Choosing a company form is one of a new entrepreneur’s most important decisions. A Finnish sole proprietorship (toiminimi) and limited company (osakeyhtiö or Oy) are both common choices, with different strengths and drawbacks. This comparison will help you choose the structure that best supports your goals.
1. What is the difference?
A sole proprietorship is a simple and lightweight way to begin. The entrepreneur and business are not separate legal persons, and the entrepreneur is personally responsible for the business’s debts. A limited company is a separate legal entity responsible for its own obligations. This generally limits a shareholder’s personal liability but adds administrative duties.
2. Taxation and ways to receive income
A sole trader’s business result is divided into earned and capital income for tax purposes, based partly on the business’s net assets. A limited company is a separate taxpayer, and its corporate income tax rate is 20% in 2026. Salary paid and dividends distributed to the entrepreneur are taxed separately under their respective rules. The total tax burden depends on the circumstances of both the company and the entrepreneur.
3. Capital and liability
A Finnish private limited company does not require minimum share capital, although working capital is often needed to begin operating. A sole proprietorship has no separate capital requirement either. The largest difference is liability: a sole trader is personally liable for the business’s obligations, while a shareholder is not generally liable for a limited company’s debts. Personal guarantees and the statutory liability of board members and management can nevertheless apply.
4. Growth, credibility and scale
If you intend to divide ownership, bring in investors or sell the business later, a limited company often offers a more flexible structure. Either form can employ people, and access to finance does not depend on company form alone. A sole proprietorship often works well for part-time or small-scale activity, while a limited company may be better suited to growth-oriented businesses.
A sole proprietorship is a good option when you want to start quickly and affordably and do not need a separate ownership or income-distribution structure. A limited company offers more ways to arrange ownership, risk and income distribution, especially as the business grows. Base your choice on your business plan, risks and a case-specific tax calculation.