When starting your operations in Finland, you will need to choose a legal form most suitable to your business plan. In this summary, we will briefly compare the pros and cons of three legal forms to help you make the right decision.
Foreign entrepreneurs in Finland have three main options to choose from:
- Operate with your existing foreign company
- Register a branch in Finland for your foreign company
- Register a new limited liability company (osakeyhtiö – OY)
Below we have listed some pros and cons for each option to help you make the right decision.
Pros and cons of different legal forms in Finland
|Foreign company||Finnish branch||Finnish limited liability company (OY)|
|Pros||• Great for short-term or fixed time projects|
• Short set-up time and low cost
• Limited local accounting responsibilities
• Local Finnish or EU representatives not required
• No need to open a separate bank account for Finnish activity
|• Suitable for long-term business, or if the company has physical premises in Finland|
• Enrolled also with the local Trade register, unlike a foreign company
• Easier to end operations than with a limited liability company
|• Easier and cheaper to set up than a branch|
• The most common business form in Finland – trustworthy for local business partners
• It’s easiest to maintain as the bank account and accounting are completely independent and separate
• Perfect for long-term business
|Cons||• Only enrolled with the Tax office – not with the Trade register|
• Local business partners may be wary of foreign companies
• Taxation and accounting can become more complicated, compared to a limited liability company, if the operations remain ongoing for years
|• More difficult and expensive to set up than the other two forms|
• Full accounting must be maintained both in the home country as well as in Finland, and the branch must report back to the home country
• May require a local representative in Finland, or the EU, depending on the home country of the company
|• Requires at least 1-2 persons from the EU to set up|
• Full accounting must be maintained in Finland
• Ending operations and liquidating a company takes longer than with other options
• Must have a separate independent bank account
So, which legal form to choose?
As you can see, all three legal forms have their pros and cons. Therefore, the right form depends mostly on your plans and goals in Finland.
If you need to carry out a short-term project in Finland that doesn’t require involving local partners, the best option is definitely to operate with your existing company. The process is low-cost as it doesn’t require establishing a new entity, but there are still some rules you have to follow (tax registrations, legal address and accounting). Read more: Starting package for a foreign company
If, on the other hand, the project needs finding some local partners and showing your trustworthiness, you might consider opting for registering a branch. A branch is also a good choice if you know that your business activities in Finland are temporary but not necessarily lasting only a couple of months. Maintaining a branch is definitely the most expensive option, but it can be a good option as it is easier to end operations than with a limited liability company.
However, if your goal is to do long-term business in Finland, registering a limited liability company is much easier and cheaper than registering a branch. It’s also easy to maintain and looks good for all potential partners. As for cons, you must have a separate banking account, and your accounting must be kept in Finland, but if your business plan is long-term and business is growing over time, those would be necessary anyway. For this, we can also recommend a full starting package for new entrepreneurs that already includes all the registrations, state fees, legal address and support regarding accounting and banking options.
Also, bear in mind that when registering a new limited liability company, you can choose to set it up as a private person shareholder, or it can be registered as a subsidiary of your already existing foreign company. In that case, the existing company can become partly or fully the shareholder of your new Finnish company.
Still not sure which legal form to choose for your business in Finland?
1Office can help you decide which option is best for your situation and what are the main differences between the business forms.