Sole trader or limited company in Finland: toiminimi vs osakeyhtio in 2026

The first real decision when starting a business in Finland is the company type. For most foreign founders the choice comes down to two: toiminimi (sole trader) or osakeyhtio (limited company, Oy). The short answer: pick a toiminimi if you are a solo freelancer with low risk and modest profit and you live in Finland, and an Oy if you want to protect your personal assets, plan to grow, or want to own a Finnish company from abroad. The rest of this guide explains why, with the 2026 tax rules.

The quick comparison

Liability is the first thing to weigh

With a toiminimi, you and the business are the same legal person. If the business owes money it cannot pay, your personal assets are on the line. That is fine for a consultant writing reports from a laptop, and risky for anyone who signs supplier contracts, holds stock, or takes on client liability.

An osakeyhtio is a separate legal person. If things go wrong, you generally lose only what you invested, not your home or savings. This single point is why many founders choose an Oy even when the tax math is close. Note one catch: banks and landlords often ask new company owners for a personal guarantee, which narrows the protection in practice.

How each is taxed in 2026

Toiminimi: taxed as your personal income

A sole trader pays no separate business tax. Your net profit (revenue minus allowable costs) is added to your own income and taxed progressively. The profit is split into two parts:

• Capital income: by default 20 percent of the net business assets is treated as capital income, taxed at 30 percent up to 30,000 euros and 34 percent above that. You can elect a 10 percent or 0 percent share instead, which is sometimes better at lower incomes.
• Earned income: the rest is taxed at progressive state rates plus your municipal rate, the same way a salary is taxed.

At low profit this is efficient, because low earned income is taxed lightly. As profit climbs, the progressive earned-income rates climb with it, and that is where the Oy starts to look better.

Osakeyhtio: 20 percent first, then salary or dividends

An Oy pays a flat 20 percent corporate tax on its profit. Money you take out personally is taxed separately, in one of two ways:

• Salary: deductible for the company, taxed as your earned income, and it builds your pension. Useful up to a reasonable level.
• Dividends: for an unlisted company, dividends up to 8 percent of the company net assets and up to 150,000 euros are taxed lightly, 25 percent as capital income and 75 percent tax-free. The part above the 8 percent limit is taxed mostly as earned income (75 percent earned income, 25 percent tax-free).

The practical advantage is twofold: the corporate rate is flat and predictable, and you can leave profit inside the company, taxed only at 20 percent until you distribute it. That lets a profitable owner smooth income across years and reinvest before paying personal tax.

Cost and admin: the toiminimi is lighter

A toiminimi is cheaper and simpler to run. Registration costs around 60 euros online, the bookkeeping is lighter, and a small trader can often use single-entry accounting. There is no requirement to prepare formal financial statements in the way a company does.

An Oy costs 280 euros to register and must keep full double-entry bookkeeping and prepare annual financial statements (tilinpaatos). Most small companies do not need an auditor: you can skip one if no more than one of these is exceeded in two consecutive years, a balance sheet of 100,000 euros, turnover of 200,000 euros, or three employees on average. Even so, the ongoing accounting work is more involved, which is why company owners almost always use an accountant.

One cost applies to both forms: entrepreneur's pension insurance (YEL) is mandatory once your estimated annual work income passes the threshold (about 9,000 euros). Budget for it from the start, because it surprises many new founders.

What this means for a foreign founder

For founders who do not live in Finland, the choice is often made for you. A toiminimi is legally tied to you as a person and normally requires that you live in the EEA, or hold a Finnish residence permit that allows self-employment. An osakeyhtio can be owned fully from abroad, as long as at least one board member resides in the EEA or PRH grants an exemption. That is why nearly every international founder I help registers an Oy.

So which should you choose?

Use this as a starting point, then check your own numbers:

• Choose a toiminimi if you are a solo freelancer or consultant, your risk is low, your profit is modest, and you live in Finland or the EEA. It is the cheapest, fastest, simplest way to start.
• Choose an osakeyhtio if you want limited liability, you plan to grow or take on partners or investors, you want to retain profit in the company, you expect profit above roughly 30,000 to 40,000 euros, or you are a foreign owner based abroad.

The 30,000 to 40,000 euro figure is a rule of thumb, not a rule. The right answer depends on how much you withdraw, your other income, and your appetite for risk. The good news is that the decision is not permanent.

You can switch later

Many founders start as a toiminimi to test the idea cheaply, then incorporate into an Oy once revenue is steady. Under certain conditions the transfer of a sole trader business into a new limited company can be done without triggering immediate income tax. The conditions matter, so have an accountant check them before you move, but the path is well worn and nothing about starting small closes the door on going limited later.