Whether you want to limit your personal liability, maximise profits, or access specific benefits, choosing the right legal entity in Finland is the first step. Familiarising yourself with the country’s main business entities will allow you to make an informed decision for the future growth of your foreign-owned business in Finland.
In this article, Leinonen Finland will introduce the seven main legal entities you can opt for, covering everything from formation and governance requirements to compliance and tax considerations.
Legal Entities in Finland
There are Seven Main Business Entities in Finland:
- Private Limited Company (Osakeyhtiö – Oy)
- Public Limited Company (Julkinen osakeyhtiö – Oyj)
- Branch of a Foreign Company
- Sole Trader (Toiminimi)
- Limited Partnership (Kommandiittiyhtiö – Ky)
- General Partnership (Avoin yhtiö – Ay)
- Cooperatives and Foundations
What Is the Most Popular Business Entity in Finland?
The Oy is the most popular legal entity in Finland. It offers limited liability and flexibility, which makes it a suitable choice for both small and large businesses. An Oy is often the preferred structure for companies that plan to attract investors and scale over time.
When Might Branch or Sole Proprietorship be Favoured?
A branch is often the right choice for a foreign company that wants a local presence in Finland without setting up a separate legal entity. A sole trader structure tends to suit smaller, individually run businesses instead.
Formation Requirements
What are the Key Steps Involved in Forming a Legal Entity in Finland?
- An Oy or Oyj must register with the Finnish Trade Register; the company only exists in law once this registration is complete. Registration requires articles of association and founding documents. For an Oyj, proof of paid-up share capital is also required.
- Branches must likewise register with the Trade Register, submitting documentation from the home country and appointing a local representative.
- Sole traders are not required to register before starting business; the business begins once the required notification has been filed.
- A Ky or Ay is formed through an oral or written partnership agreement. Registration is not what brings the entity into existence, but it is required for the public record.
How Long Does It Take to Register a Business in Finland?
Registering a legal entity in Finland typically takes three to four weeks.
How Much Does It Cost?
Costs depend on the type of legal entity chosen and whether expedited processing is used. Statutory fees for registering an Oy typically range from €270 to €380. If specialists handle the process on your behalf, total costs are usually closer to €1,500 to €2,000.
Capital and Ownership
Do any Legal Entities in Finland Require a Minimum Share Capital?
Forming an Oyj requires a minimum share capital of €80,000. None of the other main business entities have a minimum share capital requirement.
Do any Business Entities in Finland Have Restrictions on Foreign Ownership or Directors?
At least one board member of an Oy must be resident in the European Economic Area (EEA). If this condition is not met, an additional permit must be requested from the Finnish Patent and Registration Office (PRH). Beyond this, there are no general restrictions on foreign ownership for any of Finland’s main legal entities.
How Many Shareholders or Partners are Required for Each Business Entity?
| Legal Entity | Shareholders | Partners |
|---|---|---|
| Oy | 1+ | n/a |
| Oyj | 1+ | n/a |
| Ay | n/a | 2+ |
| Ky | n/a | 1+ general partner and 1+ limited partner |
| Sole Trader | n/a (one individual) | n/a (one individual) |
Taxation of Legal Entities in Finland
Corporate Income Tax
Companies in Finland are currently subject to a flat 20% corporate income tax rate on their profits, a rate that has applied since 2014. For sole traders and partnerships, business income is instead taxed as part of the owner’s or partners’ personal income.
The Finnish government has proposed reducing the corporate income tax rate to 18%, alongside an extension of the business loss carry-forward period from 10 to 25 years for losses confirmed from tax year 2026 onward. As of July 2026, this proposal is still going through the legislative process, and the lower 18% rate would only take effect from tax year 2027 at the earliest. Businesses should continue to plan on the basis of the current 20% rate until the change is formally adopted.
VAT Registration
VAT registration in Finland becomes mandatory once annual turnover exceeds €20,000. The general (standard) rate of VAT is 25.5%. Finland also applies two reduced rates: 13.5% for goods and services such as food, restaurant and catering services, books, accommodation, and passenger transport, and a narrower 10% rate that now mainly covers newspapers and magazines.
VAT in the Digital Age (ViDA)
The EU’s VAT in the Digital Age (ViDA) package entered into force in March 2025 and is being rolled out gradually until January 2035. Its measures, including digital reporting requirements and e-invoicing obligations, will affect VAT practices in Finland as implementation progresses. You can read more about the package in this overview from the European Commission.
