Light Entrepreneurship

Light Entrepreneurship

Considering becoming a light entrepreneur – when is it worthwhile and when is it not?

Do you have a potential business idea in mind, but taking the leap into entrepreneurship is daunting?

If you answered YES, light entrepreneurship might be the right path for you towards a new career.

Light entrepreneurship – namely using an invoicing service – has been steadily gaining popularity in Finland in recent years, and it’s no surprise.

While there are drawbacks to light entrepreneurship, at its best, it’s a very flexible and, above all, risk-free way to test your business idea and its viability.

Moreover, you can do all this without dealing with the bureaucracy associated with accounting, taxation, and official notifications.

If there’s enough work and the new career feels right, it’s easy to establish a sole proprietorship or a limited company after being a light entrepreneur.

For thousands of Finns, light entrepreneurship has indeed been the stepping stone to a full-fledged entrepreneurial career.

In this text, we will tell you what light entrepreneurship is, its pros and cons, and what a light entrepreneur needs to know about their taxation, unemployment security, and insurances.

Finally, we’ll give a couple of good tips on what to keep in mind when comparing different invoicing services – because there are differences, and by being aware of them, you can save money.

What is light entrepreneurship?

A light entrepreneur refers to an individual who works under their own name and invoices for the work done using an invoicing service. Light entrepreneurs are therefore customers of invoicing services.

Example: You are a light entrepreneur and offer lawn mowing services for the elderly. After mowing the lawn in Aunt Irma’s yard and finishing your work, you tell Irma that the invoice will follow.

Next, you log into the invoicing service’s website and fill in the invoice details: what was done, for whom, and at what price? The invoicing service then sends the invoice to Aunt Irma.

When Irma pays the invoice, the invoicing service takes a small commission (e.g., 5% of the amount) and transfers the remaining amount to you.

The invoicing service also takes care of withholding tax, i.e., they retain the correct amount of taxes from the sum paid to you, provided you have delivered your tax card to them.

The invoicing service reports payment details to the tax authority.

You don’t have to worry about accounting since, as a light entrepreneur without your own business ID, you are not obligated to keep accounts.

In short

Your job is to invoice your clients, the invoicing service takes care of everything else.

NOTE! There are differences in the side costs of invoicing services (e.g., the proportion of the service fee and insurance premiums). Always check the exact and up-to-date details from the service providers’ websites.

Light entrepreneurship thus makes you an entrepreneur in many ways but does not burden you with the bureaucracy associated with entrepreneurship. This is beneficial especially when you want to first try entrepreneurship without major risks.

In other words: You pay the invoicing service a little extra to handle the mandatory paperwork that regular entrepreneurs have to deal with.

“Light entrepreneur” is not a term defined by law but is used as a general marketing name for customers of invoicing services. The term “light entrepreneur” was coined by the invoicing service.

Depending on the invoicing service, the same thing can be referred to by many different names – however, “light entrepreneur” is the most popular term and is gradually becoming common. defines light entrepreneurship as one of four forms of work. The other forms are salaried work, sole proprietorship, and limited company entrepreneurship.

Examples of traditional invoicing services offering light entrepreneurship include, in addition to, Eezy, Omapaja, Free-Invoicing, and Odeal. In the OP-Light Entrepreneur service, the user operates as a sole trader or “sole proprietorship entrepreneur”, so this service, despite its name, differs from regular invoicing services – we will explain more about this later.

Registering as a user of an invoicing service is free, so you only pay if you actually invoice something. There are no so-called ongoing expenses. However, light entrepreneurs cannot enjoy all the tax benefits that sole traders with a business ID are entitled to.

We will discuss this matter in more detail later in this text.

Experiences of light entrepreneurship – benefits and drawbacks

Woman smiling in the picture

We asked five users of invoicing services about their positive and negative experiences of light entrepreneurship.

Below is a summary of experiences and issues that received more than three mentions.

Benefits of light entrepreneurship

“Startup costs are 0 euros. You only pay for the invoicing service when you invoice something.”

“Risk-free. Since the service is free, getting into financial trouble due to light entrepreneurship is practically impossible.”

“Reliable and safe to use. There have been no issues with receiving funds with Finnish service providers.”

“You don’t have to deal with the intricacies of accounting and taxation, as the invoicing service handles the paperwork.”

“Light entrepreneurship can encourage you to learn about entrepreneurial matters. In any case, you have to understand the basics of taxation and accounting if you plan to establish your own company at some point.”

“If you wish, you can stop using the invoicing service at any time and set up a sole proprietorship or limited company. This is recommended if you have enough customers and more money starts to move in your business.”

“If you are in salaried work or studying, light entrepreneurship offers an easy way to invoice for your part-time work.”

