Even though I was not present at the opening session, thanks to pictures my classmates shared on our whatsapp group I am able to get an idea of what they talked about. This week's topic might be really challenging for me because as a foreigner, who doesn't know many Fins older than 25 years, my general knowledge about Finnish businesses is very low.
My classmates agreed on the following questions:
My classmates agreed on the following questions:
- What are the types of company forms to open a business and what are their pros and cons?
- What are the legal requirements of accounting/ documentation in different forms of businesses?
- What is the process of acquiring finance for a new business (budgeting, finance, business plan, etc.)
a) Types of company forms
while searching for answer on this question, I found a website called Infopankki, where I found a really nice summary of steps that I person should do before starting a business ( http://www.infopankki.fi/en/living-in-finland/work-and-enterprise/starting-a-business )
1. Come up with a good business idea
2. Make a business plan
3. Organize funding
4. Select your company form
5. Find out which permits you will need
6. Notify the Trade Register and the tax authorities of your company
7. make sure you have the necessary insurance
8. Organize your accounting
I find it quite interesting that according to this website, selecting the company form is on the 4th place, while I thought, it would be the second right after having a good business idea. On the other hand, it makes sense that first after you have some idea how much funding we are able to gather, you can decide about the suitable company form.
The same website also provides a very detailed article about the forms ( http://www.infopankki.fi/en/living-in-finland/work-and-enterprise/starting-a-business/company-formsl ).
Generally, we can divide businesses into two basic categories: company/partnership- known as the name of it and represented by at least two people, who have created it. On the other side there is an entrepreneur / self-employed who acts in his/her own name.
The forms are then the following:
Proprietorship (toiminimi): very popular, usually the starting point for most business, especially for part-time businesses. The power is in hands of one entrepreneur, who still can employ other people working for their company.
+ easy and quick to establish
+ a lot of freedom
- cannot work forever if the company is growing
Partnership (avoin yhtiö): is basically the same as the previous type with the difference that the owners are two or more people and they are on the same level. They have to sign a partnership agreement.
+ more people: more ideas, shared risk, mutual support
+ equality, all have the same status
- it is more difficult to agree on things in more poeple
- arguments within the owners can ruin even successful start-up
Limited partnership (kommandiittiyhtiö): very similar to partnership, in this form the roles are divided, there are those who have money (generally called sleeping partner) and those who have ideas/ skills/ experience to start and govern a business. In the settling agreement, there has to be stated, who holds which role.
+ people with ideas meet people who are willing to invest
+ still relatively easy
- responsibility problems
- rare
Limited company (osakeyhtiö): this form requires at least 2 500 € as the starting capital and thus it is not ideal for small startups. Investors (Owners) each have to put their share into the company. Their deciding power depends on the amount they invested.
+ trustworthy for banks
+ shared risks and money invested
- the more money invested the bigger the risk
- difficult for decision making
- those who have more money have higher voting power even though they do not necessarily understand the problem the best
Cooperative association (osuuskunta): developed for the biggest, international companies with very complicated structure. There are usually several owners, each of them has one vote. The decisions are made on regular cooperative association meetings. The money warranted is only the money invested, they do not warrant their whole assets. Very common among middle sized and large companies.
+ suitable for big companies
+ set structure
+ same voting voices
- very complicated and expensive
b) Requirements of different forms of businesses
For each type there are legal requirements a partnership/company has to fulfill in order to start the business. This ensures the trustworthy of a business and is a guarantee for financial and tax offices.
For starting up a business a Finland, there is a unified form called Start-up notification (https://www.ytj.fi/stc/ytjliitteet/y2_and_personal_data_form.pdf ). I think the form is very clear and not very difficult to fill in. I found interesting that there are boxes not only for one name of the company, but one has to fill in more alternative names, in case the first one, or even the secondchosen is already taken.
I found answers on this question on a website called Enterprise Finland ( https://www.yrityssuomi.fi/en/perustamiseen-vaadittavat-asiakirjat-yritysmuodoittain )
For a partnership, there is are so called Partnership agreements. There is not a unified form, the content depends on a specific case. however in order to be registered in the trade register, there has to be the business name, domicile, line of business and partners.
Usually, there should also be stated, which roles and responsibilities do the partners and investors have. Also for legal reasons, it is good to state, how the profit (loss) will be divided.
Owners of a limited liability company have to prepare a form called Y1 ( https://www.ytj.fi/stc/ytjliitteet/y1e.pdf ). It is very similar to the Start-up notification, but there has to be more precise specification about the are of business the company wishes to work in. There also has to be a Memorandum of Association and Article of Associations written. Before being registered, the sum of the shares also has to be paid.
