Becoming a private trader

Working as a private trader has traditionally been one of the commonest and easiest forms of entrepreneurship, particularly as a main or side occupation of self-employed persons. The Business Information System counts 222,053 private traders in Finland (7/2020), i.e. 36% of companies and associations operating in the country. Light entrepreneurship, which is very similar, has also become a highly popular new form of business in recent years.

You may need the courage to try out your own business idea and the paperwork can seem tough at first. Our service makes establishing a business ID so easy that all you have to do is think up a marketable name — and even that is not statutory.

Private trader or light entrepreneur?

Working as an OP Light Entrepreneur and operating as a private trader are ultimately very similar. Compare them below.

Which option do you prefer? If you want to become a light entrepreneur, you can become an OP Light Entrepreneur right away! Alternatively, if becoming a private trader sounds best, we recommend considering the following information before doing so.

Become an OP Light Entrepreneur

Differences between a private trader and light entrepreneur

When reading about becoming a private trader, you will often run into the term ‘freelancer’. These terms are often used informally to mean the same thing, and are only slightly different in practice.

The difference is that a private trader has a business name in the Finnish Trade Register. This name is protected and cannot be used by others for marketing or as part of their own company name. Entry in the Finnish Trade Register is optional for most entrepreneurs, but can sometimes be statutory. We’ll provide tips on when to join the Finnish Trade Register later.

When should I make a startup notification with the Finnish Trade Register?

A freelancer can operate without registration in the Finnish Trade Register. However, you must register in the following cases:

• The business activity is licensed
• You work from a room outside your home
• You employ someone who is not a member of your family
• You want to register as an entrepreneur and have a certain company name protected.

Licensed activities include, for example, setting up a beauty parlour for which you must notify the health and safety authorities about your business premises.

What do I need to know about becoming a private trader?

You will need to find out about several important matters, which you must think about and plan in good time, before registering as a private trader. This will avoid unpleasant surprises and get you off to a fast start!

How do I handle bookkeeping as a private trader?

We would recommend using an external accountant or accountancy firm. The Accounting Act states that you must keep accounts for your business: the scope and nature of your business determines how you must arrange bookkeeping. You can contact an accountancy firm, discuss your needs with them and ask for a preliminary quote for bookkeeping and managing your tax routines.

How should I send bills?

You must give a receipt or other record of work done or each product sold. For cash transactions, a duplicate receipt book will do, but customers generally ask for bills (invoices) for goods or services. You can make invoices yourself, or use billing software to create and send them.

The creation and sending of bills is included in the OP Light Entrepreneur service. You can send bills by email, e-invoice or on paper.

Coming up with a company name

It is worth taking time to think of a company name. What kind of name would describe your business and help with marketing? What image does it create and will it differentiate you from the competition?

Coming up with a company name can be the hardest of the many issues involved in starting out as a private trader.

Be aware that it could take some time: the Finnish Patent and Registration Office will check for bars to registering the name you choose.

Choosing your line of business

You will also need to define your sector i.e. your company’s line of business. You must notify the Finnish Tax Administration and the Finnish Trade Register of your line of business. Companies can have several lines of business or a ‘general’ one, but restricting the line of business could make it easier to register the name you want.

Categorising the line of business could be difficult in certain sectors that don’t have a pre-made category. In such cases, you should use the closest category available.

If your business cleans homes, you could select "81210 General cleaning of buildings". This category does not include special cleaning services, such as window cleaning, but you can still clean windows alongside your other business activities.

The idea is to base the selection on your main business activity. If your business changes completely, or mainly to window cleaning, you can change your line of business to "81220 Other building and industrial cleaning activities".

Who is suited to becoming a private trader?

Aside from light entrepreneurship, being a private trader is the easiest and lightest way of getting started in business, but you should consider whether it suits your stage of life.

Becoming a private trader as a student

Working during studies can be an opportunity to make extra money and gain important work experience, making it easier to find work once your studies are over. Becoming a private trader, i.e. a light entrepreneur with a business ID, could make sense for you as a student, because you can decide how much work you do.

As a private trader, you can also make tax deductions for business-related purchases, such as laptops and phones.

Working as a private trader will not exclude you from benefits such as student financial aid and housing allowance. However, student benefits are subject to income limits and your income as an entrepreneur could reduce your student financial aid in the same way as wages.

Keeping track of income limits is easy if you create your own invoices.