“You can use the invoicing service whenever you want, and its maintenance requires no work or expenses.”

Drawbacks of light entrepreneurship

“You get a little less from your work because the invoicing service takes a small percentage of your fee. And even if the percentage is only 5%, some invoicing services have a minimum commission of 15-20 euros. So if you invoice small amounts to customers, the actual percentage is higher than the mentioned 5%.”

“Some licensed jobs may not be invoiced through invoicing services. For example, taxi operations and some HVAC works are examples of this. However, there can be differences depending on the service provider.”

“Light entrepreneurship is mainly suitable for selling services. If you sell goods or food products, light entrepreneurship may not be a smart option. For this reason, running an online store selling goods through an invoicing service may be ruled out.”

“Fully deducting business expenses is not possible with all invoicing services. For example, if you are a photographer, you cannot record your camera as a business expense and thus lose a valuable tax benefit. Some expenses can, of course, be deducted in personal taxation.”

“Light entrepreneurs (without a business ID) are not granted a startup grant, but you can get it later if you transition to a full-time sole proprietorship or limited company entrepreneur.”

Light Entrepreneurship and Taxation

If you have ever been employed, you know that your employer has deducted withholding tax from the salary paid to your bank account, i.e., the portion that goes to taxes. This withholding is done based on the tax card you provided.

The same principle applies when working with invoicing services. The portion that goes to taxes depends on your tax rate. You can electronically provide your tax card to the invoicing service.

Thus, the taxation for a sole entrepreneur is very straightforward.

The income you receive is considered earned income, which is taxed progressively. This means that the more you earn, the higher your tax rate will be.

Note that the income you receive through the invoicing service is taxed together with your other earned income (e.g., income from your employment).

So, if for instance, you earn 40,000 euros annually from your day job and invoice 5,000 euros annually as a sole entrepreneur, these incomes are combined and taxed together.

As someone employed, you cannot assume that you don’t need to pay much tax on the few thousands earned through the invoicing service just because the earnings were minimal.

Light Entrepreneur’s Unemployment Security

In recent years, aligning sole entrepreneurship with unemployment benefits has been turbulent – the issue has been widely discussed on various media websites and newspaper columns.

The most important thing to understand is that as a sole entrepreneur, you’re considered an entrepreneur in terms of unemployment legislation as well. If you’re a full-time entrepreneur, you’re typically not eligible for unemployment benefits.

This matters if, for instance, you are a part-time sole entrepreneur and lose your primary salaried job.

In such cases, the Employment Office evaluates whether you are a full-time or part-time entrepreneur.

Your sole entrepreneurship is considered full-time if, in the Employment Office’s view, the required workload is so substantial that you couldn’t accept full-time work elsewhere. Earnings don’t matter, only the time the work requires.

As mentioned before, a full-time entrepreneur is not eligible for unemployment benefits.

However, if your entrepreneurial activities are short-term, i.e., a project lasts for a maximum of two weeks, you retain your eligibility for unemployment benefits.

If business activities start while unemployed, the distinction between full-time and part-time entrepreneurship is assessed only after four months. This change in unemployment security law took effect in January 2018, and more details can be found later in this section.

If you’re not a full-time entrepreneur, this means you are classified as part-time.

As a part-time entrepreneur, you may receive adjusted, i.e., typically lower, daily allowances.

This means that during unemployment, you can do part-time work, which reduces the amount of benefit paid to you.

As a full-time sole entrepreneur, you can join the entrepreneurs’ unemployment fund if desired. Under certain conditions, this would make you eligible for earnings-related unemployment benefits when work runs out.

If you’re employed and are a part-time sole entrepreneur, to receive earnings-related unemployment benefits, you should belong to a wage earner’s fund.

If you’re unsure about unemployment matters, it’s always a good idea to inquire at your local Employment Office. They make decisions on unemployment security and decide whether you are classified as a full-time or part-time sole entrepreneur.

In past years, interpretations of full-time and part-time statuses could vary considerably. Hence, it’s advisable to ask if there’s any risk of confusion.

How did the sole entrepreneur’s unemployment security change at the beginning of 2018?

From the beginning of 2018, there was a change in the unemployment security law that affects, among other things, starting a business while unemployed.

The change is still in effect, meaning that, for instance, an employee who becomes unemployed can start as an entrepreneur and run the business for four months without being considered full-time, which would prevent benefit receipt.

After these four months, the business’s full-time or part-time status is then evaluated.

However, if you had already been a part-time entrepreneur before becoming unemployed from a salaried job, this change doesn’t apply to you.

It’s because, in this case, your business activities began before becoming unemployed.

The advantage of this change is that you can now try out entrepreneurship for four months without fearing the loss of benefits.

