Expert’s 7 tips on starting a business when unemployed

Our expert reminds unemployed people that starting a business does not automatically mean the end of unemployment benefits.

As unemployment numbers rise, starting one’s own business has become a relevant option for self-employment.

An unemployment fund or Kela can pay unemployment benefit to an unemployed person who starts their own business for four months, regardless of whether they run the business full- or part-time. During that time, their unemployment benefit is adjusted in line with the income the person gets from their business.

“If after four months the business activity is deemed part-time, the person can continue to receive adjusted unemployment benefit. If the business activity is deemed full-time, the person’s right to unemployment benefit ends,” says Atte Rytkönen-Sandberg, a Vice President at Suomen Yrittäjät, the Finnish SME association. He encourages unemployed people who are interested in running their own business to try it out and be courageous in developing their business ideas.

“At its simplest, running your own business is about employing yourself. If you’ve lost your job and you have an idea that you want to test out, I strongly encourage you to try and see if running a business is for you. Starting a business doesn’t mean you automatically lose the right to unemployment benefit, and you also have that security when you start out.”

Consider these seven things

1. When you start a business while unemployed, you can still receive unemployment allowance. If you start your business while unemployed and employ yourself in it, you can receive your unemployment benefit for a maximum of four months from the day you start working in your new business. 
2. The business activity is usually considered to have begun when the company’s actual productive or financial operations begin or the company has been entered on the Tax Authority’s VAT register, prepayment register or employer register.
3. Remember that you must notify the employment office about starting your business before you start it. In addition, to get unemployment allowance, you must continue to apply for full-time jobs, even if you have started your business.
4. If you start your business while unemployed, the employment office does not make a decision during those four months whether your business is full- or part-time. When the four months are up, the employment office assesses whether your business operations are full- or part-time and issues a decision. 
5. If you get income from your business activities during the first four months, you are paid adjusted unemployment allowance. Your unemployment benefit is adjusted in line with the income you get from your business.
6. Your income from your business reduces the amount of unemployment benefit: generally, for every €1 you earn from your business, your unemployment benefit is reduced by 50 cents. In the first instance, income you receive from your business is examined using accounting records. For this purpose you must provide your unemployment fund with a monthly income statement or free-form income-expense statement. It must show your income and expenses by month.
7. If after four months your business is considered part-time, you can continue to receive adjusted unemployment benefit while running your business. If your business is considered a full-time one, then you lose your right to unemployment benefit.

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