Are you interested in light entrepreneurship? It could suit you if you want to sell your skills as services and thus try out running your own business on a small scale.
“Light” entrepreneurship is a constantly growing form of entrepreneurship. Its other name, “invoicing entrepreneurship”, describes its essential trait well: an invoicing company that invoices your clients for the services you have sold plays an essential role. Neither term is official, even though they are used in marketing and everyday speech.
Light entrepreneurship is often the start of an entrepreneur’s journey. It is an easy way to try out how successful an entrepreneur you are or how to sell your skills on a small scale. With light entrepreneurship, you can avoid things like large start-up costs.
Light entrepreneurship could be for you if you are selling services — when you want to use your skills and sell your services to others. An example of typical light entrepreneurs is professionals in the cultural sector.
Light entrepreneurship is not suitable for sectors subject to permit, such as healthcare, electrical installation or property. The business owner applies for the permits for business of this kind, and that cannot be outsourced to an invoicing company.
The difference between the work of an entrepreneur and an employee can raise questions. For example, one crucial issue is who manages and supervises the work: an employee’s work is supervised by an employer, whereas an entrepreneur delivers the final product to a client. An employer is generally responsible to a large extent for the employees’ social security, liabilities, insurance and tools, whereas an entrepreneur is independently responsible for them.
A light entrepreneur is an entrepreneur who does not necessarily own a business or have a business ID. This entrepreneur invoices for his or her services via another company, one offering invoicing services, and often using its business ID. However, some invoicing services provide their customers with a business ID, making the entrepreneur practically a sole trader. Even without a business ID, the light entrepreneur operates as an entrepreneur, selling his or her skills and work as services and invoicing for them. “Light entrepreneurship” is still quite a new term, and its meaning is interpreted in slightly different ways in different situations.
Like other entrepreneurs, light entrepreneurs must pay contributions to their entrepreneur pensions (YEL) if the value of their work input exceeds the confirmed limit and the business activities last longer than four months. This is regardless of whether the entrepreneur has a business ID.
Under employment and social insurance legislation, too, a light entrepreneur may be treated as an entrepreneur, which could affect the light entrepreneur’s unemployment security. You should check these issues with the employment authorities in detail.
A contract with an invoicing company affects your taxation and things such as travel expenses and other tax credits available to you.
If you are a light entrepreneur, the invoicing company takes care of your tax and other statutory obligations and transfers you the client’s payment for your work either as salary or trade income. The invoicing company sends invoices on your behalf and, depending on the contract, can also pay mandatory employer’s contributions and tax.
If you become a light entrepreneur, you can sign one of the following types of contract with an invoicing company:
- Formal employment contract: in this case you are an employee for taxation purposes and are paid salary
- Invoicing contract: in this case you are a person performing income-generating activities (without a business ID) or an entrepreneur (with a business ID) and you or your business receive trade income.
The difference is important and substantial, as the form of light entrepreneurship is directly linked to things like taxation and claiming back costs. The way that suits you depends on your situation, your preferences and your business activities.
An invoicing company can also take care of insurance and YEL payments — tasks that are usually entrepreneurs’ responsibilities. The company naturally charges the light entrepreneur for this, as the light entrepreneur is outsourcing his or her financial administration to another company.
An entrepreneur without a business ID does not keep his or her own accounts; the invoicing company’s accounting takes this entrepreneur’s business operations into account.
From the unemployment security perspective, a light entrepreneur may be classified as an entrepreneur. What is decisive here is not whether the entrepreneur has a business ID, for example, but the nature of the work: entrepreneurship consists of doing work independently.
If you operate as an entrepreneur while receiving unemployment benefit, the TE office will evaluate whether it is a primary or secondary occupation. The amount you earn affects the level of your unemployment benefit. A part-time entrepreneur may receive adjusted unemployment benefit.
As a light entrepreneur, your income and invoiced working hours, recorded in invoicing, are generally clearly visible in the invoicing company’s accounting. This makes evaluating whether your entrepreneurship is a primary or secondary occupation. It is not always so easy for other entrepreneurs to prove how much they work.
You should read the employment authorities’ rules to avoid misunderstandings. You can get more basic information on the TE Services’ website.
Read more: Entrepreneurs’ social security
Initial funding is support intended for new, full-time entrepreneurs. A light entrepreneur can also apply for initial funding, but a condition for receiving it is a business ID. To receive initial funding, you must apply before starting trading. If your business is more of part time, you can get initial funding later on when it becomes full-time. However, if you want initial funding you must apply for it before you take this step, and you must get a business ID.
Can a light entrepreneur join Suomen Yrittäjät?
Light entrepreneurship — advantages and disadvantages
- An easy, flexible way to sell your own skills and test out a business idea.
- Also suitable for a part-time business.
- No start-up costs; you just pay for using the service.
- A light entrepreneur without a business ID does not need to keep accounts.
- Low risks, as the invoicing company takes care of the details of accounts and taxation.
- The invoicing company charges a share of your rates.
- Not suitable for operating in sectors which require permits.
- A light entrepreneur operating without a business ID cannot receive initial funding.
- A contract with an invoicing company affects your taxation and things such as travel expenses and other tax credits available to you. Unemployment security issues are also not simple. You should study these carefully with your own situation mind.