Light vs small entrepreneurship
Small entrepreneurship is the most common form of entrepreneurship in Finland. Small businesses are more or less the backbone of Finland’s business sector as they account for 98 percent of the country’s businesses. However, a small entrepreneur has to regularly take on the challenges of bureaucracy and many other obligations. In this article, we’ll explain when light entrepreneurship is a better alternative.
At its best, self-employment can be a rewarding alternative to more traditional forms of employment as it allows you to sell your own expertise. Unfortunately the challenges of small entrepreneurship, starting up a business and running it, not to mention all the bureaucracy involved, raise the barrier to becoming an entrepreneur. Luckily there is a flexible and modern alternative to the traditional form of small business entrepreneurship: light entrepreneurship.
What is a small entrepreneur?
As its name suggests, a small entrepreneur represents a small business. In Finland, a small business is defined as a business that employs less than 50 people and has an annual revenue or balance sheet of no more than 10 million euros.
The definition of a small business entails also independence of other businesses. This means that no other business larger than an SME or a corporate group owns more than 25 percent of the business’ capital or voting shares.
Small business and accounting
Finland’s accounting law has stricter accounting obligations for larger businesses. The accounting law uses different criteria for defining the size of a business than the definition above.
In the accounting law, a small business is defined as a business that employs at most 50 people, has at most 12 million euros of revenue and its balance sheet does not exceed 6 million euros. No more than one of these criteria can be met.
Light entrepreneurship as an alternative to a business
Getting started as a light entrepreneur takes only a few minutes. You only have to use your online banking account or a mobile ID for authentication. After this you can start providing your services as a light entrepreneur.
When it comes to taxation, light entrepreneurship does not differ from a more traditional form of employment. The light entrepreneurship service pays your income as salary, which is why taxation works as usual. All you need is an up-to-date tax card, as the service gets it automatically from the Tax Administration. All the necessary monitoring of cash flow can be done with the service. A light entrepreneur has to focus only on their work and finding new clients.
Part-time light entrepreneurship
Light entrepreneurship is a great option for part-time or seasonal work. It is a good choice in case you want to try your hand at self-employment while continuing your day job. Light entrepreneurship is a great alternative also for working during studies when the goal is to get some extra income.
Whereas an entrepreneur has to take care of the running expenses of their business at all times, light entrepreneurship provides more flexibility for someone employing themselves only part-time. In case your current job requires more commitment for the time being or there is a busy period in your studies, a light entrepreneur does not need to worry about running expenses. The service does not cost anything as long as it is not used to invoice clients.
When is small business entrepreneurship a better choice?
In many industries, hiring employees may come to the question quite early. At this point it is necessary to start a business as light entrepreneurship does not allow employing other people. It is a great choice for self-employment, however. Some light entrepreneurs work as a team or as a part of a network for carrying out larger commissions.
When expanding operations, in addition to hiring more people, it is often the time to bring in outside capital. This is most often done either by involving more owners to the business as stakeholders or applying for a loan for the business. A small business entrepreneur can do both of these, whereas a light entrepreneur cannot.