Earning extra income - Starting own business advice

[mpjacko]

Hello,

Can anyone give me some advice regarding earning extra income on top of your main job i.e a second income.

My wife is a pre-school teacher teaching english to 3-7 year olds and gets a monthly salary. She is from the UK and has been in finland for the past 3 years. Recently she has had the idea of setting a afterschool english club for children upto 15 for an hour once a week. She would charge each child so much.

Because she has a main job, how soes she go about paying taxes on this second income. If she got some of the other teachers to help, would it be easier to form a company where they can pay tax on the total money they make each week and then split the profit after tax between themselves.


Who would be the best person should i go and see about this? Kela or the employment office. Someone told me about getting a Y3 form but in truth, i don't know where to start. Any advice would be greatful. Maybe you have been in the same situation.

thanks

[Rosamunda]

Your wife must decide whether she wants to run the club as

1) a self-employed person (ie sole trader or toiminimi "TMI" in Finnish)
2) an association (non-profit making organisation "Ry", but she could still pay herself a salary)
3) an employee (eg: the PTA - if there is one - could employ her)

Whichever you choose your wife's personal taxation would be pretty much the same. The tax office http://www.vero.fi could help you and tell you what the tax rate would be on your wife's second income.

The easiest solution is probably (1). Registration as a sole trader is easy (use the search engine on this forum to find lots of info). The revenue from billing the parents who use the club would be your wife's taxable income and of course you can deduct all your expenses. The tax rate would be the same as for a normal salaried second job (a second job is always taxed more than your main job), vero will give you more info on this. No worries about Alv (VAT) for a revenue of less than 8500 euro per annum and the bookkeeping is simple cash-based ledger, no need for double-entry accounting etc.

There may be specific rules and regulations to comply with concerning child care. Your municipality can help you with this and you should be able to find a contact on your city's website. Somebody already asked this question earlier in the week, maybe you could brainstorm this together

viewtopic.php?f=37&t=32183&p=289060#p289060

[DMC]

a second job is always taxed more than your main job

Can you write a bit more about that? Are you saying that getting X euro from a second job would mean paying more tax than getting X euro raise from your main job?
I am currently looking into starting a new business. One thing (among many) I still have to consider is whether this should be a completely new business or whether I should expand the range of operations of my existing business. In effect the former would mean me having a second job, whilst the latter would (I hope!) mean me getting a raise from my existing job, so this is very pertinent for me.
(Edit to correct silly error ).

[Rosamunda]

First of all... you need to distinguish between salaried income (we call it PAYE in the UK) and capital income (income from dividends). Both of these are considered personal taxation but are taxed at different rates. (There is also Company tax due on the profits of an Oy but that is a different subject altogether).

In Finland your tax card tells you what your PAYE tax rate should be. You give this to your employer so he knows how much to deduct from your salary. If I understand correctly the tax card indicates the "perusprosentti" which is the tax rate for your main job and then a "lisäprosentti" which is the rate applied to any other job you may have. Maybe someone else can correct me if I am wrong.

My understanding is that yes, you do pay more tax on a second job than you would on a pay increase in your first job. But if you pay too much tax overall during the year, then you get it back, eventually.

I have a freelance tax card which means that when I work for several companies they all tax me at the same rate.

For your particular circumstances Vero can advise you which is the best way to do this. I'm not sure I completely understand your post because you talk about starting a new business, so I don't know if you are a private entrepreneur, a major shareholder or an employee of your own company.... you may even be all of these....

[Rosamunda]

If - on the other hand - you are talking about expanding an existing business, then there are other things you might want to consider like optimising VAT, cash flow, working capital etc etc. Then it gets technical. I am not sure to what extent it is possible in Finland to have two quite distinct businesses under the same Oy (don't think this is a problem with a toiminimi since all the profits are simply included in you personal income). Eg: If someone has an Oy selling organic chickens (I wish) and then decides to start doing web-page design, can he or she do it all under the same company name? Dunno.

[DMC]

I am not sure to what extent it is possible in Finland to have two quite distinct businesses under the same Oy ... Eg: If someone has an Oy selling organic chickens (I wish) and then decides to start doing web-page design, can he or she do it all under the same company name? Dunno.

Yes, it is possible. I already do this. So long as you are clear about declaring what the business is going to do there doesn't seem to be a problem, but (I think) you do need a different name for the different lines of business. At least that is the way I have done it. I have two trading names, and had to pay a fee to register each one, but both come under the same Oy.

I'm not sure I completely understand your post because you talk about starting a new business, so I don't know if you are a private entrepreneur, a major shareholder or an employee of your own company.... you may even be all of these....

Yes, I would say I am.