Establishment of a limited company
Forming a limited company
“Think effectiveness with people and efficiency with things.” -Stephen Covey
I always wanted to be a C.E.O of a large company and be responsible of many employers, lift impressive salary and make important decisions. During the last two years my thoughts have changed radically. Is it because of the covid pandemic, because of growing older or just unknown reason. Who knows.
Only four years ago I was very dedicated to my work with TUI, very career orientated, working as a Team Leader in a new department I was lucky to organize and create from a scratch. I was leading a multicultural team of 15 people. This was a huge acknowledgment and a challenge for a 25-year- old girl. I applied for the tourism industry and my goals were crystal clear. I would sacrifice my life for work and be strong independent boss lady. Well, things change and suddenly one morning I woke up and had totally different set-up in my head. I wanted to come back to Finland , settle in and definitely not work for anyone else anymore. You could say I had some kind of vision of building something of my own. Now this day I am C.E.O of my own jetski rental company, I run a rental service for saunaboats and organize a villa rental service. Some people say everything in life has a meaning. I have been a bit doubtful to this saying but in the end, it might be the truth. Whatever happens in life is supposed to happen. Let me tell you a bit of insights of founding a company based on my recent experiences.
Where to start from
First of all, you need to ask yourself which type of company you should form. What is the most convenient form of company for you? Good thing about limited company are that if everything backfires and the company is facing bankruptcy, the responsibility stays within the company. You are not responsible with your personal assets, only in the case you have backed up a loan as a natural person.
When speaking about business, limited company is the one that sounds like the most serious type of business. If you’re a solo proprietor, people might not take you so seriously than if you are the c.e.o of a limited company. If you are planning to invest some money in the future for the company or dreaming about selling it in the future, limited company is the correct decision.
There is a bit more bureaucracy than being a solo proprietor like example when it comes to the bookkeeping. You must have double bookkeeping and you must make a financial statement each year. I personally prefer to hire expert early in the beginning of the journey to help you with these things. They cost you a lot of money, but there is a sigh of relief as you do not need to worry if something goes wrong. Most of the businesses in Finland fail because of poor tax planning or not understanding the financial situation of the company.
If you are going to form a limited company you will also need at least one person, to be your associate. Often in Finland, this might be your relative or your spouse. If you find out that running a business was not your thing, it is a bit more complicated to close the limited company than other company forms. You might want to try the business out with your private entrepreneur ID before starting a limited company for this reason.
Make sure these steps are handled
- Have enough capital to start the business. You will need to pay 240/380 euros to form the company. You will also need 100 euros to open a business account in the bank. Normally expenses of the bookkeeper and billing service will start to run quite quickly after forming the company as well. Depending on the style of the business you might need starting budget to cover other costs in the beginning. There used to be a rule of needing 2500€ to start the business, but they got rid of it during the year 2019. This is a good directive of the ideal amount of starting capital to cover all the starting fees. If you are in the cosmetician industry, or in the construction business the need of starting capital might differ a lot.
- There is a very easy way of forming all the needed documents nowadays to start the company. You can file the application online if the following steps are fulfilled:
- There is no capital included when founding the company nor the stakes
- All the stakeholders are over 18-years old natural human beings, not companies and they are in possession of Finnish ID’s and have possession of a digital signature process
- Company is fine with a regular articles of association
- Possible authorized signatory and people representing the company are holding a Finnish Id
- Find out if you will need parallel company name, this is only needed if you would like to form the company name in another language, example Swedish or English. The names must be similar.
Auxiliary company name might be useful if you need another name for other areas of business. Let’s say you have a Catering company but sometimes you are performing as a dance on the local club, you might not want to market your show with your catering companies brand name.
- Will you be responsible of registering to V.A.T register? If you are planning to have more than 15 000 euros revenue during the financial year, you have to register. In Finland this is consumption tax which companies are billing from the customer and settling directly to the government.
- Will you sign up for repayment register? This is a sign that company is responsible of filing the taxes correctly. It also shows to your customers that you are reliable and legit.
- Do you have to sign up for employer register? If you will be regularly paying salaries to at least two employees.
- Do not add your personal phone number when filing the application in PRH. Unfortunately, there are a lot of “scam” kind of companies who are trying to add new companies into their registers and ask money to do so. I already had a bad experience with one so called phone book company. They did send me a bill, even though I did not order anything. So look out for these unpleasant surprises.
- Make sure you have all the needed insurances and funding in place to start the business. Pick a reliable bookkeeper and start the process with them straight away. If you are planning to apply a grant or funding, you have to have a functioning business plan. If you are forming the company with someone else, make sure to have a shareholder’s agreement written on a paper. Just to avoid any problems in the future. Place some ground rules and be prepared to “what if “, situations. What if you will sell the company one day? Or someone wants to sell their stocks?
Make a plan before you start to do anything else. Make a business plan. What will you sell, product or a service? Who are you going to sell if for? Who will use this service? How much will the customer pay for the service. How does your business stand out from the competitors? Figure out all the expenses and find out based on similar services what is the expected cash flow. Form a budget based on these details.
Find out if you are entitled for a startup money provided by the government. It is a personal support for the entrepreneurs starting their business. You must apply for this before forming the company. They are expecting some evidence of being suitable to be an entrepreneur and financial need for the startup money.
Choose the perfect name for your company. Think about this intensely before making the decision. This is the name you will use to represent your company. Be proud of the name you represent.
“Without doubt, you have to leave the comfort zone of base camp and confront an entirely new and unknown wilderness.” -Stephen Covey
Being an entrepreneur is amazing. It gives you all the freedom in the world do be innovative, reach for the stars or create something totally new and different. But it also can be the most stressful, demanding work in the whole world. Everyone is not meant to be entrepreneurs unfortunately. It takes a lot of guts, uncountable amount of hours and very good time management to be successful when working as an entrepreneur. I love the saying of entrepreneurial mindset. If all the people in the world would have a bit of this, they would more easily understand the employer and the decisions the leaders are making.
Be prepared to be occupied. Being an entrepreneur takes lot of your personal time. Especially in the beginning. You can work countless number of hours and not be rewarded instantly. Sometimes it might take years to be worth it, or sometimes you just work for nothing so to say. But don’t give up. Trust the process. Manage yourself. Make a schedule, but do not forget your own wellbeing. Eat healthy, do sports and get enough rest.
These 7 wise steps written by Stephen R. Covey are a good reflection about the importance of our own perceptions and how by remembering and achieving these steps we can be successful:
- Be Proactive
- Begin with the End in Mind
- Put First Things First
- Think Win-Win
- Seek First to Understand, Then to Be Understood
- Sharpen the Saw