When I established my company in fall 2020 I decided to go with the most simple way of entrepreneurship – therefore I have been a practitioner (in Finnish: yksityinen ammatinharjoittaja, toiminimi) ever since. In a nutshell it means, that the company as well as all its assets are mine; I am personally in charge of everything on my own. When the company is a limited company, the entrepreneur is not in charge of everything with their own money. This transition from practitioner to limited company is normally recommended to small business when they grow (turnover grows somewhere between 50 000-75 000€ per accounting period) and especially if there will be for example employees in the company or international affairs. In my case I have big dreams for the company (more about this a bit later) so it was only the matter of when.
So, I decided to change my company form to a limited company (in Finnish: osakeyhtiö). First time I thought of it was in 2021, when I started to consider expanding the firm. My plan was to do the change by new years 2021-2022, but luckily I was far too busy at the time to focus on it. Luckily because I now know I wasn’t ready back then and I really wouldn’t have had enough time and energy for it! In September 2022 the issue came up again and I started to make plans.
A lot is changing and then again nothing changes. In this blog I am writing about what needs to be done and in what order. I am opening up the reasons behind this decision and unlock my point of view how it all went. In the end I am giving some tips what to do when you are making this kind of company change and I’ve also listed some valuable links for deeper research.
Why am I doing this?
There are many reasons behind this decision, but one of the biggest is that I want to keep my company assets separate from my own assets. A limited company is also required, when one applies for a funding for example and as I have said, I have big plans for my company so this is just one step closer to those.
As I have those great plans and dreams, it is inevitable that one day I will have people working for me. This could have been possible also without the limited company, but only occasionally. (By the way: If you want to become my assistant, let me know! Send me an email and let’s talk business!).
One reason for all of this was also very simple: money. As the turnover grows, it is just good business to have it in the company and pay profits instead of it all being ones own money which one needs to pay personal income tax. Companies do pay taxes as well, but the structure is different.
It can sound a bit odd, but a limited company seems, feels and looks like a proper company. It is not just this one person supporting their life, it is about the firm now. It’s to be taken more seriously – and nothing suits me better than that!
What was most surprising?
I was a bit surprised with the fact that the company form can not be only changed, yet it needs to be done so that one needs to cease operations totally with the existing company and start the new company from scratch. This seems weird and far too bureaucratic – why is this made so difficult? Especially when Finland is supposed to be the promised land of companies, small businesses and start ups! It should be an absolute value that companies grow and it should be encouraged with all ways, not to be made too difficult.
All this wouldn’t be (such a big) a problem (which it would definitely be!), if I didn’t want the same name for my limited company. But yes, you guessed it: of course I did! Now it is a bit trickier – all of it.
What needs to be done and in what order?
Establishing a new company and ceasing operations for the old company is in theory an easy thing: only one or two documents to be send out and pay some hundreds and that’s it. In practice there is much more to it. And yes, as the tax number (in Finnish: y-tunnus) changes, all the contracts made in company name must re-do. This may not sound a lot, but it is. It is a lot. All the places I have registered, everywhere I am a member, everywhere I have send my tax number to. The list is looong.
But let’s start from the beginning. I used approximately two months studying the cause, taking notes and getting my head around this change. I really wanted to know what I was doing and understand why I was doing what I was doing. I asked close people to join me as a board member and an alternate board member and got them in. I had a remote meeting with my bookkeeper about the change and got really good tips and I felt more sure about everything after that.
As I wanted to keep the Salmenoja Films name, I first changed the existing company name and paid 60€ for that. Then I established the limited company online and paid for the establishing fee 240€. This happened on 14th of December during lunch time. On 20th of December I got noted that the registrations are completed. I was the CEO.
After the company was registered I started to arrange everything. It all happened in this order:
- open a bank account and order a credit card
- change insurances from old company to new company
- new contract for the production company I am currently selling my services to
- open book keeping account for the new company
- do book keeping for both companies
This doesn’t seem that much written like this here, BUT for example the first part, opening the bank account process itself took almost two weeks! I talked to two different sales persons, answered questions about my business and so on. All this is necessary and very good service from the bank, that they are interested in their clients. At this point I had no plans to change or even consider to have a competitive bids from other banks (nor insurance companies either!), but if I would have wanted to do that, this would have been the perfect time for that. I however was and am more than happy with both my bank and my insurance companies so I continued with them gladly.
