Private trader, general partnership, limited partnership, limited liability company, co-operative, and branch of a foreign enterprise are all legal business forms in Finland. There are numerous ways to work as an entrepreneur or in an entrepreneur-like capacity. Finnish people have several options for starting a business: as a sole proprietor, a co-op member, a partner entrepreneur, a part-time entrepreneur, or a part-time entrepreneur. 

1. Private trader

A private trader is a person who conducts business operations and activities alone or jointly with their spouse, meanwhile, this person is the owner of the business. The entrepreneur has full control over the company.

Operation as a private trader is easy to start. No separate paperwork is required. However, when starting a business, you must notify both the Finnish Central Tax Administration and the Finnish Trade Register. 

The private trader is responsible for all debts and liabilities of the company, but they are also entitled to keep all revenue. This means that any obligations incurred by the company are their responsibility. 

To start the business, private traders could borrow money from friends and family or utilize their funds. Other forms of funding, like invoice financing, are available for entrepreneurs who want to expand their companies.

The advantage of this business form is that the company is easy to set up, which is suitable for small-scale entrepreneurs who are just starting. However, the entrepreneur is fully responsible for the business, which means that his assets are exposed to certain risks.

2. General partnership

A general partnership is a legal body that conducts business and consists of two or more general partners. These partners are the owners of the business. They both agree to assume the company’s earnings and losses.

The law requires partners to draw up a formal partnership agreement and complete a personal data form. The agreement must be registered in Finnish Central Tax Administration and Finnish Trade Register.

There is no cap on the legal and financial obligations of the general partner. Therefore, the assets of the company and the general partner can be used to satisfy the company's debt.

Usually, general partnerships may have difficulty obtaining financing. In addition, the entire firm may be dependent on the partners for capital and credit, as all liability for any financing come from the partners. 

A general partnership has management and organizational flexibility. Nonetheless, it lacks a corporate framework. This presents challenges because it means that any liabilities arising from the business may be borne by the owners' assets.

3. Limited partnership

A limited partnership must be formed by two or more individuals and must jointly operate a profitable business. Those individuals are owners of entrepreneurs. Unlike general partners, limited partners do not actively control the business, but have limited liability for obligations.

The partners must have a written partnership agreement that includes the names of the partners. The partnership agreement for a limited partnership must also specify which partners are general partners and which are silent partners, as well as the amount of the silent partner's contribution in euros. 

The general partner has unrestricted liability and full management rights to the company. Any limited partner in a limited partnership has limited liability up to the amount of their investment, while the general partner has unlimited liability for debts.

Limited partners are financed by capital contributions, partner advances, and external borrowings. The capital of each limited partner is required to be registered with the Registrar of Companies. 

The main benefit of LPs to limited partners is that their liability is limited. Only the money they invest in LPs is their responsibility. But LPs impose unlimited liability on the general partner as a drawback. They are solely responsible for management oversight and any business affairs.

4. Limited liability company

One or more people or companies can create a limited liability company. They are collectively referred to as "partners". Depending on whether the company is a limited company or a guarantee, its members are referred to as "shareholders" or "guarantors".

To form a limited liability company, a memorandum of association with articles of incorporation is required as an attachment and a personal data form. Before operating legally, the company must be registered with the Finnish Trade Register. A shareholders' agreement that defines their rights and obligations in the business must also be completed.

A shareholder's financial liability in an LLC is usually capped at the amount of his or her investment in the business's shares. When an LLC is sued, the claim is against the business itself, not its owners or investors. Limited partners in a limited partnership have the same rights and obligations as members.

Members of a company limited by guarantee receive funds through loans, contributions from members, or retained profits. A company limited by shares can raise capital from investors in exchange for a larger ownership portion of the company. Any proceeds are also paid to the shareholders in the form of dividends. 

On the plus side, members are immune from personal liability for the actions of the LLC and its other members. Taxes at the corporate entity level are not usually paid by the LLC. In addition, starting an LLC may make it easier for a new corporation to establish credibility than a sole proprietorship or partnership. On the other hand, for example, the cost of forming and maintaining an LLC is usually higher than the cost of a general partnership. Ownership of an LLC is difficult to transfer.

5. Co-operative

An association with one or more members is a cooperative. These members can be people, companies, or other organizations.

The rules of the cooperative are attached to the memorandum of the organization prepared for the formation of the cooperative. In addition, the cooperative must be registered with the Finnish Trade Register. A personal data form must also be completed. 

The members make decisions on matters involving the cooperative, and the cooperative's board of directors is elected by the members. The Board of Directors is responsible for the management of the cooperative and acts as its representative. 

Cooperatives are financed in a variety of ways, just like for-profit businesses. Their working capital may come from membership dues, common or preferred stock, bonds, other portfolio investments, bank loans, or other sources. 

The benefits of cooperatives are numerous. For instance, members have equal voting rights, and this structure promotes participation and shared accountability. There is no upper limit to the number of members, and members' responsibilities are limited. However, cooperative members have equal voting rights regardless of their investment, which may not be appropriate for investor-driven companies.

6. Branch of a foreign enterprise 

A branch of a foreign trader is a component of a foreign organization or foundation that regularly conducts business or trades in Finland at its principal place of business in the name of and for the benefit of the foreign organization or foundation.

Notification of the opening of a branch must be sent to the Finnish Trade Register. Foreign organizations or foundations from outside the EEA need to obtain permission from the Finnish National Board of Patents and Registrations to open a branch in Finland.

Since a branch is considered an extension of its international parent company's operations and not a separate legal entity, the foreign parent company is responsible for all debts and other liabilities of the branch, in addition to the invested capital. 


References

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Huston, H. (2021). How to Form an LLC, What is an LLC, Advantages Disadvantages And More. [online] www.wolterskluwer.com. Available at: https://www.wolterskluwer.com/en/expert-insights/how-to-form-an-llc-what-is-an-llc-advantages-disadvantages-and-more [Accessed 2 Oct. 2022].

Kramer, L. (2019). Advantages & Disadvantages of Business Cooperatives. [online] Chron.com. Available at: https://smallbusiness.chron.com/advantages-disadvantages-business-cooperatives-24608.html [Accessed 2 Oct. 2022].

Shabat, B. (2020). LLC Business Loans: 6 Ways to Finance a Limited Liability Company. [online] Become. Available at: https://www.become.co/blog/llc-business-loans/ [Accessed 2 Oct. 2022].

Unsplash (2020). Photo by David von Diemar on Unsplash. [online] unsplash.com. Available at: https://unsplash.com/photos/cars-parked-on-parking-lot-near-building-during-daytime-JnWfxikjB-s [Accessed 2 Oct. 2022].