Profit Distribution Taxation
Dividends Received by Individuals
When a dividend is received from a listed company, 85% of it is taxable as capital income, and 15% is tax exempt. Capital income tax is charged at 30%, rising to 34% on the portion exceeding €30,000 per year.
Taxation of dividends from unlisted companies depends on the amount relative to the company’s net assets. For dividends of up to 8% of net assets and up to €150,000, 25% is taxable as capital income and 75% is tax exempt. For amounts exceeding €150,000, 85% is taxable as earned income and 15% is tax exempt. For dividends exceeding 8% of net assets, 75% is taxable as earned income and 25% is tax exempt.
Dividends Received by Entities
Dividends received from domestic companies are generally tax exempt, with some exceptions, including cases where the payer is an unlisted company and the recipient is a listed company. In such cases, the dividend is fully taxable.
Are Dividend Payers Taxed?
Companies generally do not pay tax on the dividends they distribute, but they must withhold tax on the dividend and report distributions to the tax authority. Dividends received from abroad are generally taxed in the same way as domestic dividends, though any foreign withholding tax may be credited against Finnish tax.
Accounting and Reporting
Accounting Standards
The Finnish Accounting Act and Finnish Accounting Standards (FAS) apply to most companies. Publicly listed companies must also keep accounts in line with International Financial Reporting Standards (IFRS).
Statutory Audit Requirements
A Finnish legal entity must appoint an auditor and conduct a statutory audit unless it qualifies for an exemption. An auditor may be omitted only if, in both the most recent and the previous financial year, no more than one of the following conditions is met:
- The balance sheet total exceeds €100,000
- The turnover or corresponding revenue exceeds €200,000
- The average number of employees exceeds three
Deadlines and Procedures
Annual financial statements and tax returns must typically be filed no later than four months after the end of the financial year.
Legal and Operational Aspects
Permitted Business Activities
All legal entities in Finland can engage in most business activities, unless restricted by law or by their own articles of association.
Employment
Both branches and sole traders are permitted to employ staff in Finland.
Liability of Business Entities in Finland
- In an Oy or Oyj, liability is limited to company assets
- Ay partners have unlimited liability
- Ky general partners have unlimited liability, but the liability of limited partners is restricted to their investment
- Sole traders have unlimited personal liability
Compliance and Governance of Legal Entities
All legal entities in Finland carry ongoing compliance and governance obligations. Here we focus on the two most common entities, Oy and Oyj; full guidance for other entity types is best obtained by consulting a Finnish accounting and tax expert.
Governance Requirements
| Legal Entity | Board Members | Deputy Members |
|---|---|---|
| Oy | 1+ regular member | At least 1 must be appointed if only 1 regular board member |
| Oyj | 3+ members | Not mandatory, but may be appointed |
What Conditions Do Board Members Need to Meet?
For both Oy and Oyj, board members must be of legal age, must not be bankrupt, and must not have restricted legal capacity. At least one board member (and one deputy member, for an Oy) must reside within the EEA, unless an exemption has been granted by the Finnish Patent and Registration Office.
Under the Equality Act, companies that are majority owned by the state or by municipalities, and bodies that exercise public authority, must maintain at least 40% representation of both men and women on their boards, unless specific reasons justify an exception.
For an Oyj, board members must also have sufficient expertise and experience relevant to the company’s industry and risks. The board’s diversity and gender balance must be actively promoted, supported by written policies.
Ongoing Obligations for Oy and Oyj: Summary Table
| Obligation | Oy | Oyj | Deadline |
|---|---|---|---|
| Annual General Meeting (AGM) | Yes | Yes | Must be within 6 months of financial year end, and financial statements and related documents must be made available to shareholders at least a week prior |
| File financial statements | Yes | Yes | Within 2 months after AGM |
| Tax return | Yes | Yes | Annually |
| Notify Register changes | Yes | Yes | As needed |
| Statutory audit | If required | Yes | Auditor’s report must be delivered to the board at least 2 weeks before AGM |
| Listed company disclosures | n/a | Yes | Ongoing, as per law |
Choose the Right Legal Entity With Leinonen Finland
Leinonen Finland has specialised in supporting cross-border businesses in Europe for more than 37 years. With unparalleled local knowledge, our Finnish accounting, tax, and payroll experts can offer tailored advice for foreign-owned businesses in Finland.
Choosing the right legal entity for your foreign-owned business in Finland is crucial. Consult with Leinonen Finland for the expert guidance your company deserves.
