Setting up a web hosting / design company in Finland

[Patrick1970]

Hello,

I moved to Finland a few months ago and am planning to set up a web hosting/design business. I have been in this type of business for years, so I know how that works, but now I would like to start my own company in Finland, so I will need to gather some information about that first.
I have been reading several threads (and links to other sites) about starting a business in Finland, but I would like to find out some more specific details about a business like this (web hosting / web design). Does anyone have experience with similar businesses in Finland?

I assume a toiminimi should be fine, at least for now, until the company becomes established enough and earnings become higher. I will be running the business by myself, there are no other partners. But what if I would need to hire an outsourced company (from outside Finland) to for example handle support requests? Is this still allowed by toiminimi laws?

Actually, is there a point in a business when you can no longer be a toiminimi? For example, if the business becomes too big? Meaning that you would need to switch to an OY instead or so?

Also, when you register a toiminimi, are you obliged to have a separate bank account for it or can you just use your own account?

I understand that there is no obligation for a bookkeeper if you can handle it yourself. I will have to see how that goes. On average though, how much does a decent English-speaking bookkeeper cost? I have read posts about several hundred EUR per year, but as this seems a rather small amount, I would like to make sure about this.

Any guidance would be greatly appreciated, thanks!

[Rosamunda]

The book I have often mentioned "Establishing and Doing Business in Finland" by Tuulikki Holopainen answers most of those generally toiminimi questions. As far as I know there is no upper limit for a toiminimi in terms of sales revenue. As a toiminimi you can employ people in the same way as a limited company (Oy) can. The difference is in your personal liability (ie: risk exposure). As a toiminimi you are personally responsible for everything related to your business. So if a customer, supplier or an employee has an issue with a private entrepreneur then - in theory - the courts can order you to pay damages out of your personal assets.

The other difference is in personal taxation. As a toiminimi you will pay more or less the same level of income tax that a salaried employee would (ie the profits of your business are taxed - more or less - according to the usual progressive personal income tax rates). However, the profits of a limited company are taxed at the corporate tax rate (26%). As the shareholder of an Oy, income from dividends is tax free up to a certain level and is then taxed at the capital income rate of 28%.

More and more salaried workers are trying to find ways of working as limited companies (eg: doctors, dentists) as they pay less tax that way. But you'll probably have no worries in the beginning if your revenue is not huge. And it is OK to earn a salary as some services (eg house repairs and domestic services etc) are tax deductible

VAT rules are the same for toiminimi and limited companies. So are rules governing accounting requirements and financial statements. The audit rules are slightly different though. A toiminimi does not need to engage an auditor but a limited company does if it employs more than 3 people or has a balance sheet total over 100K€ or turnover exceeds 200K€.

BTW, regarding bookkeepers and accountants... do not expect a bookkeeper to give you tax advice or make suggestions on how to optimise your cash flow etc. On the whole, bookkeepers don't do that. They just do your VAT returns and pay your bills and give you a financial statement every now and then.

edit: Yes, I think you can use your own bank account for the toiminimi. Check with your bank what they suggest. Sometimes it makes sense to keep the business stuff separate. (I remember we had an issue with paying salaries, we couldn't use the salary slip template provided by Nordea because our business account had the same Solo access code as our private account, or something weird like that).

[Sakari]

From what i've understood you can not employ workers normally under Toiminimi. This is because Tmi means that you're the sole proprietor and that is your own personal source of livelihood. You are allowed to use your spouse or direct descedents as helpers though.

If you really want to work under toiminimi and employ workers they would also have to have their own Tmis and work under them while actually being your workers while you (your Tmi) pays to their Tmis for services (the work done to you). From a law point of view this means that they really wouldnt be your workers, of course.

Also you don't really need to make an official annual financial statement like OYs have to. It's just an attachement that you add to your normal tax form.

OYs and sharing dividend... It's a bit more complex than that. You can't just decide that you're going to share dividend whenever you like, also there are strict rules how much you can share dividend. Your revenue should be quite significant before you could actually get enough money shared as dividend only, so it would top the amount if taken as salary only. Usually the combination of both salary and dividend gives the biggest net amount in small limited companies.


P.S: I'll have to admit that I have no real hands-on experience of the matter but I study in a finnish school of economics and business administration.

[DMC]

BTW, regarding bookkeepers and accountants... do not expect a bookkeeper to give you tax advice or make suggestions on how to optimise your cash flow etc. On the whole, bookkeepers don't do that. They just do your VAT returns and pay your bills and give you a financial statement every now and then.

That's a good point. Running a small company in the UK my bookkeeper was very pro-active and often suggested ways to minimise tax liabilities etc. I find here that a bookkeeper is really a form-filler. Useful because I don't speak Finnish, but limited. As regards cost of a bookkeeper, mine said it depends on how many invoices I issue, but I don't know how she calculates her bill. The hundreds of euros per year sounds the right range for a 1-man company though.

[Rosamunda]

I think the bookkeeper charges a flat fee for some things (eg VAT returns, financial statements) and a transaction fee (ie: per piece of paper) for processing ledger entries and paying bills.


I disagree with Sakari about Tmi's not being able to hire employees. Toiminimi's are able to hire employees but if these people are not spouse/children of the private entrepreneur then the toiminimi must notify the trade register and also comply with all employment legislation as a limited company would do (entry in the employer register, TyEL pension insurance, accident and unemployment insurance, group life insurance).

