Advice and tips for entrepreneurs

– Despite its simplicity, light entrepreneurship is still entrepreneurial activity where the responsibility for one’s work, pricing and profitability lies with the individual. That is why becoming a light entrepreneur should be carefully considered and planned, just like starting any business, reminds business advisor Tuija Räihä-Pundars.

What does light entrepreneurship mean in practice?

In Finland, light entrepreneurship can refer to two different models that differ significantly.

In the most common model, a person uses an invoicing service without having their own Business ID. The service invoices the client and then pays the worker a salary. In this case, the person is not legally considered an entrepreneur but a contractor performing work assignments.

The second model is light entrepreneurship with a Business ID, offered for example by banks or invoicing services. In this case, a sole proprietorship is established and the service provider handles accounting, invoicing and some tax matters. The person is legally an entrepreneur and income is taxed as business income, even though administration is outsourced.

– The differences between these models directly affect taxation, deductions, social security and responsibilities, so the choice is not merely a technical detail, emphasises Räihä-Pundars.

A light entrepreneur with a Business ID can deduct business expenses but must also take on entrepreneurial obligations such as potential pension insurance contributions. With invoicing services without a Business ID, administrative responsibility is lighter but deductions and entrepreneurial status are more limited.

– Anyone considering light entrepreneurship should understand that using an invoicing service without a Business ID is not entrepreneurship but rather earned income without employee benefits such as paid holidays. If you operate with a Business ID, then you are an entrepreneur and entrepreneurial obligations apply, Räihä-Pundars explains.

Easy to start – but planning is still important

Light entrepreneurship is often seen as a low-risk way to try entrepreneurship and for many it is a natural first step. However, the Enterprise Agency Startia emphasises that the fundamentals of business still apply.

– Profitability, pricing, acquiring customers and understanding costs are just as important as in any traditional business. Even as a light entrepreneur, it is not wise to start without a plan, even though the technical start is easy, says Räihä-Pundars.

– Invoicing services are businesses themselves, so their costs, terms and financial impact should be examined in advance. At the same time, it is worth considering whether operating through an invoicing service is the right solution or if starting a company would be more reasonable. These questions can be discussed with a business advisor.

When does light entrepreneurship work best?

Light entrepreneurship is particularly suitable when the activity is small-scale, part-time or experimental. Many freelancers, trainers, creative professionals and experts start this way because it allows them to sell their work without establishing a company.

It also works well when testing a business idea or building a customer base before starting a business.

– Light entrepreneurship can also be a natural solution when work is project-based or occasional. In these cases, invoicing services offer an easy way to invoice clients without the administrative responsibilities of entrepreneurship. When activity becomes more regular and income grows, many move on to establishing a sole proprietorship, Räihä-Pundars explains.

When is starting a company a better option?

Light entrepreneurship is not intended as a permanent solution in all situations. When operations grow, turnover increases or the company brand becomes central, establishing a sole proprietorship or limited company is often a clearer and more economically sensible option.

The same applies when business requires investments, employees or more extensive operations.

Business advisors emphasise that light entrepreneurship can be a good stepping stone to entrepreneurship, but the business structure should be evaluated early enough. Otherwise, entrepreneurs may miss support opportunities or pay service fees when running their own company would already be more cost-effective.

– It is also important to check how light entrepreneurship affects benefits and potential start-up grants if the activity later becomes full-time entrepreneurship, concludes Räihä-Pundars.

• Book an appointment for start-up counselling