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- Light entrepreneurship or starting up a business?
Light entrepreneurship or starting up a business?
More and more people are looking to employ themselves by selling their products, providing a service, testing a business idea, or trying something else. Many are faced with the important question of how to get started. In order to start doing business and billing your customers, you have to choose between starting a business or becoming a light entrepreneur.
Light entrepreneurship and starting a business differ on almost all fronts, but in the end, fulfill the same function. Many are interested in self-employment and starting with their own business, whatever that may be. However, not all are aware of the demands of being an entrepreneur. In many cases, light entrepreneurship is a simpler alternative.
What are the requirements for starting a business?
When starting a business, first you have to choose a suitable company form, also referred to as the form of enterprise. The most common one in Finland is a limited company, although many beginning entrepreneurs choose a simpler trade name. Starting up a limited company does not require initial capital but comes with extra work and expenses for the entrepreneur, due to stricter accounting obligations.
Starting up a business begins by making a start-up notification and paying both the tax authority and the Finnish Patent and Registration Office (PRH). The notification can be done both online and by filling out a paper form, the latter one being a pricier option. Depending on the chosen company form, the entrepreneur can get started quite soon after making the notification.
- Starting up a business requires filling out a start-up notification for the PRH.
- Entrepreneurs are obligated to keep accounts. Depending on their company form, an entrepreneur has to do single- or double-entry bookkeeping.
- An entrepreneur is responsible for insurance as well as regular notifications and payments.
- Entrepreneurs are liable to pay VAT when their revenue exceeds 15 000 euros per year.
Light entrepreneurship as an alternative
Recently, light entrepreneurship has become more and more common as a method of self-employment and bringing one’s own business idea to life. The purpose of light entrepreneurship is to help people sell their own work and products without having to start up a business.
Starting up as a light entrepreneur is notably easier. A light entrepreneur can start invoicing for their work immediately once they have finished identification on a light entrepreneur service, either with their banking ID or mobile ID. The service gets the new light entrepreneur’s tax card automatically from the Tax Administration.
A light entrepreneur also does not have to bother with the ins and outs of bureaucracy and taxation or spend their time and money managing a business’s accounting. Light entrepreneurs are not entrepreneurs per se, so they do not have to worry about prepayments, VAT or other responsibilities starting a business would entail. When a light entrepreneur withdraws their “salary” from the service, all withholdings are done for them based on their tax card.
Accident and liability insurance is just as important for a light entrepreneur as for someone starting their own business. However, the service fee of a light entrepreneur service covers most such insurances.
- A light entrepreneur does not have to keep accounts themselves
- The service fee of a light entrepreneur service often covers the necessary insurance
- As a light entrepreneur, it is possible to start billing clients in just minutes after getting started
- Light entrepreneurship is a great option for seasonal work, for example during a summer break. The service does not cost anything unless the light entrepreneur uses it for billing clients.
- When billing with Eezy, a light entrepreneur is not liable to pay VAT, even if the amount of billable work exceeds 15 000 euros.
When is light entrepreneurship the best choice?
Light entrepreneurship is a great solution when billing for part-time work. Instead of worrying about the demands of taxation or getting slowed down by bureaucracy, the time can be used to focus on what matters the most. The payment of salary and taxation is carried out just like when working full time, as long as the tax percentage is high enough.
Taking care of the paperwork, various notifications, and payments is simpler as a light entrepreneur, whereas becoming a private entrepreneur makes one obligated to keep accounts. The time spent on accounting could be used to sell one’s products or serve customers. Eezy takes care of a light entrepreneur’s obligations and accounting for them.
Light entrepreneurship fits seasonal work better than starting up a business. There are no fees for operating as a light entrepreneur, as long as the service is not used for billing. Closing down an active business for a limited period of time is often a more complicated process.
When should you start a business?
In case the plan is to hire employees, starting up a business is more or less inevitable. Light entrepreneurs, on the other hand, can easily sell their own services and products. Starting a business is also required when ownership of the business is shared between multiple people and the entrepreneur wants to invest a great deal of capital from the very beginning of operations.
Investing in or sharing the ownership of operations is not possible as a light entrepreneur. Hence, light entrepreneurship is the best choice for those looking to sell their products and services by themselves.