Learn more about becoming a private trader as a student

Private trader as a secondary occupation

Starting up as a private trader is a great way of making extra money, in order to save for the future or enjoy a cherished hobby. Employees can’t always cut their spending or raise their pay, so relying on your own skills can make you money to save in a bank account.

If you are a public servant, you must inform your employer that you have a secondary occupation as an entrepreneur. Even if you work in the private sector, your employment contract, for example, may require you to notify your employer of your business activities. The best way to be certain about this is to ask your employer before you establish your company.

By being an entrepreneur as a secondary occupation, you can take time to try out your business idea, since you can cover early business purchases. with your salary. With the OP Light Entrepreneur service, you get a business ID free of charge and can get started with minimum fuss, leaving the paperwork, bookkeeping and tax matters to us.

Private trader as your main occupation

Depending on your line of business, you can also engage in larger-scale business activities with a business ID. Working as a private trader is the best option when you are self-employed and mainly sell your expertise or time. As an OP Light Entrepreneur, you can operate under a business ID and sell products and services, while enjoying the benefits of being an entrepreneur..

If your business idea requires a lot of purchases and equipment and machinery or vehicles, other types of company may be worth considering.

OP Light Entrepreneur is also suitable for entrepreneurship as your main occupation. When your net sales, excluding VAT, reach 30 000 euro, the rest of the year is yours free of charge.

How do I become a private trader?

You can establish a company name online, with the Finnish Patent and Registration Office and the Business Information System website of the Finnish Tax Administration.

What does it cost to establish a company name?

Establishing a company name online costs 60 euros. Your start-up notification must include a suggestion for the company’s name, address and contact details, and state its line of business.

A start-up notification in the more traditional paper format will cost 110 euros. In such a case, you will need a start-up notification form for private traders (Y3 form) and personal data form. You must pay the fee for establishing the business before filing the notification, and attach the receipt for payment to the notification.

You can become an OP Light Entrepreneur quickly and easily, directly online. When you register with the service, you will receive a business ID soon after and can start billing your customers.

How is bookkeeping done for a private trader?

Companies have a statutory obligation to keep accounts for their business. Bookkeeping is also a key business tool which you can use to track your business’s development.

The entrepreneur is responsible for keeping accounts. Although you can do this yourself, if you wish, we strongly recommend using a professional, such as an accountant or accountancy firm. See our guide on arranging your bookkkeeping. in Finnish

OP Light Entrepreneur includes an automatic bookkeeping service, at no separate charge for you. This includes an intuitive billing service, enabling quick billing of customers directly from our online service.

Start-up grant for private traders

A new entrepreneur can apply for a start-up grant for the early stages of their business. The grant forms part of the entrepreneur’s personal income intended, for example, to keep routine activities going until the business starts generating income.

You must apply for a start-up grant before your business starts operating — i.e. remember to apply before filing for a business ID or becoming an OP Light Entrepreneur!

Read more in our guide on start-up grants. (in Finnish)

Avoid the pitfalls of starting a business

The start-up notification form for private traders (Y3 form) includes the section "Address information for public use at PRH and the Finnish Tax Administration", which states that the postal or street address is mandatory. This information will be publicly displayed on the Business Information System database and can be viewed by anyone.

So think carefully before adding your phone number and address: telemarketing is targeted at startups and consumer protection rights, such as the 14 day right to cancel in distance selling, do not always cover business-to-business sales.

On the other hand, OP Light Entrepreneur will do all the paperwork for you and confidentially file your phone details with public registers, leaving you to focus on starting up your business.

Where can I get a business ID?

When you have filed a start-up notification with the Finnish Patent and Registration Office and the Finnish Tax Administration’s Business and Information System, you will receive a business ID for your company name.

In some ways, this is equivalent to your personal identity code. The business ID differentiates your company —no other company has the same ID. A business ID has seven digits, a hyphen and a control mark. For example: 2241007-8

You may need your business ID when interacting with the public administration or other companies. A business ID will also enable you to make business-related tax deductions on expenses in your company accounts.

As a private trader i.e. an entrepreneur with a registered company name, you can also make purchases under your own name as a private person.

Naturally, as an OP Light Entrepreneur, you will receive a business ID.

What can we do to help?

We hope that this article helped you to see how a light entrepreneur differs from a private trader. If you are worried about the work involved in becoming a private trader, we recommend trying out light entrepreneurship to start with. As an OP Light Entrepreneur, you can focus on your expertise from the start, while our team handles the paperwork and other matters.

If you need help, our expert customer service is available via chat on our website. OP Light Entrepreneurs can also phone us on our helpline — log into the service to see our contact information.