The form of company matters

The form of company affects taxation, liabilities and funding opportunities, among other things. Choosing the right form makes daily life easier and supports the growth of your business.

The form of company has a key impact on how the company is managed, how responsibility is shared, how profit is distributed and what kind of taxation is applied to the business. It also determines how funding is applied for, how the business can grow and develop, and what happens when ownership changes.

The most common forms of company in Finland are trading name (that is, a sole proprietor, t:mi) and a limited liability company (oy). Other forms of enterprise include a general partnership (ay), a limited partnership (ky) and a cooperative (osk). For a sole entrepreneur, a trading name is a simple and quick option – but the liability for the company’s commitments will be personal. In a limited liability company, the entrepreneur’s personal finances are separate from the company’s finances, which can limit liability but require more administration and responsibility, for example in accounting and company documents.

A cooperative may be a suitable model when several people want to engage in business together as equal members. It is particularly suitable for cooperation and sharing services or work.

The choice of company form is also affected by your goals: do you want to work alone or with partners, aim for growth or keep your business at a small scale? If you are considering light entrepreneurship through an invoicing service, this may be well suited for the early stages of operation and for testing the business idea. However, in operations subject to a permit, for example, a separate business ID is often required, which excludes light entrepreneurship from the alternatives.

It is a good idea to take time and talk to a professional business advisor at the Enterprise Agency.