Have you always wanted to start a business in Finland? Look no further, because we will cover how to establish a limited liability company (LLC) here in Finland. An LLC is the most popular business type in Finland as it offers more liberty in organising your business, payments, and personal responsibility.
A limited liability company (FI: osakeyhtiö) is a fantastic form of business organization thanks to its flexibility: It effectively minimises the risks for its owners compared to other forms and it is the most straightforward form of business to attract external investors or to sell off the business down the line. A limited liability company can also be split into segments more conveniently.
In our first English article, we provide you the best tips and advice on how to establish a limited liability company in Finland.
Two people required for liftoff: Establish a board first
It’s not hard to start a business in Finland: To establish a limited liability company, you need to form a board of directors for the company. A board of directors requires just two individuals. The first individual acts as the ordinary member (FI: varsinainen jäsen) of the board that is responsible for the company operations and is in charge of running the company.
The other person acts as a deputy member (FI: hallituksen varajäsen) of the board, filling in for the founder when they are absent. The deputy member can either be a second founder equally important and involved with the company but nominally appointed as a deputy member to meet the legal requirements. Alternatively, a close friend or similar person may be a deputy member with only a ceremonial role to allow the primary individual to establish an LLC.
Please note that regardless of your own interests, becoming a deputy member carries responsibility as you can be held responsible for the same obligations as the ordinary member if you make decisions when acting on behalf of the ordinary member.
If there is more than one ordinary member, a chairperson (fi: puheenjohtaja) must be elected by the board.
Who can start a company?
Your citizenship doesn’t matter when establishing a Finnish LLC. What matters is your residence: If at least one ordinary and deputy member reside in a European Economic Area (EEA) country, you do not need a separate permit to start an LLC. This means that the minimum amount of people needed to establish an LLC is two: one ordinary and one deputy member who both need to live in a country within the EEA.
If the company board of directors has three or more members, no deputy member is needed. This means you can establish an LLC with just one EEA resident member and two members from any other country.
See the following examples:
Scenario 1: Two EEA founders
Matti and Rodrigo want to start a business in Finland. Matti lives in Finland, and Rodrigo lives in Portugal. They do not need a permit to establish an LLC as Matti can act as the ordinary member and Rodrigo as the deputy member because they both live in EEA countries.
Scenario 2: One EEA founder and two board members
Jaakko, Li, and Thomas want to establish an LLC in Finland. They do not need a separate permit even though Li lives in China and Thomas in the United States, because Jaakko can act as the ordinary member because he lives in Finland (an EEA country). Because all three are part of the company’s board of directors, no deputy members are needed.
Two necessary founding documents
To successfully establish a limited liability company in Finland, both a Memorandum of Association (fi: perustamissopimus) and an Articles of Association (fi: yhtiöjärjestys) are required, which need to be attached to the start-up notification. The signature date of the Memorandum of Association is the official establishment date of the company.
The LLC can be registered to the Finnish Trade Register on the Memorandum of Association signature date at the earliest, and it must be registered within six months of signing the memorandum.
Memorandum of Association
The Memorandum of Association is a way to agree upon the important details of the company. If you file your start-up notification electronically, you don’t need to draw up a separate document. It is recommended that you file the start-up notification on paper because this way you can customise the new LLC further. Benefits include being able to customise the Articles of Association and being able to add share capital.
The following details must be included in the Memorandum of Association:
- company name
- shareholders and their subscribed shares
- share price and the last payment date
- members of the Board (including ordinary and deputy members)
- financial year
- auditor and deputy auditor (optional until certain requirements are met)
- Managing Director (optional)
- Members of the Supervisory Board (optional)
Articles of Association
The Articles of Association is like a constitution of the company. It sets down the common rules of your business, defining important details such as regulations on the Annual General Meeting (fi: yhtiökokous), representation rights, and parallel and auxiliary company names.
It is important to note that the actual company name must always be in either Finnish or Swedish format – Oy for Finnish, short for osakeyhtiö and Ab in Swedish, short for aktiebolag. If you want a company abbreviation such as “Best Company Ltd”, you must report the parallel company name to the Trade Register at the start-up phase or later on. You can combine several suffixes into one name, such as “Best Company Oy Ltd”.
The shareholders’ agreement – an important but optional rulebook
Have you ever wanted to start a business in Finland with your friend? While friends can make fantastic colleagues, trusting their word can be a recipe for disaster when it comes to disputes down the line.
If there is more than one founder member in an LLC, it is essential to establish common rules between the founders with a shareholders’ agreement. Imagine a scenario where you have established a successful business with your friend and you get into a disagreement: At worst, if you can’t reach an agreement, it could ruin the entire business.
With a shareholders’ agreement you can set common rules, such as conditions for a founder exit or rules for various dire situations. This way you can avoid company takeovers, disobedience, other unfortunate situations and above all very expensive legal proceedings arising from simple disputes.
More officially, the shareholders agreement is a vital document that acts as a legally binding rulebook regulating the responsibilities, shared terms, and various scenarios to avoid legal disputes.
Please note that a shareholders’ agreement is separate from the compulsory articles of association. It is not obligatory but very recommended to draft a shareholders’ agreement so that you and your business partners are on the same page no matter how bright your tomorrow might look like.
Got questions? Don’t hesitate to reach out!
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