Different ways to run your own business
Running your own business — why not? You can start running your own business whenever you want if you have a business idea, desire and courage. What way of running your own business suits your situation best?
Entrepreneurship has many faces: one person is happy to spend her whole career as a single-person business, while another wants to be a growth-oriented start-up entrepreneur from the beginning. A third person could be on part-time pension and at the same time run a business. A fourth sets up a side-line business while on maternity leave, and a fifth is a serial entrepreneur who registers, buys and sells companies. The possibilities are endless! Here are some perspectives which could help you as you consider the options.
Full-time and part-time entrepreneur
You are a full-time entrepreneur if your work on behalf of your business takes up so much of your working time that you could not accept a full-time job from someone else. Your work input is your business’s most important resource, and you spend your time and energy for the good of your business. As the business owner, you pay yourself compensation for your work (depending on the business entity it is either salary, dividends or private withdrawals), within the limits permitted by your business’s financial situation, naturally.
Many business entities suit full-time entrepreneurship. You should choose a business entity carefully. For example, does being a sole trader or running a limited company suit you better? They are the two most common business entities in Finland.
A part-time entrepreneur spends most of his or her working time on something else than running a business, such as studying. Suitable ways of including part-time entrepreneurship might be registering as a sole trader or using an invoicing service. This way is easy to run with low overheads. On the other hand, all business entities are possible.
You can also earn part-time as a freelancer. It is important to remember that freelancers are often considered entrepreneurs, because they have several clients and invoice for their services. Sometimes a freelancer can be classified as a salaried employee if he or she works on an employment contract. Deciding when a freelancer is which can sometimes be difficult, and you should check with the Tax Authority, TE Services and other authorities for their interpretation in your case to avoid difficulties with things like unemployment security.
The business entity that suits you best depends on the nature of your work, your situation and your needs. In some sectors, gigs or freelancing are major ways of earning a living. You can do them either full or part-time.
Whether you are a full or part-time entrepreneur is significant if you apply for unemployment benefit: as a full-time entrepreneur you are not entitled to unemployment benefit, but as a part-time one you could be.
Read more: Entrepreneurs’ social security
Running a business at various life stages
You can start your own business at many life stages and in many situations. Everyone has the freedom to run a business! Here are some tips if you are thinking about whether entrepreneurship suits your situation. If you are thinking of doing it part-time, in particular, you may have to think about combining your own business with other income or benefits.
You can start your own business even if you are not yet 18: you can even register as a sole trader as a minor. However, if you are under 18, you need a parent’s or guardian’s consent and signature on the business registration form you submit to the Trade Register.
On certain conditions, a minor can also be a shareholder in a limited company. He or she can subscribe shares and sign a memorandum of association by paying the issue price with his or her own earnings. A minor can also be a shareholder with shares received as a gift, on certain conditions.
If you are aged 13–28, you can set up a 4H business, for example for a summer. You join the 4H organization and get a wide range of support and help for your part-time business.
If you are an adult student, you could be a part-time entrepreneur while still studying. You can freely choose your business entity. The business entity you choose depends on the extent of your business and the number of business partners you have. For example, if you have a low volume of sales in the beginning, light entrepreneurship or sole trading could suit you.
Read more: Light entrepreneurship
If it is clear from the start that your operations are going to expand and need things like external finance, it might be best to register a limited company. If you are registering a company with some fellow students, for example, other options might be partnerships or limited partnerships.
Your income affects your student grant, whether you run your own business or earn wages. If your income exceeds the annual limit for your student grant, you will have to pay your grant back.
The work income you declare for entrepreneur pension (YEL) purposes is considered when you are awarded housing allowance. The Kela website has more information about the effect of income on student grants.
Parental allowance is determined in accordance with annual income. The annual income is calculated according to the income you received during the 12 calendar months preceding the start of the right to the allowance. In the case of an entrepreneur’s annual income, the work income for YEL purposes during the preceding 12 calendar months is considered. Salaries from the entrepreneur’s own company and earnings from business activities are not included in this calculation of annual income.
This is why it is important for you to choose the right level of YEL work income. It is the basis not only for calculating your pension, but also your sickness and parental allowances.
If you are a part-time entrepreneur and at the same time work for someone else, both your YEL work income and your wage income will be considered when calculating your annual income.
Even if you are already of pensionable age, you can continue to work in accordance with your own schedules, energy and needs. After a long career, you can take advantage of your skills as a part-time entrepreneur.
You don’t need to start your own business alone. The secret of success is often a brilliant team that combines its forces and skills to achieve a common goal.
You can find business partners in your own sector or in completely different ones. It’s important to think carefully about who you start a business with: do you share the same goals and values? Will you cooperate well? Will you complement each other, both in terms of personalities and skills?
When you agree to start a business, you should think from the start about precise agreements, regardless of business entity: limited company or partnership (partnership or limited partnership).
You can also establish a cooperative with like-minded people, or join an existing one. A cooperative is yet another way to sell your own products or services. This business entity is an old but feasible way of running a business.
Cooperatives exist so their members can take advantage of all the services offered by the cooperative, such as invoicing. A typical example of a cooperative is one founded by craftspeople.
There are several options when it comes to business entities, so the lack of choice, at least, is not an obstacle to entrepreneurship. If you want to try out running a business by yourself in an easy way, you can consider light entrepreneurship or sole trading.
Light entrepreneurship means that you sell your own skills like an entrepreneur, but an invoicing service looks after things like invoicing, accounting and payroll for you. Light entrepreneurship also goes by the name of invoicing entrepreneurship.
Read more: Light entrepreneurship
Someone running his or her business without anyone else is often called a sole trader. Sole trading is often the choice for single person businesses, because it is easy to register and has lighter regulation than a limited company, for example. You can operate as a sole trader either full or part-time.
If you are skilled in your field and want to work for your own business, it’s easy to become a sole trader. This business entity suits you best if you plan on selling your own skills and only employing yourself.
You don’t always have to create business activities from scratch or based on an idea of your own. You can buy an existing, functioning business or become an entrepreneur as a member of a well-known chain and existing business idea. Such chain businesses are known as franchises. The franchisees run each unit as a business in accordance with the chain’s concept.
Franchising is common in many sectors, such as cafés, restaurants and property.