Finnish business circles, you’ve got to understand the local cultural norms and business etiquette. Finns appreciate modesty, straight talk, and being on time. Business meetings are usually set up by email or SMS, and sharing an agenda in advance is common.
Make sure your presentations are thorough to avoid any need for follow-up questions. Don’t be thrown off by silence during discussions—it’s not a sign of disinterest. While most Finnish business professionals speak English, knowing these cultural subtleties can help you build strong business relationships.
Economic Sectors with Growth Potential
Finland’s startup scene is buzzing, with a keen focus on innovation and sustainable solutions. The government backs startups with support like funding and grants through initiatives and organisations such as Business Finland and Tekes. The Finnish startup culture is all about collaboration and looking beyond borders. It’s known for churning out companies that make a mark internationally.
Technology, digital services, and AI are sectors ripe for growth, especially geared towards sustainability and social impact. As an entrepreneur, you’re encouraged to tap into Finland’s extensive international network to break through the limitations of a smaller domestic market and to draw in and keep the best talent.
Choosing the Right Business Structure
Selecting an appropriate business structure is crucial when embarking on your entrepreneurial journey in Finland. This decision influences numerous facets of your enterprise’s operation, including the number of proprietors, required initial capital, distribution of responsibilities and decision-making, and financial and tax obligations.
Sole Trader vs. Limited Company
Opting to be a sole trader, or ‘Toiminimi’, is advantageous for those beginning on a smaller scale or still need to be able to employ staff. This form is uncomplicated, demands minimal initial investment, and grants you complete authority over your enterprise’s decisions. The registration process is simple and cost-effective.
This structure suits part-time entrepreneurs or individuals transitioning from unemployment to self-employment. However, it’s important to note that sole traders bear full responsibility for all business liabilities, potentially affecting personal assets.
Conversely, an Osakeyhtiö (OY) is a favoured structure for various businesses. It can be established solo or with multiple shareholders, where influence is proportional to share ownership. A key advantage is that shareholders’ financial risk is confined to their share contributions.
In July 2019, the requirement for a minimum capital of USD 2,700 was removed, simplifying the establishment of an OY.
Partnership Options in Finland
Business partnerships are typically categorised as either General Partnerships (Avoin Yhtiö) or Limited Partnerships. A general partnership involves at least two individuals jointly managing the business, sharing responsibilities, and directly distributing profits to the partners.
Limited Partnerships differ in that they require one general partner with full liability to a private limited company and one or more limited partners whose liability is restricted to their contribution. Both types of partnerships do not necessitate substantial initial capital.
The Process of Forming a Limited Company
Establishing an OY necessitates registration with the Finnish Trade Register. The process has been streamlined, and the previous capital requirement for private limited companies is no longer applicable. However, a permanent establishment with a minimum of USD 87,555 in share capital is required for a public limited company.
Registration can be completed through a startup notification or by utilising a guided startup package.
Legal Implications for Different Business Structures
The legal ramifications of your chosen structure are significant. For instance, the contrast in liability between a sole trader and a company’s shareholders is considerable. In partnerships, the extent of liability and decision-making authority is contingent on whether you are a general or limited partner.
Foreign entities, such as branch offices, that share the liability of the parent company should also be considered.
Cooperative associations offer a versatile structure without specific capital requirements. Members’ control is akin to that of shareholders in an OY, with liability limited to their contribution. A Public Limited Company allows for share trading on the stock market for larger enterprises. Still, it requires significant initial capital, a CEO, and a board of directors.
Finnish Business Registration
Registration at the Finnish Trade Register
Registering your enterprise with the Finnish Trade Register is a crucial initial step. This public register maintains comprehensive data on traders and businesses, with entries predominantly comprising limited liability companies and private traders.
The online notification system can expedite the process, although it is currently only accessible in Finnish and Swedish. The PRH offers an advisory service to aid with the registration process and any related notifications or applications.
