Starting a Business

After coming up with a solid business idea, the next step is to consider the potential establishment of the company. Starting a business is a multi-step process, and it’s advisable to seek guidance from professionals. The first step in starting a business is to choose the right legal form – options include sole proprietorship, limited partnership, limited liability company (LLC), or general partnership. For instance, a sole proprietorship is most suitable for a business that doesn’t require significant loans and has moderate revenue. On the other hand, establishing an LLC might be appropriate when there are multiple owners or the intention is to make larger investments.

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Once the legal structure has been decided, it’s time to create a business plan. The business plan includes a strategy for sales, marketing, personnel, and product development – who the service is aimed at and how sales will be generated. The business plan should be more detailed for larger companies. It’s important to note that a well-crafted business plan also lays the foundation for achieving sales goals. Additionally, it’s a requirement for potential startup funding.

The establishment of the business must be registered with the Trade Register of the Finnish Patent and Registration Office. At this stage, the company needs to come up with a name and determine its field of operation. The founding notification should include, in addition to the name and field of operation, details like the company’s domicile, address, and contact information. Before registering the business and commencing operations, it’s important to address regulatory matters. Not all industries require permit applications, but some are regulated and require the necessary permit investigations.

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Company registration and articles of association

Company establishment is a process in which a company receives a business identification number (y-tunnus) and is registered in the Trade Register. According to the Limited Liability Companies Act, every limited liability company must have articles of association. The articles of association define the company’s name, domicile, field of operation, the board of directors and its functions, the functioning of the general meeting, share redemption and transfer clauses.

The content of the articles of association must be carefully considered to align with the company’s needs and growth expectations.

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Shareholders' agreement

Creating a shareholders’ agreement is beneficial whenever a company has more than one shareholder. A shareholders’ agreement can protect minority shareholders. Often, the topics covered in the agreement might seem unlikely when it’s being drafted, but crises do arise, and a shareholders’ agreement safeguards both shareholders and the company.

Employment relationships and executive agreements

Employees are a company’s most valuable asset, and preventive efforts should be made when it comes to contracts. Employers have many obligations, and employees’ rights are defined by law. Mishandling personnel matters can result in liability for damages, so it’s wise to invest in these matters beforehand. Confidentiality and non-compete agreements also provide security. In the case of executives, often the consideration arises whether they will enter into an employment relationship or an executive agreement, as opposed to a standard employment contract.

Leasing a commercial space

Leasing a commercial space is regulated by special legislation. This is applicable when the leased property is used for purposes other than residential. Whether the lessor is a company or a private individual doesn’t matter per se; the key factor is to determine the primary use agreed upon in the contract. The distinction from residential leasing is most evident in the fact that many provisions can be deviated from through a separate agreement.

Validity, Termination, and Termination
A lease agreement for a commercial space can be made for a fixed term or an indefinite term. If the parties haven’t agreed on the duration of the contract and no other law dictates otherwise, the contract is assumed to be in effect indefinitely.

A fixed-term lease agreement generally cannot be terminated during its term. This means that the tenant commits to paying rent for the entire agreed period, regardless of circumstances. However, early termination of a fixed-term agreement can be agreed upon between the parties. It’s important to note that a fixed-term agreement must be in writing; otherwise, it will be interpreted as an indefinite-term agreement.

An indefinite-term contract is generally terminated through notice of termination or termination. The notice period can be freely agreed upon. If no specific period is agreed upon, the law’s provisions apply: for the lessor, the notice period is three months, and for the lessee, it’s one month. The notice period typically starts from the beginning of the month following the notice date. In the contract, the parties can always agree on specific terms that suit the situation best.

Rent Amount and Payment
It’s recommended to specify payment terms in detail, including the amount, due dates, and late payment interest. This greatly clarifies the proof of what has been agreed upon between the parties in case of disputes.

If value-added tax (VAT) is to be included in the rent, this should be mentioned in the contract, as the general assumption is that leasing real estate and share apartments is not subject to VAT. The situation changes if the lessor has opted to become liable for VAT due to leasing activities and the lessee operates business in the premises.

Maintenance Responsibility, Insurance, and Limitations of Liability
The parties can agree on who is responsible for costs related to the premises and the procurement of maintenance services. If not agreed upon, the law’s provisions apply. Such responsibilities are considered to be included in the rent amount.

It’s also a good idea to prearrange the insurance of the property. Typically, the lessee commits to taking out liability insurance covering at least a certain amount of damage. Additionally, other obligations towards each other might arise, so it’s wise to have these mentioned in the contract as well. It’s common for all indirect damages to be excluded from liability.

Security Deposit
In commercial space leasing, it’s common to arrange a security deposit to protect against potential damage caused by the lessee or rent payment defaults. The deposit doesn’t necessarily have to be in the form of money, but in this case, it’s essential to carefully consider the actual value of the security deposit to the lessor or whether the deposit’s value is too significant from the lessee’s perspective.

Usually, the security deposit is placed in a bank account, which is pledged to the lessor. When arranging the security deposit, it’s important to define precisely under what circumstances the lessor can utilize the deposit.

Subleasing and the transfer of lease rights

The law allows subleasing for up to half of a commercial space. Usually, this right is restricted in the contract, but it’s also possible to agree differently. In a subleasing arrangement, the original lessee becomes the sublessor. The rules governing termination protection or damages don’t apply to subleasing relationships; these generally pertain to the original lessee.

If a tenant sells their business to someone else, it’s crucial that the lease rights for the business premises are also transferred. For this situation, the law stipulates that when a commercial space tenant transfers their business, they can transfer the lease rights to another without the lessor’s permission, unless otherwise agreed upon or the lessor has justifiable reasons to object to the transfer of lease rights.

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