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How are different company forms evaluated?

You are considered to be an entrepreneur, if you are in gainful employment without being in an employment relationship in the private or public sector. In addition, you can be considered an entrepreneur for the purposes of unemployment security, if you work in a company and are considered to be a part-owner. The company form affects how the question on part-ownership is solved.

Company forms

The company forms are sole trader, general partnership, limited partnership, co-operative society, and limited liability company.

Agricultural entrepreneur is not a separate company form. Regarding employment security, however, the definition of entrepreneur complies with the pension acts and thus entrepreneurs under the Farmers’ Pensions Act are also considered entrepreneurs.

Sole trader

As a sole trader you run business operations as a private individual. The term “toiminimi” is commonly used in Finland. In addition, the Tax Administration divides sole traders into self-employed business entrepreneurs and self-employed professional individuals.

As a sole trader you are considered an entrepreneur for the purposes of unemployment security, because you are in gainful employment without being in an employment relationship in the private or public sector. In that position you have 100% authority, and hence a family member living in the same household with you will also be always considered an entrepreneur if he/she works at your service.

General partnership

General partnership is a partnership company in which more than one persons run business operations together. As a partner of a general partnership you are considered an entrepreneur, because you are personally liable for the obligations and commitments of a community or corporation.

As a general rule, all partners have 100% authority in a general partnership. Unless your authority in the general partnership has been essentially limited, a family member living in the same household with you will also be considered an entrepreneur if he/she works at the service of the company.

Limited partnership

Limited partnership is a partnership company. The authority is exercised by responsible partners. A responsible partner is considered an entrepreneur for the purposes of unemployment security, because he is personally liable for the company’s obligations and commitments.

Unless your authority as a responsible partner has been essentially limited, a family member living in the same household with you will also be considered an entrepreneur if he/she works at the service of the company.

A limited partnership also has a silent partner who has no authority and no liability for the company’s obligations. Hence a silent partner is not considered an entrepreneur for the purposes of unemployment security. Similarly, a family member of a silent partner cannot be considered an entrepreneur based on their position alone.

Co-operative society

In a co-operative society the authority is based on the membership of the co-operative society. If the members have equal authority, you will be considered an entrepreneur when you are a member of a co-operative society with a maximum of six members. It is possible to agree on different number of votes in the rules of a co-operative society, so you will not necessarily be considered an entrepreneur even if the number of members were smaller than six.

Regarding co-operative societies with more than six members, your authority and senior position will be evaluated in the same way as in a limited liability company. In that case the authority and ownership of your family will be taken into account in the same way.

It is also possible to agree in the rules of the co-operative society on the members’ obligations to the creditors of the co-operative society. If the rules stipulate on unlimited obligation to pay by the members, you will be considered an entrepreneur for the purposes of unemployment security.

If you are employed through an invoicing company, you will be considered to be entrepreneur primarily because you are in gainful employment without being in an employment relationship in the private or public sector. That may cause confusion, because the company form of an invoicing company can also be co-operative society.

Limited liability company

When you work in a limited liability company, you are considered an entrepreneur for the purposes of unemployment security, if your authority in the company is extensive enough. We evaluate the authority through shareholding. We also take into account indirect ownership and the holding in the company by the family members living in the same household.

Holding shares of a limited liability company alone will not make you an entrepreneur, but you also need to work in the company you own.

You are considered to be an entrepreneur, if

  1. You work in a senior position in a limited liability company in which you hold at least 15 per cent of the share capital or votes, or you have otherwise similar authority.
  2. You work in a senior position in a limited liability company in which your family members or you together with your family members hold at least 30 per cent of the share capital or votes, or you have otherwise similar authority.
  3. You work in a limited liability company in which you hold at least half of the share capital or votes, or you have otherwise similar authority.
  4. You work in a limited liability company in which your family members or you together with your family members hold at least half of the share capital or votes, or you have otherwise similar authority.

While evaluating the authority we also take into account indirect ownership. We will take into account indirect ownership, if at least half (50%) of the intermediate corporation is owned by you or your family member or you together with your family members, or you hold similar authority in the intermediate corporation. If the corresponding authority is less than half, indirect ownership will not be taken into account.

Agricultural entrepreneur

When you practise agricultural operations, you will be considered an entrepreneur for the purposes of unemployment security, if you are an agricultural entrepreneur under the Farmers’ Pensions Act. According to the said act, an agricultural entrepreneur refers to:

  1. a person who practises agricultural operations for himself/herself or a community on a farm that comprises at least five hectares of agricultural land, and participates in the work;
  2. a fisherman who works in professional fishery without being in an employment relationship;
  3. a reindeer owner who works at tending reindeer for himself/herself, his/her family member, or a reindeer herding co-operative;
  4. a person who performs work mentioned in item 1, 2 or 3 as a family member of an agricultural entrepreneur;
  5. a person who performs work mentioned in item 1, 2 or 3 and continuously lives in the same household with an agricultural entrepreneur;
  6. a person who practises operations mentioned in item 1, 2 or 3 in a limited liability company or another community as a part-owner.

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