Tag Archives: entrepreneurship

Starting a Finnish limited liability company (Oy) without share capital

Starting a Finnish limited liability company (Oy) without share capital

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A fairly inconspicuous change that allows starting a new limited liability company entirely without share capital took effect on July 1st. We establish companies with customers regularly and just last week postponed the registration of one. This wasn’t because the customer was unwilling to invest in their new company, but for the practical reason that online registration would needed to have been processed by the end of the week. From now on, starting a company online will always be done without share capital.

Especially new entrepreneurs have often had misconceptions about the meaning of share capital. A common one is that this so-called restricted shareholders’ equity is similar to expenses, and becomes unavailable. In practice, money invested as share capital will be immediately transferred to the company’s bank account, and can be used for normal expenses. In bookkeeping, the money has been tied and unavailable to be e.g. returned directly to the owner personally. Considering that nearly all business requires some sort of financial investment in the beginning, a share capital requirement of €2,500 has typically not been an issue. However, removing this requirement makes it easier to start a company, as an entrepreneur can complete the registration immediately and only then specify how much financial investment they need. It remains to be seen whether this is a good or a bad thing. Most likely it will be a bit of both.

Small delay can lead to harsh penalties

One aspect of share capital investing is that the small preliminary investment of shares in the company provides more incentive for the mandatory organization of the company’s administration to be taken seriously. Larger penalty payments imposed by tax authorities create a situation where even a small delay in e.g. establishing bookkeeping can lead to costs for the entrepreneur. I have witnessed situations even this year where an entrepreneur has accumulated over €1,000 of mandatory penalty by submitting reports of intra-community sales late and incorrectly written. This is only one example of situations in which a company founded easily and flexibly between friends has quickly gotten into trouble. Similar problems are sure to increase as starting a company is made easier.

The importance of a company’s bank account

An essential viewpoint into the topic is postponing the opening of a bank account. Because of requirements imposed onto banks, entrepreneurs have occasionally found it nearly impossible to open a bank account. However, starting a limited liability company currently requires such an account, and the prerequisites of opening one have been considered before registering the company in the first place. Since share capital investments are not required, a company can go into business before having a bank account. This can easily cause problems, as the company’s pay traffic is managed using e.g. employees’ own accounts or online payment services. In my Finnis blog post from 11.12.2017 I wrote about how essential being a bank’s customer is to a company. The matter can even be justified by direct cost savings by taking into account how e.g. we at AutoAccount can manage bookkeeping using digital information from banks at a much lower price than the rest of the market.

Starting a company is easy – closing one is not

Despite the previously discussed possible issues, I do not mean to decry this entire update. For instance, we ourselves have founded a subsidiary in Estonia entirely without share capital, since the nature of the business did not require new capital. When needed, the means for investing can be found from other sections of bookkeeping besides share capital. In Estonia, the option to distribute dividends is tied with paying share capital, which for Finland’s benefit does not seem to be included in the new changes.

Many business ideas are based on one’s own skills and know-how, and actual material purchases are barely needed. When a society sends a message to remove obstacles to entrepreneurship and self-employment is more common than before, the change is justified. If, for instance, one’s own employment depends on having to invoice customers through one’s own company, the possibility to easily start an LLC/Oy is welcome. However, an Oy is a less risky option than a business name of a self-employed in regards to e.g. responsibility matters, even for a one-man business.

A tip for new entrepreneurs: despite the seeming ease, do not start a limited liability company without a concrete plan for the future. Starting a company is now easy, but it brings with it a managerial burden, and shutting it down is its own expensive and arduous process.

 

Author Mikko Ilves is an entrepreneur and the Chairman of the Board of Digibalance Group. More blog updates: www.autoaccount.info/blog/

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Running small business in France – 5 steps for accounting

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We have made a brief and practical list regarding accounting if you’ve decided to start a business in France.

  1. Select your business form
    • The options are basically to operate as a self-employed or to register a limited company SARL. There are also other less common business forms.
    • Evaluate if you need to be VAT registered. It is not necessary if your annual turnover doesn’t exceed certain limits.
  2. Choose the most suitable income tax regime
    • SARL corporate tax is always based on the actual taxable profit it shows. The corporate tax rates are from 15% to 33,3%.
    • The self employed can opt to be taxed on certain percentage of the turnover of the business (tax status of micro-entrepreneur). The turnover means the gross revenues without any deductions. They also need to pay considerable social security payments based on the turnover.
    • The other option for the self employed is that the taxable income is based on the actual profit of the business.
    • The amount of income tax is assessed on a household’s total taxable income which means in practise that if your family lives permanently in France the tax is based on the total income of the family. The system is quite complex and there are also a lot of possible tax reductions and credits. The tax authorities calculate the accurate tax amount. Altogether the total of income and social taxes can be very high compared to many other European countries.
  3. Open a business bank account
    • You have a liability to open a separate bank account for your business purposes. It is important to keep the private transactions and business transactions apart from each other.
    • When choosing the bank group it is advisable that you make sure the bank can produce you the bank statement in XML format. That’s the standard confirmed by EU and it can be a basis for an effortless and affordable accounting.
  4. Organise the accounting
    • Invoicing software is very important tool if your sales are mainly based on billing the customers. Be sure to choose a modern digital invoicing software which is location independent and cost effective.
    • Basic bookkeeping is an essential part of the accounting and business management. It is smart and advisable that you organise your books to understand what is the real profit of your business, whatever is the taxation regime applied to you.
    • AutoAccount by Digibalance is an effortless and affordable bookkeeping system which is based directly on the transactions in your business bank account.
  5. Archive
    • The accounting of the business is based on the documents to confirm the transactions. It is important to remember to archive the documents. Most of them can nowadays be saved as electronic files on cloud services.
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Starting Micro-entrepreneur Business in Finland – 7 Points to Take into Account

