Finnish your business: Tax and law for entrepreneurs
Welcome to Finnish your business. Here, we leave no business unfinished. I am your host, Namrata Sethi. This podcast is by Mege, a joint project of - Haaga-Helia, Helsinki Business College - Aalto University and the Shortcut. It's funded by Uudenmaan liitto.
Joining us today is Janne Jokinen from Jokinen and Associates. Welcome. Thank you, Sethi. It's a pleasure to be here and I feel really honored. And thank you. If you could please introduce yourself. Yes, I'm an attorney, in Finnish <i>asianajaja, -</i> which means a member of the Finnish Bar Association.
I also belong to the International Bar Association, - and I have been in law practice - over 30 years since my graduation, - doing advisory and dispute resolution for my clients. On the side, I also teach at - Haaga-Helia University of Applied Sciences - on these topics. What does entrepreneurship mean to you? Why is it important? I think entrepreneurship is actually the key - because if you think a bit deeper what it means, - it actually is the core - how additional value is created - in our economies, and - if there are no entrepreneurs who are willing to take the risk and - of course, in anticipation of the reward, which is uncertain, - there wouldn't be any development in technologies, - in ways of doing business in various fields of life.
So it's fundamentally important. Okay. How do you help entrepreneurs? I help entrepreneurs by giving them advice, - which is normally regarding contracts - that are in process of concluding - or if they have other types of questions - regarding if something is legal, - if something is doable according to the laws. That is called proactive legal care, - taking care of the problem before it arises, actually.
And of course, sometimes I also help entrepreneurs - by solving these problems, like - if there is a contract dispute - which cannot be amicably settled by negotiation, - so we have to resort to go to court - or start an arbitration, and - in that way, I help and assist entrepreneurs. At what stage can they come to you? Pardon? I didn't hear... No worries. At what stage should they come to you? At what stage? Yes, that is a very good question. Early on, that is my advice, because - in hindsight, often I can see that - a lengthy and very sort of financially and mentally - taxing lawsuit could have been avoided - by taking these necessary steps in advance, - before it has escalated, and - often that is when the contract - is being drafted and negotiated, because - if you have a short, vague, - incomplete contract, that opens up - the possibility for disputes afterwards. So it would be definitely worthwhile to - contact early and in that way avoid - avoidable missteps, for example.
What legal issues should be considered when registering your business - or when you have partners? If you form... The most popular form - running a business in Finland nowadays is limited liability company, - and you can form one without putting in any share capital. That is relatively new, but you can have several shareholders. The most important thing when you're starting a business with - partners or shareholders is to have a shareholder agreement - where you beforehand define the roles of everybody. What is the idea you have regarding your business, - are you going to create - intrinsically or are you going to look for venture capital - or at a certain point, maybe you want to - flip the company, meaning you do an exit.
So everybody's clear about the purpose and their roles, - their responsibilities and also about these exit mechanisms, - it's clearly agreed, then, - if one has to sell with the others. There are many clauses. That is a private document, - which is very important. I think every company or every startup - should have one and preferably before you start the business, - because when you have started your business, - it's more difficult maybe to have an agreement - on the content of your shareholder agreement. What are the legal issues when we are hiring? When you're hiring, you have to take into account - the Finnish labor norms, - the norms covering employment.
Historically in Finland, we have a lot of regulation - in hiring people, and employees are quite well protected - as the weaker party of the contractual relationship. That's why it's important to know, for example, - the field-specific collective agreement, if you have to comply with that - because in the collective agreement, you find the minimum wages - and other, - other employment related rules for that specific field. What are the legal issues we should be aware of in fundraising? And... -Fund... Yeah, I just wanted to ask, where we can ask help for it? Oh, for fundraising, - I think there are several sources you can resort to. There are Finnish Venture Capital Associates - and there are official websites you can - retrieve the information from, for example, - Trade Register contains several links. Even your own bank, as an entrepreneur, - they could have some ideas where you could - have more information, contacts.
How are the companies in Finland taxed? We have a flat rate corporate tax - for limited liability companies, which is currently 20% for the profits. Then, the owner will be taxed separately - if you take out salary as - an entrepreneur from your limited liability company, it will be - taxed most often according to your personal income tax rate. But that depends on - how much assets you have in the balance sheet - because you can take some part as dividends - which are taxed as capital income and dividends and - some part of the dividends are salaried dividends. So if the company pays for profits, of course, - business related expenses are first deducted.
