Category Archives: Sutina Consulting

Options for owning a car

This post discusses the different options that you have for owning a car. Here are the usual disclaimers:

  • I’m assuming a single man limited company in Finland
  • I’m assuming that you need to “fully” own a car, so I’m not considering car pools, taxis, and such
  • I’ve done the comparison from my own perspective. Your mileage (pun intended) may vary.

Option 1 – personally owning the car

In this option you own the car personally, so the company is not involved at all. If you drive company trips with your car, you can pay yourself 0,41€ / km (2017) tax free mileage allowance.  Note! If you tend to work in a single place, the tax authorities consider that place as your workplace, and you aren’t eligible for mileage allowance for trips between your home and the workplace.

Option 2 – leasing

In this option, your company makes a leasing deal with a leasing company, and you get to drive a brand new car for a monthly fee. You can fully deduct the fee in your company’s taxes. The downside is that you’re usually commited to the deal for 2 to 3 years. And after the deal is done, the car is gone.

Option 3 – company owns the car

In this option, your company buys the car, either directly with cash or then you make a deal with a finance company. The value of the car goes to your balance sheet (tase), and you can make depreciations (poistot) from its value, 25% each year. Basically this means that if you spend 30000€ to buy a car, your company’s yearly profit isn’t 30000€ less, but 7500€ less. This is important consideration because companies pay taxes based on the profit that they make.

The downside of owning the car is that usually it’s just added risk and a liability. But the plus side is that after you’ve paid for it, your company owns the car, which is not the case if you choose leasing.

Full benefit or not?

If you choose option 2 or 3, you need to add car benefit to your personal taxation. So for example, if you have 4000€ monthly salary and the car’s taxation value is 600€, you pay taxes based on 4600€ monthly income.

You also need to decide whether you choose full benefit or just usage benefit. In the former company pays for everything, including gas. In the latter you need to pay for the gasoline yourself, and if you drive company trips with the car, you can have 0,10€ / km mileage allowance.

Conclusions

The downside of mileage allowances is that you need to have a travel diary for every company trip that you drive. That’s probably the main reason I chose full benefit — I don’t have to worry if a journey is company travel or not. I just drive around and the company pays for everything.

I haven’t made complete financial calculations. But I think if you have multiple customers and you need to drive around a lot, then it’s probably worthwhile to just personally own the car and bill tax free mileage allowances from your company. But if you drive less and usually just to single workplace, then it’s probably wiser for the company to own the car. Choosing between leasing and owning is more a matter of personal taste and preferences.

One additional thing to consider is that if you currently personally own a car, you can sell it privately and then get the new car for the company. Whatever you get for selling the car — that’s your personal money, not company’s.

P.S. Actually I would love to go with Option 4 — not owning a car at all. Unfortunately that’s not an option for me yet. 🙂

 

Sole proprietorship versus limited company

I’ve been asked this a couple of times: what’s the benefit of having limited company versus having sole proprietorship? Let’s try to compare.

Assumptions:

  • I’m assuming a one-man freelancer thing again
  • I assume that operating costs for both options are about the same. They usually may be a bit higher for a limited company.
  • Your yearly income (sales – operating expenses) is 100k€ in both options.
  • You decide to have net salary of 2500€ per month for your daily life (30000€ per year).
  • Rest of the money you want to save up for future use

Sole proprietorship

Income 100k€
Personal taxes 33500€ (estimated tax % for that yearly income is 33,5%)
Your salary 30000€
Net savings, free to use: 36500€
Total tax payed: 33500€

Limited company

Income 100k€
Gross salary paid from company 37000€
Personal taxes 6845€ (18,5%)
Company gross profit 63000€
Company tax for profit 12600€ (20%)
Company profit after tax 50400€
Maximum dividends with lowest tax%: 50400€ * 0.08 = 4032€
Tax payed from dividends: 4032 * 0.075% = 302€
Total tax payed: 19747€
Net savings, free to use: 3730€
Gross savings: 46368€

By “gross savings” I mean that the money is in the company. If you want to use it for personal purposes, you have to pay income or capital tax. Here the comparison becomes difficult because there are so many ways to use the money. But the good thing is that it won’t get taxed again if you decide to keep it inside the company.  And the more money you have inside the company, the more you can pay lowest tax-% dividends.

Conclusions

My two key takeaways are:

  • With these assumptions, limited company seems to be better money wise
  • At the very least, limited company offers more flexibility to spread the income. This is useful because personal taxation is per year. You could, for example, work your ass off for a couple of years, save 200k€ for the company, then take the money away from the company gradually over years as dividends and small salaries.

I’m not 100% sure if I miss a key detail here, but roughly it should go like this. If I miss a key detail, please let me know!