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Image of a start-up meeting

We have made a brief and practical list of things you need to think through if you have decided to start a business in Finland.

  1. Select your business form
    • The options are basically to operate as a sole trader called “toiminimi” or to register a limited company called “osakeyhtiö”. There are also other less common business forms.
    • The registration process depends on which business form you selected.
    • Be sure to register in prepayment register (“ennakkoperintärekisteri”) and also in VAT register if you know your business is VAT liable. The employer registration is not recommended if you are not employing other people on a permanent basis.
  2. Organize the accounting
    • Basic bookkeeping is an essential part of the accounting and financial management. You should start co-operation with an accounting agency which utilises digital tools to keep your bookkeeping affordable and effortless.
    • Taxation is based on the books and can be handled by the same accounting agency electronically when you have given the appropriate authorization.
    • Invoicing software is very important tool if your sales are mainly based on billing the customers. Ask your accountant contact for help when choosing the software.
    • If you’re planning to employ other people it makes sense to choose an accounting company who can also offer payroll services.
  3. Open a business bank account
    • You have an accounting liability concerning your business. As a part of that it is important to keep the private transactions and business transactions apart from each other.
    • Choose the bank group and appropriate bank services based on your accountant’s advice.
  4. Make the insurance agreements of at least the obligatory pension insurance (YEL)
    • Your accountant might be able to recommend you an appropriate insurance company.
    • If you will be employing you need also other obligatory insurances
    • As a part of risk management it might be wise to consider other voluntary insurances.
  5. Have a look if you’re entitled to the start-up grant
    • More information at the TE Office
    • Note! If you apply for the start-up grant you cannot start your business before the application is handled.
  6. Be sure of other possible permits
    • Some entrepreneurs see Finland as a bureaucratic country, some don’t. It depends on the line of business you are in. Find more information on the necessary permits especially if you are, for example, in the restaurant business.
  7. Start
    • Remember that the most important thing is to know what you sell and to find customers! You also need to keep your archives in order and respect the deadlines of invoices. There is support available for business administration but you have to be careful and buy only affordable services.
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Migrant entrepreneurs in Europe

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More than a million refugees arrived in Europe last year and this great migration has continued this year. There are also millions of migrants in European countries who are not refugees instead they have voluntarily moved in their current country. The main reasons are usually work or personal relationships.

The lack of work is the most common reason for the immigration problems. There are a huge amount of people who are willing to work and adapt in their new country but they cannot find work. They might also possess expertise which would meet the local demand but the local employers do not have courage to employ them due to limited language skills, cultural differences or just some non-specific prejudice.

European Commission has also realised the potential of migrant entrepreneurs. They are one of the main target groups when promoting entrepreneurship:

“Entrepreneurship is a powerful driver of economic growth and job creation: it creates new companies and jobs, opens up new markets, and nurtures new skills and capabilities.

The European Commission aims to support an environment attractive to all forms of entrepreneurship, where also business support services reach all potential entrepreneurs, including those from more vulnerable groups, with the aim to make the EU in its entirety stronger and more cohesive.

Within the EU, migrants represent an important pool of potential entrepreneurs, but can face, as other more vulnerable groups, specific legal, cultural and linguistic obstacles. These issues need to be addressed in full to give support equitable to that received by all other entrepreneurial groups. “

Migrants have been included in EU’s Entrepreneurship 2020 Action Plan.

The entrepreneurship percentage of migrants is higher than with the EU citizens with non-migrant background. The total amount of micro enterprises in EU is about 21 million. According to the estimates made in Digibalance, over 3 million of them are run by migrant entrepreneurs. Digibalance Limited is actively promoting migrant entrepreneurship in all the EU countries where its AutoAccount bookkeeping service is available.

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Entrepreneur, humble yourself and start selling

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Published in Kauppalehti/Debatti on 22nd February 2016
Guest writer: Mikko Ilves

One of the most challenging tasks in having a business is creating turnover. That is is based on sales and customer service. As an entrepreneur myself, I try to examine this also from a customer’s point of view. I’m sure that everyone has had unforgettable customer experiences, my own top 3 would be the following.

I was being a support person for a patient at a private clinic. After a small operation, the patient was in a near fainting condition, when the clinic employee noted that maybe the patient should be taken to a public health-care centre!

