Are you aspiring to become your own boss? You must have a cool business idea, right? Well, starting a business is satisfying, exciting, adventurous, and nerve-racking, all at the same time. You need to preserve your mojo for establishing a business even when going through the red tape and drudging administrative offices, to get something finally, of which you can pat your back.
Finland makes a spiffing destination to locate a business. Why? Thanks to its highly-advanced infrastructure, immense talent pool, opportunities for international expansion, access to potential investors, and more. The country bagged 20th position among 190 economies according to the Doing Business report 2020 in the Ease of Doing Business index, which directly beckons to the country’s business conducive environment. Furthermore, Finland is counted among the least corrupt countries worldwide, and also it offers a vibrant community of entrepreneurs with R&D facilities. Although taxes are high in Finland, you would happily reimburse it given the profits you will earn. If you want a highly skilled and qualified team to handle the operations of your business, you can never ignore Finland.
Although it can get a bit challenging when registering your company and getting official recognition for the entity. You can mitigate the hassles by knowing upfront the requirements, formalities, and procedures you must go through. So, here’s an ultimate guide on the process of starting a business in Finland with all things you need to be familiar with. Dive in!
To establish a business, start by gauging the viability and marketability of the business idea you have conceived. Then, prepare a solid and convincing business plan followed by a selection of suitable business structures, such as sole trader, company, partnerships, etc. Now get your company registered with the Chamber of Commerce PRH in Finland and in the prepayment register, VAT register, and other Tax Administration registers. Now open a corporate bank account where you would be asked for a personal ID and trade register extract. Finally, procure the permits that are applicable for your entity, and voila.
In the sections that follow, you will find the process of starting a business in Finland in a detailed manner. Read on!
Process of setting up a business in Finland
How to start a business in Finland?
It is quite easy. Initiate your journey by planning the things, identifying your potential customers, and understanding the purpose, vision, and mission of your business. Analyze the practicality and marketability of your business idea before you jump into the administrative procedures such as that registering your company name, property, choosing a legal structure, etc. It’s always wise to know what you are getting yourself into before putting yourself into it directly without a thought. So, let’s understand what all it takes to establish a venture in Finland.
- Prepare a business plan: Start by preparing a solid business plan. It must be scribed in a clear and precise manner and entails an executive summary, products and service demand and supply, marketing strategy, marketing budget, and financial planning. It is instrumental to entrepreneurs, and new ventures in many ways, such as it works as a roadmap, helps procure investors, and facilitates the navigation of weaknesses in the plan.
- Choose a legal structure: Now is the time to select an optimal business structure. The common types of business entities found in Finland are Public Limited Company, Private Entrepreneurship, General Partnership, Corporation and Cooperative Association, and Limited Liability Company. This is a critical step that you must follow wisely and patiently as it poses several consequences for the businesses.
- Pick a company name: Pick an original and solid company name that compels people to connect emotionally to your brand. You must check the availability of the name before giving it a go. It must not infringe the existing trademarks in Finland.
- Register your company: To operate a business in Finland, you will need to register it with Finnish Trade Register, VAT authorities, employment register, and prepayment register. There are three tax registries where you need to enroll your business and also with the Finnish Chamber of Commerce.
- Set up a business bank account: Now, you will need a corporate bank account in Finland. At this step, you will need a personal ID and an extract taken from the trade register. Once you have your business bank account all set, your company registration process will be completed with Finnish Patent and Registration Office.
- File for initiating a business notification: Now, after filing for the start-up notification, you will receive a letter of your company’s registration from the Tax Administration. The letter will also contain an estimate formed by the Tax Administration on whether you own a permanent establishment in the country and also directions on how to proceed.
- Procure applicable permits: The next and final step involves procuring the permits that are applicable to your business. These are needed to operate an entity legally. Certain professions and trades ate subject to permits and licenses. For instance, businesses like security guards business, debt collection businesses, and serving alcohol are some businesses for which permits are a necessity.