Of course, as this type is developed for bigger businesses, the bureaucracy connected to its establishing is much more difficult. On the other hand, it ensures that all participants know what they are doing.
The same form (Y1) is also used for Cooperative association. The required appendixes are the rules of the cooperative, incorporation instruments, the Board of directors and the election of the chairperson. It is even more complicated that the limited liability company, usually it is so that companies 'evolve' to this form, rather than that a company would start from scratch with this form.
b) Acquiring finance for a new business
The most important factor and also the one that causes most business failures is money. Getting enough funding is essential to start and run a successful business. In today's world, it is almost impossible to finance a business only from own resources and it is also inconvenient (more expensive). Most companies have to, at least at the early stage, take a loan.
To get a sufficient amount of loan with a reasonable interest rate that will not put the company in depth for the next 50 years, requires a great amount of credibility and a promising business plans. All banks that specialize in corporate finance have their specialists that look into how promising a start-up is, what is the risk of failure and if the company is able to pay the loan back. Often, starting entrepreneurs have to go to multiple banks and consult with financial advisers to get the necessary money.
Seeking funds is not only a problem of starting business, but of the whole life time of a business. On the INC website a very nicely put list of ways of funding can be found ( https://www.inc.com/guides/2010/07/how-to-finance-your-business.html ), there is actually 10 of them, so a loan from a bank is not the only way even though being often considered the most. The article also mentions a credit card, which however is also a type of a loan. A very popular way nowadays is also crowdfunding. There are many websites where to find people who are willing to sponsor. It is rather for specific projects and short-term financing. It is also important to keep in mind that this way of financing is forbidden in some countries (including Finland). Another problem is that for the 'investors' there is no actual reward for them except for a good feeling that they gave a support to somebody.
The article also highlights the importance of how the company should make itself attractive and that it might lead to finding an 'angel investor' who can put a huge help to the company.
I also liked the article on Forbes called 4 Realistic ways to fund your small businesses ( https://www.forbes.com/sites/brentgleeson/2013/08/29/4-realistic-ways-to-fund-your-small-business/#281a6dfb40be ). At the beginning it describes the irony that small businesses are really important for a country's economy, however they might not always get the necessary support.
Starting entrepreneurs should not be afraid to try to fund the company by themselves at least at the beginning and also try to ask family member or friends for help, since those could be the people, who know us the best and also believe in us the most. It is good to remember, that our friends also have other friends as well as family members, who could overhear about our business, get interested and it might even lead to gaining a so called angel sponsor.
Everybody knows, starting up a new business is not a piece of cake. Luckily in today's globalized world with all possible information available it is actually much easier that before. Having startup is a valuable life lesson, which can bring lots of experience, both good and bad ones, life-long friendships and last but not least enough money to live a carefree comfortable life.
Sources:
Enterprise Finland. Establishment documents required from various forms of businesses. Available from: https://www.yrityssuomi.fi/en/perustamiseen-vaadittavat-asiakirjat-yritysmuodoittain. Accessed: 6.11.2017
Forbes. 4 Realistic ways to fund your business. Available from: https://www.inc.com/guides/2010/07/how-to-finance-your-business.html. Accessed: 6.11.2017
Inc. 10 Ways to finance your business. Available from: https://www.inc.com/guides/2010/07/how-to-finance-your-business.html. Accessed 6.11.2017.
Infopankki. Company Forms. Available from: http://www.infopankki.fi/en/living-in-finland/work-and-enterprise/starting-a-business/company-forms. Accessed: 6.11.2017.
Infopankki. Starting a business. Available from: http://www.infopankki.fi/en/living-in-finland/work-and-enterprise/starting-a-business. Accessed 5.11.2017.
YTJ.fi. Start Up notification Y2. Available from: https://www.ytj.fi/stc/ytjliitteet/y2_and_personal_data_form.pdf. Accessed: 6.11.2017.
YTJ.fi. Start Up notification Y1. Available from: https://www.ytj.fi/stc/ytjliitteet/y1e.pdf . Accessed: 6.11.2017
b) Requirements of different forms of businesses
For each type there are legal requirements a partnership/company has to fulfill in order to start the business. This ensures the trustworthy of a business and is a guarantee for financial and tax offices.
For starting up a business a Finland, there is a unified form called Start-up notification (https://www.ytj.fi/stc/ytjliitteet/y2_and_personal_data_form.pdf ). I think the form is very clear and not very difficult to fill in. I found interesting that there are boxes not only for one name of the company, but one has to fill in more alternative names, in case the first one, or even the secondchosen is already taken.
I found answers on this question on a website called Enterprise Finland ( https://www.yrityssuomi.fi/en/perustamiseen-vaadittavat-asiakirjat-yritysmuodoittain )
For a partnership, there is are so called Partnership agreements. There is not a unified form, the content depends on a specific case. however in order to be registered in the trade register, there has to be the business name, domicile, line of business and partners.