Sensitive personal details should not be included in notifications to the Trade Register. Additionally, most companies are required to submit a notification of their actual beneficial owners, which is obligatory for all limited liability companies and cooperatives and can be done at no cost.
The Trade Register’s information is publicly available, and anyone can access it. For information in English, translated extracts and registration certificates can be obtained through the Virre Information Service. However, certain details, such as financial statements, may be provided solely in Finnish or Swedish.
Tax Identification: VAT and Employer Registrations
Securing tax identification, including VAT and employer registrations, is another critical aspect of business registration. VAT registration becomes necessary if your company’s turnover surpasses USD 16,270 per accounting period. This is managed by the Tax Administration and can be completed through MyTax or the BIS at ytj.fi.
The registration process typically takes about three weeks. Once registered, you are required to apply VAT to your sales and periodically report and remit this tax. VAT paid on purchases can also be reclaimed from the date your business is liable for VAT registration.
Businesses with lower turnover may opt for voluntary VAT registration. Any alterations to your company, such as changes in VAT registration status, must be communicated to the Tax Administration. Non-EU businesses providing taxable supplies in Finland must appoint a VAT representative. At the same time, it remains optional for EU-based companies.
Necessary Permits and Licences
Certain business activities in Finland mandate specific permits or licenses. These include serving alcohol, debt collection, and operating a private security company. The Suomi.fi portal provides comprehensive information on the permits and obligations relevant to your business.
Foreign entrepreneurs or employees must also obtain the appropriate permits to work and conduct business in Finland, ensuring compliance with local regulations and avoiding legal complications.
Opening a Finnish Bank Account for Your Business
Establishing a bank account is indispensable for conducting business, given the country’s preference for non-cash transactions. An extract from the Trade Register is typically required to open a bank account. The documentation needed may vary depending on the bank and your company’s legal structure.
Banks in Finland have discretion over whether to open accounts for companies, and their criteria can differ significantly. To delineate personal and business finances, private entrepreneurs should maintain a separate account for business transactions.
Partnerships and cooperatives may need to provide an extract from the Trade Register and other documentation specific to their structure. Foreign companies generally must register in Finland to open a bank account. While various banking options are available, accounts for non-residents may have certain limitations, such as initially restricted access to online banking services.
Physical presence is usually required to open a bank account, although some banks may offer preliminary online procedures. N26, a fully licensed European bank, allows for the entire account opening process to be conducted online and provides deposit protection per EU regulations.
Drafting a Business Plan and Securing Funding
Components of a Strong Business Plan
A robust business plan is crucial for any entrepreneur looking to start a business in Finland. It acts as a guide for strategic planning and shows potential investors that your business is viable. Your business plan should capture the operational environment of your company, its modes of operation, and clearly defined objectives. It’ll lay out a detailed road map with time-bound goals and quantitative targets.
The plan must explore the core of the business idea, examining your expertise, the unique selling points of the product or service, the target customer demographics, and the competitive landscape. It should also include a SWOT analysis to visualise the company’s strengths, weaknesses, opportunities, and threats within the market context.
Moreover, your business plan should provide a financial forecast detailing the initial funding requirements, projected profitability, sales volumes, and an assessment of potential risks. It’s a tool for validating the business’s success potential and a persuasive instrument when engaging with financiers.
Funding Options Available in Finland
Securing adequate funding is a critical step in launching a business. In Finland, entrepreneurs have access to various financing avenues. Banks are a traditional source of capital, offering loans to those embarking on a new business venture. Additionally, Finnvera, a state-owned financing company, provides loans and guarantees to both new and existing businesses. Finnvera steps in when a business has sound prospects for profitability but needs more collateral or capital to secure a bank loan.
For entrepreneurs transitioning to full-time business ownership, a startup grant is available to support personal livelihood during the initial phase of business operations. You can apply for this grant through local Employment and Economic Development Offices or municipal employment services. The taxable grant is set at approximately USD 815 per month. It depends on your full-time commitment, competency in the business domain, and the potential for profitable operations as assessed by the TE Office or municipality.