Hiring Employees in Finland
Once you have got your company registered and in running condition, you need to draft employment contracts. However, there are certain regulations that oversee the domain of employment and labor. You need to be acquainted with these laws to come across as a responsible employer. With the help of an experienced consultant from Zimyo, all your HR-related requirements are taken care of in a professional manner.
Here, we have covered them all for you. Read on!
- Trial Period/Probation Period: As per the Employment Contracts Act of Finland, a trial period cannot exceed the duration of four months. However, under the mutual agreement, it can be extended to six months. In the case of a definite term employment contract of duration less than eight months, the probation period cannot last for more than half of the employment period. Nonetheless, when bound in a fixed-term employment relationship, the employee can establish a prolonged probation period.
Probationary periods mentioned in the employment contract allow either party to terminate the services without notice and penalty within a stipulated period.
- Leave and Holidays: The employment and labor laws of Finland entitle employees to two and a half working weekdays of the holiday with full pay. Nonetheless, in case, by the end of the holiday credit year, the employment contract is an uninterrupted span of 1 year, then the annual holiday would be observed for two weeks only. Annual leave is rolled up on the basis of a 35-hour or 14-day rule.
Any employee who is employed for less than 45 days or 35 working hours during the calendar months must be granted two weekdays of absence from work for every calendar month. An employee is entitled to get his regular wages during the annual holiday period. Sunday and public holidays such as Midsummer Day, Christmas, All Saints’ Day, etc., are official holidays in Finland.
- Maternity Leave: Maternity leave in Finland is set to 105 and working days where 30 to 50 days are used before the expected date of childbirth and remaining after that. Taking at least two weeks prior to delivery and two weeks post-delivery is compulsory. Mothers can only join work at least two weeks after the confinement. However, shall receive the minimum flat-rate grant for the days they engage in work. There would be no effect of working Sundays upon this benefit.
In case the pregnancy goes on for a minimum of 154 days, results in premature birth, and ends 30 days before the expected date of delivery, the employee must receive leave and benefits from the day that follows for 105 days.
- Termination of Services: Termination of employment contract can either be done due to lack of work or grounds related to the employee, with prior notice. However, the reasons for dismissal must be valid and solid.
Individual termination is possible either on the grounds of serious infringement of the necessary duties of the employee or due to serious misconduct. Collective termination is possible if work has been reduced due to production-related or economic reasons. An employee who is at least 45 years old and has been terminated on sound collective dismissal reasons must be granted severance pay if re-employment is not possible from a public fund.
- Pension: Statutory pension plans provide coverage to those 18 years old or above. Statutory pension schemes are of two types in Finland:
- Provision related to earning for public sector employees.
- Provision related to earnings for private-sector employees, self-employed, and farmers.
In addition to these plans, certain employers propose additional pension plans, which may be either defined contributions or defined benefits in nature. Generally, these pension plans supplement TyEL by providing higher rates of accrual and reducing the retirement age. Contributions made by employers in these schemes are tax-deductible for up to EUR 5000 per year or a ceiling of 5 percent of the earnings of the employee.
- Work Hour Norms: According to the Hours of Work Act, in Finland, the standard workweek consists of 40 hours, while a working day is of eight hours. Nonetheless, working hours per week may be extended further up to a period of 52 weeks. Overtime work is allowed only under the employee’s consent and is permitted for a duration of 130 hours within 4 months and up to 250 hours for each calendar year. Emergency work and overtime work must be paid with time and a half for the initial two hours, and for hours beyond that must be paid with double time.
How easy is it to conduct business in Finland?
Doing Business report 2020 positions Finland at 20th position among 190 economies in the Ease of Doing Business index and allocated a score of 80.2 out of 100. What does this mean, and why should you see into this? The Doing Business report is prepared by the World Bank to understand how enabling an environment in a country is for setting up a new business. That is determined by considering various factors which serve as indicators of the EODB index. For instance, the Doing Business considers factors like getting electricity, trading across borders, enforcing contracts, getting credit, etc., to estimate the overall EDOB rank of an economy. These ranks are conferred by comparing 190 countries. Let’s see where Finland lies in each of these sub-indices. Read on!