Then, if the company shows a profit, 20% of that, - you have to take into account, if you take salary from your company, - that will decrease the amount of profits because - it's to be deducted before calculating the profit. But there is good information available if you look into, for example, - the Finnish tax authority's website: vero.fi. And in several languages, - you can get detailed information on company taxation. What if I'm making less than 10K revenues on the first year? If you make less than 10,000... Yes, less than 10,000. You mean as a profit or...? -Or revenue.
Revenue, okay, there might be possibilities - that you can be exempted from a VAT. You can apply for that. There are certain limits which are pretty low. It's not always actually important to be exempted from the VAT - because that is a tax - the entrepreneur collects from the customers - and it can be set off, deducted against the VAT. The entrepreneur has paid for - business related purchases, - like computers, other equipment, so... But that's possible, and you can find more information on that - in the previously mentioned websites. And if I'm not making any profit? -No tax.
Okay. -There is no tax if there is no profit. You can have a big revenue, but you can still be at a loss. And losses you can carry forward. So if this year you make a loss, it will be confirmed in taxation, - you can use the year after if you make profit, - and it will be deducted in the future profits. There are time limits for that. But you can use - even losses to benefit...
Yeah. And if I'm... -Your company. How does it impact if I'm still hiring people? I'm not making profits, but I'm hiring people. Hmm... You can finance the salaries -
by external funds, for example, if you have got - a capital infusion from venture capital firm, for example, - you can have a lot of money actually in the company bank account, - and that can be used for salary payments - even if you don't make profit. But then you're burning investor money. Many companies, big companies have done that and they have just - continuously shown losses. And funnily enough, their valuations have grown - because the companies have grown in size. And so, you can make losses - provided you are adequately capitalized.
Okay. And there are a lot of people - who are taking entrepreneurship also. Other legalities we should be aware of when freelancing, - like using Ukko or Eezy? Those are relatively new ways of - trying the entrepreneur role.
They are services where you can invoice through them - your different clients. I see maybe it can be a good first step into - testing waters, so to say, if you want to be an entrepreneur - and after trying that way, - you can easily leave. Is there any impact for taxes or legalities that we should be aware of - when we're taking the light entrepreneurship route? (Sighs.) There can be legal issues, - and also relating to if you're considered as an employee - or if you are considered as an entrepreneur. It's actually a worldwide discussion at the moment, - who are genuine entrepreneurs, - the food messengers, for example, or Uber drivers.
In the UK, there was a High Court decision - coming out a few weeks ago, - defining Uber drivers as employees. So, of course, it has a huge impact if you have to - yourself as an entrepreneur, pay into your own pension entirely, - because if you are employed, - a big part of your pension fees are actually paid by the employer - and you have all that employee protection. So... It should be carefully considered. From where do I get support? From accountant or SY or COC support? That's very important what you ask because you actually should have, - as a starting entrepreneur, you should have an accountant - who is reliable, who knows about - filings to the tax authorities regularly.
It can help you in many ways. There are accountancy services available. You can search for an accountant, - but you should, I think the important one is that you should have one. You shouldn't as a starting entrepreneur, - try to do all the things yourself, but you can outsource. This is one field of activities you definitely should outsource - because these services are not expensive, but they are very useful. It's advised that, as an entrepreneur, you already have so many rules - in your company, and it's better to get help when you can.
Yes, one shouldn't be too shy of that - because there are various sources you can turn to. There is, in Finnish <i>Uusyrityskeskus.</i> It's a center for enterprises. They published actually - over a 100-page long PDF document, also in English, - which is a guide for starting entrepreneur, - covering all the issues, not only legal, but - a little bit of marketing and defining your customer groups - and doing risk analyses like SWOTs. It's a very good source.
You should try to find information from different sources, which are plenty, - and not to try to just solve it yourself. In a way, it's easier to contact the experts. And get it right in one go, so to say. This brings us to the last question. What advice you would give to an entrepreneur in five words? Five words...
Trust yourself, be resilient... Hopeful. That's good. Very valuable advice. -Thank you.
Thank you for joining us and giving us this amazing insight on this topic. Thank you. As I said in the beginning, - it has been a pleasure to be here. Thank you.
2021-06-07 14:01