Finnish Business Grants and Subsidies
Finland offers startup grants aimed at fostering new businesses and employment. These grants are designed to provide financial security to new entrepreneurs during the critical startup period, which can last up to 12 months. Administered by the Employment and Economic Development Offices, the startup grant requires applicants to be engaged full-time in their business, possess the necessary skills for their chosen field, and demonstrate the necessity of the grant for their subsistence. The business must also show promise for sustained profitability.
The grant amount is pegged to at least the basic unemployment allowance and is disbursed for a maximum of five days per week. As of 2023, the daily rate of the startup grant is USD 40, translating to around USD 800 per month, and is considered taxable income for the entrepreneur.
Tips for Presenting Your Business to Investors
Clarity and persuasion are key when it’s time to present your business to potential investors. Your business plan should articulate your business concept, the market opportunity, the competitive environment, and detailed financial projections. Investors will want to understand your background, the distinctiveness of the product or service, and the growth and profitability strategy.
Be ready to answer questions about your business model, revenue streams, and the specific use of the investment to reach business milestones. Practising your pitch and delivering it with confidence and brevity can significantly boost your chances of securing investment. It’s vital to convey your passion for the business while also showing a realistic and well-thought-out plan for its success.
Taking the Leap in Finland
Embarking on the entrepreneurial path in Finland aligns you with a nation celebrated for innovation, equal opportunity, and a high standard of living. A keen understanding of the Finnish market and the practical steps covered lays a strong foundation for your business aspirations.
With your business plan polished and funding channels identified, you’re poised to navigate this promising Nordic market’s landscape. As you forge meaningful connections and build your enterprise, keep in mind the value of cultural insight and professional etiquette.
Embrace the challenge with confidence, backed by Finland’s supportive climate for startups, and your venture is already on its way to carving out its own success story in the heart of Scandinavia. Welcome to the realm of Finnish entrepreneurship – your gateway to a thriving business journey.
FAQs
Can A Foreigner Own A Business In Finland?
Yes, a foreigner can own a business in Finland. There are no nationality restrictions for business ownership in the country. Foreign entrepreneurs can establish a company just like Finnish residents. However, non-EU/EEA residents might need to apply for a residence permit based on entrepreneurship if they intend to reside in Finland for the operation of their business. The Finnish Patent and Registration Office (PRH) manages the process. It involves registering the business and complying with Finnish laws and regulations.
How Easy Is It To Start A Business In Finland?
Starting a business in Finland is relatively straightforward. Finland offers a transparent and efficient business environment and is ranked highly for its ease of doing business. The process involves registering the company with the Finnish Patent and Registration Office (PRH) and the Tax Administration. Online services simplify the submission of documents and application tracking. Finland also provides comprehensive guides and support services in English to assist foreign entrepreneurs. The entire process can be quick, especially for simple company forms like sole proprietorships or private limited companies.
What Types of Businesses Are Profitable In Finland?
Several sectors are profitable for business in Finland, with technology, clean energy, and services leading the pack. Finland is renowned for its innovation in technology, making IT companies, especially those in software development and digital services, highly profitable. The country’s commitment to sustainability also creates opportunities in clean energy and environmental technology. Additionally, the service sector, including tourism, education, and healthcare, offers profitable business opportunities driven by Finland’s high standard of living and the government’s support for entrepreneurship.
Is Finland a Good Country to Start a Business?
Yes, Finland is an excellent country to start a business. It is known for its high standard of living, well-educated workforce, and strong rule of law. Finland boasts a supportive ecosystem for startups and companies, with various government programs and incentives aimed at fostering innovation and entrepreneurship. The country’s strategic location provides easy access to European and Russian markets. Furthermore, Finland’s commitment to technology and sustainability creates a conducive environment for businesses in those sectors. The ease of doing business and a transparent regulatory environment make Finland a compelling choice for entrepreneurs.