An employee in a smaller Swedish bank wanted to terminate the banking services of a small enterprise. Even if the small company was joining a bigger corporation, it would not have an effect on the decision. It seemed that the most important thing for the employee was to get rid of the customer, instead of upselling, because maintaining the customership was currently too troublesome!

As my third memorable experience of customer service, I want to list the whole industry of boat selling. I have rarely encountered as arrogant service in any other field. I have bought three brand new boats and will definitely choose another brand when I’ll buy the fourth one. However, I’m hoping to encounter this time a sales person, who will change my opinion of the field of boat selling. It is good to keep in mind that if the customer’s purchases are being too minimal, you can always start thinking about the potential next purchase the customer will make.

All the aforementioned examples are about the employee being also a representative to the company and the whole brand. Therefore, I have been thinking if the company management or a potential entrepreneur understand how customer service works in his/her company. A few times I have mentioned about the quality of the customer service, but usually the complaints have not had any effects. If the manager does not have the courage to interfere with the employee’s way of working, the company can lose a lot of potential sales. The connection between customer service and making profit is even clearer for a private entrepreneur.

For example, if an IT consultant promises to solve a network problem, but suddenly decides to disappear, the customer will not necessarily call after him. Or if an agreement has been made about electrical installation and the customer finds that the job has been left half done. A long-time cooperation partner could turn a blind eye once or twice for this kind of behavior, but they probably will start thinking of changing business partners and spread the word about the service. Taking a customer for granted is the worst mistake a company can make in terms of maintaining and increasing sales.

Also a customer can demand unreasonable things. If you pay only the minimum price, it is acceptable to expect a good and satisfactory service for your needs, but then you cannot demand a full-service package. An entrepreneur has to be humble while explaining this, and even then you will sometimes get negative feedback. One’s character will be put to test when the feedback is unfair. In these situations, you can think over if you want to be right and get the final word or make a sale. If you find that you lack the humility, then maybe you are not the right sales person for your company.

To end up with a positive experience – The service of our software provider has been slow for a long time. After a message to the CEO, he answered quickly with an apology and in the afternoon the delivery problems were fixed. However, things can’t always be handled by contacting the top management, but it is important to also spread the positive word.

 A column in Kauppalehti by Mikko Ilves: "Entrepreneur, humble yourself and start selling"

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Can an immigrant be an entrepreneur in Finland?

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Published in Kauppalehti/Debatti on 30th November 2015      

Guest writer: Mikko Ilves

I think I am able to answer the question. A few years ago, we launched a specific service concept for entrepreneurs with foreign backgrounds in Finland. The language of service and reporting is so called “Globish” which means understandable English in different accents.

“The only contacts you will be getting are from Turkish kebab stalls, or do they even have bookkeeping at all?” warned some of my prejudiced acquaintances, when I mentioned about the idea of expanding my business to foreign entrepreneurs.

Even though I dislike the mocking of pizza or kebab entrepreneurs of any nationality, I was curious to see if the prejudice would turn out correct. I would not know, since we did not really get that kind of contacts. But instead, the whole host of entrepreneurs with different nationalities have contacted us. At least French, African, Italian, Romanian, Indian, Australian, Polish, Dutch, Japanese, Bangladeshi, Chinese, British, Pakistani, Russian, Portuguese, Swiss and Philippine entrepreneurs have sat down at the negotiating table and most of the negotiations have turned out great customerships. And let’s not forget the aforementioned Turkish entrepreneur, who might even be the most hard-working of them all! Also the diversity of the lines of businesses has been incredible. We have had customers from importing, coding, owning a gym to architect services, just to name a few.

It is hard to say what these entrepreneurs have in common, however two things come to mind: One; they have not come to Finland because they love Finland, and two; they really want to work. The most common reasons for immigration seem to be moving to a safer life environment, and love. A lot of the immigrants have moved to Finland, because they have fallen in love with a Finnish woman or even a Finnish man!

The immigrants’ businesses are mostly small one-person companies and only few are employing outside their own family. If we talk about localization, entrepreneurship is a quite effective way. Having your own business prevents social exclusion and decreases unemployment. It is also a great way to make contacts with local people. I cannot really tell if it has effects on learning the local language, since the foreign entrepreneurs I know tend to prefer English as their main language in business. Also the locals are very eager to switch the language in English when they assume that the other person is not fluent in Finnish.

In my work, I have observed that when I meet people who are starting their new business, they are almost more often immigrant backgrounded than Finnish. We can conclude that at least in Helsinki area, an increasing number of the starting entrepreneurs do not speak Finnish as their mother tongue.

To answer the question in the title: Yes. Immigrants can integrate to Finland, for example as entrepreneurs. They perform their duties and pay their taxes like other entrepreneurs. Acting by their situation and personality, not by their nationality.

In conclusion, entrepreneurship can play a meaningful role to employment, but it also has a humane and socializing factor.

Article about immigrants as entrepreneurs by Mikko Ilves. Published in Kauppalehti on November 30th 2015

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