Establishing a business
If you are planning on setting up your business in Finland, but unsure how things work here, this step-by-step guide covers the basics you need to know when establishing a limited liability company. We hope it will be of value to you.
This guide created by our experts is offered free of charge. The guide contains only general information and therefore it should not be viewed as a substitute for legal advice. If you need more specific advice or have any concerns regarding any topics discussed in this guide or wish to discuss other legal entities in the Finnish market, please do not hesitate to contact us!
If you are a citizen of an EU or EEA member state, you can enter Finland freely as a visa or a residence permit is not required. However, if you plan to stay in Finland for longer than 3 months, you must register at the Finnish Immigration Service (Migri).
If you are coming from outside the EU or EEA, you need a residence permit to start your business in Finland. For startup entrepreneurs, this is made easy as you can apply for a Startup permit, if your business fulfills a certain criterion.
Please note that according to the Finnish Limited Liabilities Companies Act, a limited liability company should have at least one member of the board residing in an EEA member state. This also applies to managing director, if appointed.
Establishing a company in Finland is easy and business operations in Finland can be carried out in several forms of company (e.g. private trader, co-operative and limited liability company). Most used company form is limited liability company (in Finnish: Osakeyhtiö or Oy) as it is easily established and offers a flexible way to run your business.
Limited liability company overview:
- no minimum capital requirement for private LLC (for public limited liability companies the requirement is EUR 80.000)
- unlimited number of shareholders, minimum requirement one
- (generally) no personal liability for the company’s debts
- managed by board of directors, minimum requirements one director and one deputy director
- a managing director can be appointed to run the daily operations (optional)
- so-called double taxation: the company is subject to corporate income tax rate (20%), whereas shareholders are taxed on distributed profits
- an address is needed but no requirements for a physical office or a lease agreement
Charter documents typically include the following:
Memorandum of association
To establish a limited liability company, it is necessary to draw up a memorandum of association. The memorandum must be signed by all shareholders and it must contain all the information required in the Finnish Limited Liability Companies Act:
- the date of the contract
- all shareholders and the quantity of shares subscribed for by each of them
- the price to be paid to the company for each share (subscription price)
- the time when the shares are to be paid, and
- the Members of the Board of Directors of the company
Articles of association
Articles of association must be attached to the memorandum. The articles of association should contain the following information on the company:
- its trade name
- the municipality in Finland where it has its registered office and
- its field of operation.
Shareholders’ agreement is not required but highly recommended as it outlines the shareholders’ mutual relations as well as rights and obligations in relation to the company. Usually the principles according to which the company’s ownership, management and operations shall be carried out are also included in the shareholders’ agreement.
A share certificate certifies ownership of shares of the company. The board of directors may issue share certificates for the shares in the company, if the shares have not been incorporated in the book-entry system.
The share certificate shall contain the following information:
- the trade name of the company and its business identity code
- the serial numbers of the shares, or the quantity of shares and the serial number of the share certificate
- the share class, if the company may have several share classes at the time of issue of the share certificate
If the shares in the company have not been incorporated in the book-entry system, the board of directors shall keep a register on them (share register). The register shall contain:
- list of the shares or share certificates in numerical order
- their dates of issue
- the names and addresses of the shareholders.
- class of each share, if the company has several share classes
- any other differences in the rights and obligations carried by the shares
Organizational resolutions of the Board of directors
The Board usually holds their first meeting before the company is established to authorize an individual to open a bank account for the company.
Limited liability company is managed by board of directors, which is the highest decision-making authority of the company. At least one director and one deputy director are required. If there are two or more directors, a chairman needs to be appointed. Directors are elected by the shareholders.
A managing director may be appointed to run the daily operations of the company. The managing director is appointed by the board of directors.
An authorized signatory with no decision-making powers may be appointed by the board of directors to sign on behalf of the company.
The shareholders’ meeting decides upon the appointment or removal of directors. A board decision is required for the removal of the managing director. Directors and managing director may resign by notification to the board.
- Please note that according to the Finnish Limited Liabilities Companies Act, a limited liability company should have at least one member of the board residing in an EEA member state. This also applies to managing director, if appointed.
- Please note that the identity of directors and managing director is public. The identity of shareholders’ in a private limited liability company is not public; however, anyone has the right to obtain a copy of the share ledger (containing the shareholders’ identities) of a company upon request.