When I after weeks of waiting (felt like months!) got my new company credit card, this whole card change operation started. I cut my old company card of from several places where I had it as a monthly payment method and before money came in to limited companies account, I used my private card in many places in the meanwhile. Once the monthly fee was taken from my personal card in the beginning of February, I changed the method once more into the new company card. This personal card usage in between was necessary as I didn’t want anymore costs going from old company account in February to ease the process. All these costs which went from my own bank account I of course will get back from the limited company when the book keeping is done for the month. All good there, only one additional phase within the process. This point I started to keep a to do list to track everything. I marked every task with a date and what were the next steps. It was one paper and in the end it looked like the meme, where the dude is trying to explain something in front of a white board with all the arrows and phases for someone who doesn’t get it.
What kind of places one can have the company card as a monthly payment method:
- softwares (like Adobe, Canva)
- streaming services
- magazines and/or newspapers
This was all a jolly good fun I must say!
Most difficult was to re-arrange all communication systems and contracts. Okey difficult is maybe too heavily said, but tiresome and time taking are more convenient. I think that in two week period I called to my network company both personal support and business support like 10 times – AND I did all possible arrangements online! I’m sure by now they have blocked my number: ”This is a difficult customer, do not answer!”.
What did I do:
- change my phone service under company name
- change my cable network under company name
- order new security softwares for company computers, iPhone and iPad (and close the old ones)
- order new software(s) for the company (and close the old ones)
What else can there be?!
Well, when both companies were up and running, I had to sell equipment from the old company to the new one (walkie talkies, computer). I made calculations of how much they were worth and added VAT on top of that. I made an invoice in the old company account, send it to the new company and paid it there. All this was me, myself and I. Paying and receiving. Fun times!
At this point I started to be quite tired for this all and everything felt very overwhelming. To be able to track all the assets, I had to do a cashflow for both companies. Before that every little receipt and every payment deadline was just a blur in my head and it felt like a lot. Then I did the excel, where I had both companies next to each other and they both had debit and credit lines as well as a separate VAT line. This way I visualized the situation and understood where the money was and what happened when. I haven’t done this level of cashflow for myself before, I’ve only tracked upcoming costs and planned of course the balance so that I have enough money at all times to pay everything in time. Naturally in productions I have done many cashflows, as it is just necessary to understand how the money comes in to be able to plan the schedule how it goes out. This was such a huge moment for me to actually see the assets, see the actual costs. Only with this tool the totality of the situation came true to me. I strongly recommend this kind of way of work for everyone who need to understand the big picture of something that seems too much or too hard to handle as it is. It could be wise for example to have a cashflow if you are doing a renovation or moving – to mention few examples.
Almost everything was now settled. Only thing left to do was to close the old company once and for all. I did the announcement online for all places needed: for tax- and for trade registers. This didn’t luckily cost anything. I did this in advance and just dated it for a specific date. I got confirmation after one business day that it is all good and the announcement was registered correctly.
My book keeper (who by the way changed in the middle of this process, but luckily the new one is just as good as the old one was<3) did the VAT announcement also in advance so I paid the VAT from the old company before due date. I had checked the bank before how to do the account closing. So when the taxes were done, I wrote to the bank and asked them to withhold their monthly fee early and transfer the remaining funds to my personal account (all this was so easy, because I have all the services in the same bank!). All there is now left to be done before April is to fix the tax report from last year as well as first two months of this year – and luckily this is 99% my book keepers work!
So, as I am writing this now, it’s the last day of February which I in December set to be the target for closing down the old company. I managed to keep up with the deadline I set for myself! I am proud, happy and exhausted. I feel so good that starting tomorrow I only have to do everything only once. One book keeping, one receipts, one taxes, one insurance fees etc. From now on I am done being a corporative business wizard and I am back to be just an entrepreneur Salmenoja with the one ”small” adjustment: now you can call me officially CEO Salmenoja – and by all means, please do! 😉
Was it worth it?
Maybe too soon to say, that all is well and everything is forgotten and forgiven (?), but one thing I am sure of: it was t o t a l l y worth it! Now all the doors in the world are open for me and my company and I can not wait to run through them. Because why to walk?
If you are planning to do this kind of company change or if you are thinking of establishing a company but you are not sure what kind of company form suits you best, I have gathered a list here below. There are also some valuable links for you to check (in Finnish only), where to find correct info to back up the process. I wish you all the best and if you ever even for a moment consider to become an entrepreneur, remember that I am rooting for you and I am here for you if you need guidance on your way!
TO DO LIST FOR A COMPANY CHANGE:
- contact your book keeper and consult them with the company form change
- consider the time period when you are doing the change: it should not be the busiest time for your company
- make sure you have enough money on both companies accounts in the middle of the process so everything goes smoothly
- make lists what needs to be done and set yourself deadlines and stick on them!
- make cashflow plan to be sure how assets are moving, don’t forget VAT and other taxes