Bureaucracy of running a one man limited company

So, how much extra work is actually involved in running a limited company? Before I answer that, here are the usual disclaimers:

  • The choice of the accountant (or lack thereof) has a big impact on your routines. I’m using Digitase Oy.
  • You don’t have employees
  • I haven’t yet gone through the-end-of-fiscal-year-reporting.
  • I don’t consider networking and getting new customers as “bureaucracy”

Here is the list of the non-billable chores I need to do:

  • Fill in hours to three different time reporting  systems.  😐 I update one UX-friendly system daily by mobile phone, and from there I (manually) export them to the other two, weekly or bi-weekly.
    • I think this is unavoidable if you’re working as a consultant, regardless of your employment status
    • Of course if you’re lucky you only have one or maybe two system to use
  • I have a business debit card that I use to make small purchases for the company. I immediately take a photo of the receipt and upload it to a dedicated Dropbox folder that is shared with my accountant.
  • I pay company bills in my bank’s online bank. I take a photo of the bills and upload them to the Dropbox folder.
  • When needed, I tell my payroll contact person how much I want to pay salary to myself. She calculates the tax + social security payment and sends me the invoice for paying it. And also tells me the amount that I can then transfer to my personal account.
  • At the end of each month I:
    • Send an invoice to my customer using Zervant’s electronic invoicing
    • Send a monthly report to my accountant about all the incoming payments that have arrived to my account during the month. This is just one figure basically.

My accountant has web service read access to the company’s bank account, so they do all the bookkeeping based on the Dropbox receipts and the monthly account statements. If they have questions about the receipts, they’ll ask. So far they haven’t (okay, it’s been only two months).

The amount of extra day-to-day paper work has been a positive surprise for me. After the initial hassle of setting up the company, there isn’t much stuff you need to do, at least if you’re working for one client only. Maybe one or two hours per month.

You might also want to check my previous articles, costs of running a one man limited company and osakeyhtiön perustamisesta.

 

How much does it cost to run a one man limited company?

One of the things I wondered before starting my own company was: how much does it cost to run a limited company? How does xxxx € billed to my company relate to the amount I’m getting as an employee?

To be honest I didn’t make the calculations beforehand. I just went for it. 🙂 But now I know a bit more and I can share my knowledge to whomever out there wondering about starting their own business.

Assumptions and disclaimers

  • You run a limited company (osakeyhtiö), owned 100% by you. Taxation for sole proprietors is different.
  • Your company is in Finland 🇫🇮
  • You don’t have any employees
  • I’m basing this on my experiences as an IT consultant, I’m assuming you don’t have to invest into heavy machinery or such
  • These calculations may be wrong and probably I’m missing something as I’ve run my company only a few months (please let me know if I’m missing something :))

Direct expenses

  • YEL-insurance ~200€ / month (after first 4 years this will be 250€)
    • Here we have chosen a relative small annual income for your YEL-insurance (12600 € / year).
    • This affects not only the pension you’ll some day get, but also the level of basic income in longer sick and parental leaves.
    • (For reference, YEL-insurance for 60000€/year income is roughly 1000€ / month)
  • Insurances ~30€ / month. This is where you will have variance, depends totally what kind of insurances you want to have. I have health insurance and liability insurance.
  • Book-keeping ~65€ / month. You can get it cheaper if you wanna do it yourself, but I’ve chosen to hire an accountant and have them also calculate my salaries.
  • Social security payment is roughly 1% of the salary you choose to pay yourself. So with 5000€ monthly salary this will be 50€ / month.
  • Bank stuff, business debit card and web service interface for accountant ~20€ / month.
  • Yearly financial statement done by accountant 250€ / year
  • Invoicing software (Zervant) 70€ / year
  • Total: ~400€ / month.

Indirect expenses

  • Obviously you pay for your holidays, training, and whatever time you’re not billing your customer. Don’t think that you will be billing 37,5h weeks through the year. 80% is a better guess.
  • If you get sick, you get money from Kela only after 4 days. And if you only pay minimum YEL-insurance, you’re not really getting anything.
  • There are unemployment funds, but they’re a lot more expensive than they’re for employees. I’ve chosen not to be part of those and save up some buffer instead.

Indirect benefits

  • You get to buy all kinds of gadgets like computers and phones for your company. This benefits you in two ways: 1) if the gadget is used for creating income for your company (you can be creative here), you can deduct that in your company’s taxes; 2) you can deduct the value added tax (ALV)
  • You can rent yourself a working room from your home

How much salary to pay?