There are no minimum capital requirements for private limited liability companies. For public limited liability company, the minimum capital requirement is 80 000 €.
It is usually necessary to open a company bank account before starting business operations. Usually an extract from the Trade Register is required when opening a corporate bank account, but if the company is not yet registered, it can be replaced with the memorandum and articles of association as well as minutes of board meeting authorizing the person to open the bank account. The extract can then be submitted later.
Company name must be included in the Articles of Association. It is up to the Trade Register to decide if the proposed company name qualifies for registration. The word “Osakeyhtiö” or abbreviation “Oy” must be included in the company name.
Before registering your company, you should check if the name for your company is available. The Finnish Patent and Registration Office offers a free name checking service.
A company (or any business in Finland) must be registered in the Finnish Trade Register. For registering a limited liability company, you must file a start-up notification. Through registration a limited liability company comes into being. The registration has to be done within 3 months from the signing of the memorandum or the formation expires.
Required information for the registration:
- company name, financial period (usually calendar year, although the first period can be between 6 to 18 months), address of registered office, line of business (so-called TOL classification is used in the Trade Register notification; you can browse the categories here)
- information of shareholders and members of the board of directors (and the managing director):
- Finnish citizens: name + social security number
- Foreigners:date of birth + address + copy of passport name page
- possible persons with rights to represent the company (other than board and managing director)
For more detailed information, see Patent and Register Office’s web page.
The registration can be done either online or with a paper application (see the English translation here). The application has to be enclosed with the memorandum as well as the articles of association. Unfortunately, the Finnish Trade Register requires that the application is filled in Finnish or in Swedish – but you don’t need to worry, because we are prepared to assist you in the registration process.
The registration is subject to charge (online notification 275€, paper notification 380€).
Parties with the obligation to pay VAT must be entered in the VAT Register which is kept by the Finnish Tax Administration. As a rule, all kinds of selling of goods and services is subject to VAT, if the activity of selling is a conduct of business. In some circumstances, however, the registration is voluntary, e.g. if the business operations are small-scale (i.e. the turnover for accounting period is less than EUR 10.000). If the company is not registered for VAT, VAT amount is not added to the price of goods and/or services it sells. However, even if your company falls into the small-scale business category, you should still consider registering.. In that case, the company cannot deduct the VAT of its purchases.
The registration to VAT Register can be done with the same form as the registration to the Trade Register. Registration to VAT Register is free of charge.
Companies’ profits from business operations are subject to tax prepayments. If the company is registered in the prepayment register, it takes care of its own prepayments, meaning that parties who make payments to the company do not need to withhold taxes from those payments. In other words, registration is not mandatory but recommended.
Getting an insurance
- An entrepreneur is obliged take a self-employed persons’ pension insurance (aka YEL insurance). The insurance must be taken within six months from starting your business from any pension insurance company. Other insurances are optional.
Notification of beneficial owners
According to anti-money laundering legislation, all limited liability companies must notify the Trade Register of their beneficial owners. Trade Register also needs to be notified if the limited liability company does not have any beneficial owners. The notification is free of charge and it can be done online.
The shareholders shall hold a general meeting to exercise their power of decision, i.e. vote on certain issues. At least one meeting (ordinary general meeting) has to be held annually and it shall take place within six months of the end of the financial period. In addition, an extraordinary general meeting shall be held if considered necessary.
The board of directors shall meet when necessary (in practice this means at least once a year). More than half of the directors must be present to constitute a quorum.
There is no obligation to appoint an auditor for a company if no more than one of the following conditions were met in both the last completed financial year and the financial year immediately preceding it:
1) the balance sheet total exceeds EUR 100.000
2) the net sales or comparable revenue exceeds EUR 200.000, or
3) the average number of employees exceeds three
The auditor must be authorized public accountant who resides in an EEA state. An accounting firm can also be used.
The issuance of new shares is decided by the annual general meeting or the board of directors authorized by the annual general meeting. If it has been decided to issue new shares, the Trade Register must be notified of the share issuance decision as well as the new shares.
According to the Limited Liability Companies Act, an LLC must be dissolved through certain procedures, and therefore the filing in of a notification to dissolve the company is not enough. Dissolution can be done by going into liquidation or bankruptcy process, or through merger or demerger.
The dissolution of company and termination of business must be reported to the Trade Register. When the company is removed from the register, the company name is no longer protected.