- Starting a Business: Of course, you must have a ground-breaking business idea. But to realize it eventually, you need to fulfill certain formalities, undergo specific procedures, get the papers done, and whatnot. The Doing Business measures the rank of a country in this sub-index by considering how much time, cost, and procedures it takes to start a business. Finland came at 31st position among 190 countries, according to the Doing Business report 2020, and scored 93.5 out of 100. In 2008, the country lowered the minimum capital requirement and simplified the documentation requirements, thus, easing the process.
- Managing Permits: Business permits are basically meant to control and regulate the structure, appearance, and safety of the business community. The requirements of permits and licenses vary for different businesses and jurisdictions. In case of violation of these regulations, a serious penalty may be levied upon you. According to the Doing Business report, Finland came at the 42nd position among 190 economies and scored 75.9 out of 100. To estimate the strength of this factor, the Doing Business looks at the time, cost, and formalities the process of procuring permits involves. Furthermore, it also considers the efficiency of the construction permitting system and regulations.
- Getting Electricity: To procure an electricity connection, you need to drudge from one government office to another. The Doing Business measures the cost, time, and formalities it takes to get connected to the electricity grid in a country while it also checks the transparency of tariffs and reliability of power supply. Finland bagged 24th rank among 190 countries and scored 89 out of 100, as indicated by the Doing Business report 2020.
- Getting Credit: Credit supports business in the expansion, recruiting people, and meeting outgos and operational expenses. Lack of access to credit and funding means often results in businesses getting shut down, either temporarily or forever. The Doing Business estimates the time, cost, and procedure involved in the process of getting credit. Furthermore, it assesses the strength of credit reporting systems as well. Finland came at the 80th position among 190 economies and scored 60 out of 100, according to the Doing Business report 2020. In 2009, the country assembled the regulations related to credit details of individuals and companies into a single act that governs the disclosure, production, use, and storage of credit data. This was done to enhance the credit information system of Finland.
- Managing Payroll: Payroll management is much more than simply paying employees and staff their reimbursements on time. You need to make social security and pension contributions as well punctually. Having an efficient payroll management system integrated into the company facilitates adherence to the regulations and legal obligations. Furthermore, it renders a more professional image and manifests your financial stability.
- Paying Taxes: Taxes are mandatory to be paid by the businesses that have gained eligibility. The Doing Business looks at the procedures, time, and cost of the process of filing taxes and paying them. Finland came at the 10th position among 190 economies that were compared and scored 90.9 out of 100, according to the Doing Business report 2020. In 2010, the country embraced the electronic method for filing taxes and reduced the social security contribution rates of an employee, thereby rendering the process easier and less costly.
- Enforcing Contracts: The Doing Business estimates the recovery rate, outcome, time, costs, and procedures involved in settling a business-related dispute in court. It also gauges the strength and efficiency of regulations that govern this domain. Finland came at the 45th position among 190 economies and scored 66.4 out of 100, according to the Doing Business report 2020.
- Resolving Insolvency: To resolve insolvency, the legal system and courts play an important role. Thus, the Doing Business considers it a potential indicator to estimate the overall EODB rank of an economy. It measures the outcome, procedures, and time the process takes while assessing the strength and efficiency of insolvency laws and court systems. According to the Doing Business report 2020, Finland came at 1st position among 190 economies and scored 92.7 out of 100. In 2009, the country amended its Restructuring of Enterprises Act to expedite hearings and enhance the flexibility in court proceedings, thus, rendering it easier for entities to enter reorganization.
If you are scrounging for an ideal location for your business, Finland is the answer. The best businesses to start in the country today are home healthcare service businesses, tech companies, travel agencies, tourism companies, freelancer platforms, affiliate marketing businesses, travel agencies, and so on.
Zimyo is a leading HR and Payroll management services provider in Finland with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.