Choosing a company type – which one is the best for your business?

Setting up a business often starts with choosing the form of enterprise, i.e. the company type, and this decision can affect many aspects of your business, such as its legal obligations, taxation and business flexibility.

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Company types in a nutshell

The first step in choosing a form of enterprise is to study the different alternatives available and their characteristics. The most common company types are:

  • Limited liability company: The owners of the enterprise are shareholders who are only responsible for the capital they have invested.
  • Trade name: Owned by a sole trader who is solely responsible for the enterprise’s debts.
  • General partnership: An enterprise formed by several entrepreneurs who are all personally liable for the company’s debts.
  • Limited partnership: An enterprise with at least one active partner and one sleeping partner.

Each form of enterprise has its advantages and challenges, and the choice often depends on the nature and objectives of your business.

Read more about different forms of enterprise.

The legal and tax aspects of different forms of enterprise

The form of enterprise you choose can have significant implications on both the legal and tax aspects of running a business. For example:

  • There is no minimum capital requirement to set up a limited liability company. A limited liability company must be registered with the Finnish Patent And Registration Office.
  • A trade name is simpler and cheaper to set up, but the owner is personally liable for the debts of the business.
  • Taxation may vary between different enterprise forms; for example, a limited liability company is an independent taxpayer and is taxed at a corporate tax rate of 20%. Read more about the taxation of different company types (in Finnish).

It is important to understand these differences and consider which form of enterprise is best suited to your business needs.

Consider your situation: what will work best for you and your business?

Ultimately, the choice of company type depends on your own personal goals, situation and business requirements. Think about the following questions:

  • How much risk are you willing to take in business?
  • Which tax system is best for your business?
  • Do you want to start a business alone or with a partner?

Be realistic and carry out a thorough analysis before making the final decision. Book an appointment for business start-up advice. We are more than happy to help you consider all your options!

Book an appointment with a business advisor.

Check out the Becoming an Entrepreneur in Finland -guide for more information.