As I tried to explain above, the only big difference between a toiminimi and a limited company is the risk factor. A TMI is personally liable for everything he does related to his business. So, if a TMI employs people on a permanent basis he/she assumes all the risks for their welfare etc.

Yes, dividends should not be relied on for sole personal income since they cannot be issued regularly. It is fairly complicated. If you are seriously thinking of starting a business try to get an appointment with a start-up advisor at your local TE-Keskus (there is one in Rovaniemi), you may even be able to claim startti-raha for the first few months.

[Patrick1970]

Thank you for your replies.

I would just like to point out that any staff I will hire, will be outsourced, like mainly support staff for support tickets. They will be from outside Finland, so I would imagine there is no need to do all the things which you would normally need to to do if your staff is actually here in Finland? Or am I wrong about that? Can't this simply be seen as an expense?

Penelope, does this book you mentioned also go into details about what you can bring in as an expense with a toiminimi?

Also, a billing script will take care of automated invoicing and keeps track of what comes in and goes out, so I am wondering whether there would be the need for a bookkeeper at all? I mean, I can print out the reports and such of monthly income, divided up into more detailed items if necessary. I would think this takes care of quite a large portion of a bookkeeper's job already.

Penelope, thank you for the tip about the TE-Keskus, I will check that out as well.

[DMC]

Also, a billing script will take care of automated invoicing and keeps track of what comes in and goes out, so I am wondering whether there would be the need for a bookkeeper at all? I mean, I can print out the reports and such of monthly income, divided up into more detailed items if necessary. I would think this takes care of quite a large portion of a bookkeeper's job already.

That's true to a great extent. The more you can do yourself, or automatically, the less need for a bookkeeper. You will want/need to keep good records anyway, simply to manage your business, so why not do the official paperwork?
I do all my own invoices etc but I still prefer to use a bookkeeper for all official paperwork. I am happy to pay for that service because I find it a boring chore and, not speaking Finnish and not knowing the system, I would probably make a hash of it anyway. You may view things differently.

[Rosamunda]

I think you can do TMI bookkeeping yourself. Most people I know with their own TMI do it themselves. Or find a local entrepreneur who will show you how for the price of a few beers. The VAT returns are the only thing you need to be careful about. There are monthly deadlines to respect. But you will probably qualify for VAT exemption (use the search engine to find threads on toiminimi VAT)

TheHolopainen book does list VAT deductions and restrictions. There is also a short paragraph on imports from outside the EU (eg if you are buying services) and it explains what you must include in your invoices (date, consecutive identifier, name and address of buyer/seller etc etc). BTW you can get the book through your local library (it is 65€ to buy I think) but make sure you get the latest edition as the rules seem to change every year. Mine is from 2007 and it contains the updates from the Act July 2007.

It does not include much detail on accounting rules for expenses. But I guess they are somewhere on Vero in the case of a toiminimi personal taxation rules apply rather than corporate taxation rules). Someone should write a Dummies guide to toiminimi administration in English, with a workbook and interactive CD. It would sell well. Or maybe there is such a book in Finnish and someone could make a buck by translating it.... definite gap in the market there!!!

[richard berman]

Someone should write a Dummies guide to toiminimi administration in English, with a workbook and interactive CD. It would sell well. Or maybe there is such a book in Finnish and someone could make a buck by translating it.... definite gap in the market there!!!

Please penelope write a book I would be a customer, I would do my own booking but I would just worry all the time if I mess it up, let me know when I can buy it

[Rosamunda]

Hmmm... will suggest it to my other half. He's the pro bookkeeper these days, not me. My beancounter days are long over. Selling ice-cream is much more fun

[Rosamunda]

Penelope, does this book you mentioned also go into details about what you can bring in as an expense with a toiminimi?

There is also this place which takes email enquiries from self-employed "newcomers" :

http://www.infopankki.fi/into/

( In To is a joint venture between Kela and Vero aimed at giving advice to foreigners coming to work in Finland)

[Tiwaz]

I would just like to point out that any staff I will hire, will be outsourced, like mainly support staff for support tickets. They will be from outside Finland, so I would imagine there is no need to do all the things which you would normally need to to do if your staff is actually here in Finland? Or am I wrong about that? Can't this simply be seen as an expense?

Question however would be... Who would be your target audience?
If they are Finns, your foreign based support staff might not be necessarily big plus. Because they would not be able to serve customers in Finnish.
Yes, most of your customers would be very fluent in English, but overall they would still prefer to perform their business in Finnish as it would be language they are most comfortable with.

[Patrick1970]

Thanks again for the information, I will be sure to check out all the things that have been mentioned.

Tiwaz, my main target audience would not be from Finland specifically, it will be clients from all over the globe.

Which reminds me, I assume I only need to deal with VAT for clients within Finland? (or within Europe?)

[karel]

If you make sure all your clients pay to your Finnish account, there's no reason why you'd have to deal with foreign VAT.

[DMC]

Which reminds me, I assume I only need to deal with VAT for clients within Finland? (or within Europe?)

My understanding is that customers located outside the EU do not have to pay VAT. Customers located in the EU are not charged VAT if they provide you with a valid VAT registration number. Everyone else should be charged VAT.