Explained for people who just want to get started
It's one of the first big decisions every Finnish entrepreneur faces.
Do you set up as a sole trader (toiminimi) or register a limited company (osakeyhtiö)?
Both are legitimate, both are widely used, and both have real advantages. But they suit different types of businesses, different stages, and different goals. Getting this choice right early makes the admin, tax, and legal side of running your business much simpler.
Here's a clear comparison without the jargon.
What's the actual difference?
A sole trader (toiminimi / Tmi) is the simplest business structure in Finland. You and your business are legally the same entity. You earn income, you pay personal income tax on it. No share capital is required, and registration is quick and cheap.
A limited company (osakeyhtiö / Oy) is a separate legal entity. The company owns its own assets, pays its own taxes (corporate income tax at 20%), and carries its own liabilities. You can pay yourself a salary, dividends, or both — and the company's finances are kept legally separate from your personal finances.
That legal separation is the core distinction, and it matters in a few important ways.
When a sole trader structure makes sense
You're just getting started
If you're testing an idea, transitioning from employment, or building your first clients, toiminimi is the easiest way to get moving. Registration costs €75 via PRH (free for some professions), and you can be up and running the same week.
You work alone and your finances are simple
One income stream, manageable costs, no employees. If that describes your business, toiminimi is perfectly suited. There's no requirement to separate your personal and business bank accounts (though it's still a smart idea), and the bookkeeping requirements are lighter.
Your income is relatively modest or variable
As a sole trader, your profit is taxed directly as personal income. If your earnings are in the low-to-mid range, progressive personal income tax isn't necessarily a disadvantage — you're only taxed on what you actually earn.
You're a freelancer or consultant
Creatives, consultants, coaches, translators, designers. Most people who sell their skills directly to clients start out as sole traders. It's simple, flexible, and doesn't require the administrative overhead of running a company.
When a limited company (Oy) makes more sense
You're earning consistently above roughly €30,000–40,000 per year
Once your business income reaches a certain level, the 20% corporate income tax rate on retained profits becomes more attractive than progressive personal income tax. The exact threshold depends on your situation, but many accountants suggest an Oy starts to make financial sense around here.
If you don't need all your earnings immediately for personal expenses, you can leave money in the company at the lower corporate tax rate and take it out later as dividends, which can be taxed more favourably than salary.
You want to limit your personal liability
In a toiminimi, you are personally liable for your business's debts. If things go wrong, your personal assets can be at risk. In an Oy, the company is a separate legal entity. Shareholders are generally not personally liable for company debts beyond their share capital investment.
This matters more in some industries than others. If your business carries significant financial risk, or if you're signing large contracts, the liability protection of an Oy is worth having.
You want to bring in partners or investors
Selling shares, bringing in a co-founder, or raising investment is only possible with an Oy. A toiminimi belongs entirely to one person and can't issue shares.
If growth or investment is part of your plan, starting with an Oy from the beginning is usually the right call — even if it feels like overkill at first.
You want to build something that can be sold
Selling a limited company is a straightforward legal transaction. Selling a toiminimi is much more complex — there's no company to sell, just assets and contracts. If building something you might eventually exit is part of the vision, an Oy gives you that option.
The practical differences side by side
A note on taxes
Tax is often the deciding factor, and the comparison isn't simple.
As a sole trader, all profit is your personal income. In Finland, personal income tax is progressive — the more you earn, the higher your marginal rate. Above roughly €90,000, you're paying over 50% in combined municipal and state tax.
As a limited company, the company pays 20% corporate tax on its profit. You can then pay yourself a salary (deductible for the company, taxable for you) and dividends (partially tax-exempt up to certain limits). Done carefully, this can result in significantly lower overall tax — but it requires more planning and professional advice to get right.
The key insight: if your income is high and consistent, and you don't need to take every euro out immediately, an Oy gives you more flexibility to manage your tax burden over time.
Which one should you actually choose?
Here's a simple way to think about it.
Start with toiminimi if:
- You're testing an idea or just getting started
- You work alone with simple finances
- Your income is moderate and variable
- You want minimal admin and fast setup
Go with Oy if:
- You expect consistent income above roughly €35,000 per year
- You want limited personal liability
- You plan to bring in partners or investors
- You're building something with long-term growth in mind
And if you genuinely can't decide, it's worth spending an hour with an accountant or a free advisor at your local Enterprise Agency (Uusyrityskeskus) before committing. The choice isn't permanent — you can convert a toiminimi to an Oy later — but it's easier to start with the right structure from the beginning.
Keeping your finances in order either way
Whether you choose toiminimi or Oy, you'll need to manage your books. Limited companies are required by law to keep double-entry accounts. Sole traders have lighter requirements, but staying on top of income, expenses, and VAT from day one makes everything simpler at tax time.
NoCFO supports both structures, with the correct accounting treatment built in. No accounting background required — just connect your bank, and the transactions are categorised for you. Your numbers stay current without the evening admin sessions.
NoCFO is bookkeeping software built for freelancers and small business owners in Finland. Track expenses, manage VAT, and stay on top of your finances without an accounting background. Try it free at nocfo.io.