Usually, there should also be stated, which roles and responsibilities do the partners and investors have. Also for legal reasons, it is good to state, how the profit (loss) will be divided.
Owners of a limited liability company have to prepare a form called Y1 ( https://www.ytj.fi/stc/ytjliitteet/y1e.pdf ). It is very similar to the Start-up notification, but there has to be more precise specification about the are of business the company wishes to work in. There also has to be a Memorandum of Association and Article of Associations written. Before being registered, the sum of the shares also has to be paid.
Of course, as this type is developed for bigger businesses, the bureaucracy connected to its establishing is much more difficult. On the other hand, it ensures that all participants know what they are doing.
The same form (Y1) is also used for Cooperative association. The required appendixes are the rules of the cooperative, incorporation instruments, the Board of directors and the election of the chairperson. It is even more complicated that the limited liability company, usually it is so that companies 'evolve' to this form, rather than that a company would start from scratch with this form.
b) Acquiring finance for a new business
The most important factor and also the one that causes most business failures is money. Getting enough funding is essential to start and run a successful business. In today's world, it is almost impossible to finance a business only from own resources and it is also inconvenient (more expensive). Most companies have to, at least at the early stage, take a loan.
To get a sufficient amount of loan with a reasonable interest rate that will not put the company in depth for the next 50 years, requires a great amount of credibility and a promising business plans. All banks that specialize in corporate finance have their specialists that look into how promising a start-up is, what is the risk of failure and if the company is able to pay the loan back. Often, starting entrepreneurs have to go to multiple banks and consult with financial advisers to get the necessary money.
Seeking funds is not only a problem of starting business, but of the whole life time of a business. On the INC website a very nicely put list of ways of funding can be found ( https://www.inc.com/guides/2010/07/how-to-finance-your-business.html ), there is actually 10 of them, so a loan from a bank is not the only way even though being often considered the most. The article also mentions a credit card, which however is also a type of a loan. A very popular way nowadays is also crowdfunding. There are many websites where to find people who are willing to sponsor. It is rather for specific projects and short-term financing. It is also important to keep in mind that this way of financing is forbidden in some countries (including Finland). Another problem is that for the 'investors' there is no actual reward for them except for a good feeling that they gave a support to somebody.
The article also highlights the importance of how the company should make itself attractive and that it might lead to finding an 'angel investor' who can put a huge help to the company.
I also liked the article on Forbes called 4 Realistic ways to fund your small businesses ( https://www.forbes.com/sites/brentgleeson/2013/08/29/4-realistic-ways-to-fund-your-small-business/#281a6dfb40be ). At the beginning it describes the irony that small businesses are really important for a country's economy, however they might not always get the necessary support.
Starting entrepreneurs should not be afraid to try to fund the company by themselves at least at the beginning and also try to ask family member or friends for help, since those could be the people, who know us the best and also believe in us the most. It is good to remember, that our friends also have other friends as well as family members, who could overhear about our business, get interested and it might even lead to gaining a so called angel sponsor.
Everybody knows, starting up a new business is not a piece of cake. Luckily in today's globalized world with all possible information available it is actually much easier that before. Having startup is a valuable life lesson, which can bring lots of experience, both good and bad ones, life-long friendships and last but not least enough money to live a carefree comfortable life.
Sources:
Enterprise Finland. Establishment documents required from various forms of businesses. Available from: https://www.yrityssuomi.fi/en/perustamiseen-vaadittavat-asiakirjat-yritysmuodoittain. Accessed: 6.11.2017
Forbes. 4 Realistic ways to fund your business. Available from: https://www.inc.com/guides/2010/07/how-to-finance-your-business.html. Accessed: 6.11.2017
Inc. 10 Ways to finance your business. Available from: https://www.inc.com/guides/2010/07/how-to-finance-your-business.html. Accessed 6.11.2017.
Infopankki. Company Forms. Available from: http://www.infopankki.fi/en/living-in-finland/work-and-enterprise/starting-a-business/company-forms. Accessed: 6.11.2017.
Infopankki. Starting a business. Available from: http://www.infopankki.fi/en/living-in-finland/work-and-enterprise/starting-a-business. Accessed 5.11.2017.
YTJ.fi. Start Up notification Y2. Available from: https://www.ytj.fi/stc/ytjliitteet/y2_and_personal_data_form.pdf. Accessed: 6.11.2017.
YTJ.fi. Start Up notification Y1. Available from: https://www.ytj.fi/stc/ytjliitteet/y1e.pdf . Accessed: 6.11.2017
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