So, how much do you want to pay yourself? One thing to consider here is that even for those “tax free” diviends, you will be paying roughly 27% tax. (20% company tax from the profit and then the smallest diviend tax% is 7,5%). So, I’ve thought this so that I want to pay enough so that my personal tax% is close to that 27%, perhaps a bit less. If I pay too much salary, my personal tax% will rise higher, but on the other hand I don’t want to pay too little, because then my tax% would be “too small” and I don’t reap the benefits of tax progression.

But this area is complicated, and also depends really much on your case. Maybe you want to save more for the company? Maybe you’re investing the money you’re saving up for the company?

Conclusion

For me, the biggest benefits of running a limited company are the ability to control how much salary you pay yourself and the possibility to buy all kinds of stuff for the company. After that there is a lot of micro-optimization to do — I myself haven’t yet done much.

I’d love to hear experiences of feedback about this article! Next I’m planning to write about the bureaucracy of running a limited company.

Osakeyhtiön perustamisesta

Pystytin hiljattain yhden miehen osakeyhtiön, ja ajattelin lyhykäisyydessään käsitellä muutamaa sudenkuoppaa, joiden pohjalla itse käväisin. Tämä ei ole ns. how-to-postaus, koska erinomainen semmoinen löytyy esimerkiksi täältä.

(Disclaimer: Tässä postauksessa käsittelen asioita vain siten, miten ne minulla itse meni. En ota mitään vastuuta mistään. 🙂 )

Vinkki 1 – Riippumatta mitä teet, suosittelen kuivaharjoittelua sähköisessä palvelussa

Mene YTJ:n sähköiseen palveluun ja kliksuttele hakemusta läpi. Tee se vaikka samantien, vaikka et edes vielä olisi varma yrityksen perustamisesta. Sinun ei tarvitse lähettää hakemusta, mutta tätä kautta saat hyvän kuvan kaikesta siitä, mitä sinun pitää miettiä perustaessasi osakeyhtiötä.

Vinkki 2 – Sähköisessä palvelussa ei voi vapaasti muuttaa yhtiöjärjestystä

Kliksuttele hakemusta läpi ja katso miltä yhtiöjärjestys näyttää. Jos se on sinulle ok, voinet luoda hakemuksen sähköisen palvelun kautta. Jos sähköisen palvelun luoma yhtiöjärjestys ei kelpaa, valitettavasti ei ole oikein muuta keinoa kuin luoda Oy perinteisellä paperisella keinolla. Tähän löytyy starttipaketti täältä.

Vinkki 3 – Tilintarkastajan todistusta osakepääoman maksamisesta ei tarvita

Edellä linkkaamassani ohjeessa mainitaan, että osakepääoman maksamisesta pitäisi olla tilintarkastajan todistus. Ainakaan minun osaltani näin ei ollut, vaan PRH:lle riitti kuitti pääoman maksamisesta kännykän ruudulla (virkailija pyysi lähettämään sen sähköpostitse itselleen). Näin lienee ainakin, kun perustamisilmoituksessa on mainittu että yhtiölle ei valita tilintarkastajaa.

Vinkki 4 – Älä laita tilikautta yhtiöjärjestykseen

PRH:n mukaan nykyään ei enää tarvitse. Ja jos tilikauttaan haluaa muuttaa, on yhtiöjärjestyksen muuttaminen kalliimpaa kuin pelkän tilikauden muuttaminen.

Vinkki 5 – Jos haluat y-tunnuksen heti, se maksaa 7 euroa

No big deal. Mutta tästäkin otetaan nykyään rahaa.

Vinkki 6 – Vaikka olisit yhden miehen Oy, hallituksen varajäsen vaaditaan

Sisko? Vaimo? Isä? Äiti? Tämä on ihan oikea vastuu, joten lienee kohteliasta kysyä hallituksen varajäseneltä etukäteen suostumustaan.

Vinkki 7 – Tee itsesi kanssa työsopimus

Tuntuu hassulta, koska työllistät itsesi, mutta tämä on ilmeisesti hyvä olla jos kohdalle sattuu verottajan tarkastus. Haluat, että sinulla on peruste maksaa itsellesi palkkaa.

Vinkki 8 – Soita rohkeasti verottajalle

Palvelevat ystävällisesti ja asiantuntevasti. Arvostukseni Suomen virkamieskuntaa kohtaan on noussut yrityksen perustamisen yhteydessä.

Vinkki 9 – Harkitse prepaid-liittymän hankkimista tai jätä puhelinnumero ilmoittamatta

Harkitse erillisen prepaid-numeron ilmoittamista PRH:n tietoihin. PRH:sta tieto menee YTJ:hin, ja sieltä sitä ei saa pois ainakaan ennen kuin yritys on rekisteröity verottajalle. Puheluita tulee paljon. Osa niistä on huijausyrityksiä. Toinen vaihtoehto on jättää puhelinnumero antamatta, se ei ole pakollista.