UKKO Kevytyrittäjä
UKKO Yrittäjä
UKKO Kevytyrittäjä
UKKO Yrittäjä
Often you start your entrepreneurial journey as a Light Entrepreneur without a business ID, and often you find yourself needing to create a business ID at some point on this journey. We have listed below a few useful points on transitioning from invoicing without a business ID to having your own business ID.
When should I transition from Light Entrepreneur to a Private Trader?
There can be multiple reasons for creating your own business ID, but here's some of the most usual ones:
1. Your business has more expenses
It is generally easier to apply for tax benefits on your business expenses when you have your own business ID; you can apply for a wider range of expenses than without a business ID and you can also apply for the VAT refund if you're registered in the VAT register. Read more about tax benefits and expenses here!
2. You invoice more often and/or higher sums
As a Light Entrepreneur you pay a percentage of each paid invoice as your service fee. Therefore it suits you best when you invoice occasionally and your invoiced sums are smaller. When your company really takes off, you get more clients and have higher invoicing sums, it may be better to change into the Private Trader service with a set monthly price rather than paying a percentage from your invoicing. Read more about the UKKO Private Traders pricing here!
The Business Tax Return
When you transition to a Private Trader, especially if you do it in the middle of the tax year, you must remember the tax declaration is different when you have your own business ID!
When you do not have a business ID, you receive the pre-completed tax return for private individuals, which already has all your invoiced income from the light entrepreneur's invoicing service.
When you have your own business ID, you will receive both private individual's and Business's Tax return. You must fill in the Business Tax Return on your entrepreneurial activity and add any expenses you wish to apply as tax benefits. Pleaser remember to add all necessary receipts and information to your bookkeeping accordingly, so they can be added to the Business Tax Return in time! You can also have UKKO Private Trader service handle it for you instead! You can read more about it here!
Taxation of Private Traders vs. taxation of Light Entrepreneurs
As a Light Entrepreneur without a business ID your income is taxed as salary according to your tax card. After creating your own business ID you will no longer receive salary from your invoices. You make a private withdrawal of your business' profit. The profit is taxed as prepayment tax. Additionally, if your business' annual turnover is over 20 000€ and/or the business ID is registered to the VAT register, you must add the VAT (value added tax) to your invoices.
Read more about how private traders are taxed here!
Invoicing and transactions
The main difference between Light Entrepreneur and Private Trader services is that payments and transactions will now come straight to you instead of UKKO.fi. This means your clients pay the invoices to directly to your bank account, you pay the taxes and VAT (if necessary) to the Tax Office from your own bank account as well based on the VAT reports.
Bookkeeping
When you have your own business ID, you're responsible of keeping track of your income and expenses, which means bookkeeping is important. The business tax refund and (if necessary) the VAT report will be filled out according to your bookkeeping. Single-entry accounting is enough for most Private Traders. You can handle the bookkeeping yourself or have someone else do it for you. UKKO Private Trader service offers you everything you need in one package; the bookkeeping, filling out tax reports and invoicing. Read more here!
Insurances
As a Light Entrepreneur you have UKKO Turva -Assurance that covers your insurances like accident and liability insurance. You also might have taken the YEL insurance if your invoiced income was over 9 423,09€ annually or 785€ per month for four months consecutively.
After transitioning to a Private Trader it is important to check what insurances you need for your business. You might need additional insurances to the usual accident and liability insurances, which you can now take out with your own business ID.
If you had YEL already as a Light Entrepreneur without a business ID, please inform the insurance company of the change. If you have not had YEL before, check your current situation with your preferred insurance company and take out YEL if necessary!