Previously, business activities classified as full-time lasting more than two weeks would prevent benefit receipt.

Light Entrepreneurship – YEL Insurance and Other Insurances

One of the most common questions related to light entrepreneurship is whether a light entrepreneur needs to acquire the entrepreneur’s pension insurance, i.e., YEL insurance.

YEL insurance is also mandatory for light entrepreneurs if the criteria are met.

As a light entrepreneur, you must get YEL if:

  • your work income value exceeds 8,575.45 euros per year (2023) and
  • the activity lasts for at least 4 months.

YEL income means your estimate of the amount you would pay to an external worker with the same skills as you for the work you do. So it’s a value you determine yourself, not based on actual invoicing or your earnings.

Those under 18 or over 67 do not need to get YEL.

It’s worth noting that some invoicing services also handle YEL matters for you if it’s relevant to your situation. In practice, this means that you can, if needed, acquire YEL insurance directly from the pension insurance company through the invoicing service.

Not all light entrepreneurs exceed the required YEL threshold, so there is no need to get insurance in such cases.

The validity of other insurances during light entrepreneurship depends on the invoicing service.

Some invoicing services insure light entrepreneurs against accidents and also offer liability insurances. In other services, these can be accessed for a small additional fee.

There are differences in insurances, so check this from the service providers’ websites.

You can find more information about the entrepreneur’s pension insurance and setting the YEL income limit in our guide YEL Insurance.

Light Entrepreneurship or Sole Proprietorship – which is better?

Considering light entrepreneurship

Comparing sole proprietorship and light entrepreneurship is always situational, so there’s no definitive answer to the question in the title.

However, below are some general guidelines on whether to establish a sole proprietorship or to gain experience from light entrepreneurship using an invoicing service.

If you’re already an entrepreneur, there’s no real reason to switch to an invoicing service and become a light entrepreneur. The exception may be situations where your operations are so occasional that you only invoice once or twice a year.

If you’re young, can’t find summer jobs, and come across something that could employ you, the invoicing service might be a good solution if you’re not going to work regularly once studies continue. However, if you know you could earn a monthly income even alongside studies, consider a sole proprietorship. You’ll learn about entrepreneurship.

If you’re unemployed, an invoicing service might suit you for billing small-scale gigs. However, always ask the employment office first for permission if you can earn some extra income (and how much), even if you’re unemployed. As we already mentioned, entrepreneurship has its effects on your unemployment benefits.

If you just want to test if there’s demand for some idea, use the invoicing service.

If you simply don’t want or have time to waste on tax and accounting tasks or thinking about statutory announcements, light entrepreneurship services are the best solution for you.

If you have a day job

And want to produce some service on the side (e.g., massage or personal training) and you already have paying customers, then establish a sole proprietorship.

And just quickly want to see if some side idea could be profitable, then use an invoicing service. There’s no need to establish a business if you don’t know if it would make financial sense. If the business takes off, you can establish a sole proprietorship in 15 minutes later.

In short

Light entrepreneurship or sole proprietorship? Consider the nature of your activity when comparing:

  • Is it continuous and could it possibly earn a full-time living?
  • Are customers already there?
  • Can you handle mandatory but minor paperwork?

If the answer to the above questions was yes, establish a sole proprietorship.

Otherwise, try first as a light entrepreneur. If the experiences are positive, move on to more economically advantageous forms of entrepreneurship – i.e., to a sole proprietorship or a limited company.

Light entrepreneurship with a sole proprietorship – what does it mean?

In this article, we’ve discussed the differences between sole proprietorship and light entrepreneurship. So at this point, you might be wondering what light entrepreneurship with a sole proprietorship or light entrepreneurship with a business ID means.

Now we’ll explain the difference between traditional light entrepreneurship and light entrepreneurship with a sole proprietorship.

Previously, no traditional invoicing services enabled a light entrepreneur to have a business ID.

This meant that you had to use their business ID when invoicing customers as a customer of the invoicing service.

You weren’t an independent entrepreneur but specifically operated through the invoicing service, more like an employee. The lack of a business ID underlined this fact.

All amounts invoiced by light entrepreneurs have been counted towards the turnover of invoicing services, always amounting to several million euros.

This, in turn, meant that light entrepreneurs were not entitled to tax benefits intended for small entrepreneurs, such as VAT relief for lower limits. You can get relief based on a low turnover.

VAT relief means that with a turnover of less than 15,000 euros, no VAT is charged. Light entrepreneurs using invoicing services had to pay VAT regardless of their turnover amount.

This was one of the main criticisms of traditional light entrepreneurship.

However, as the popularity of light entrepreneurship increased, invoicing services began to allow the possibility of operating under your own business ID. This, in turn, gives you more independence and the possibility to take advantage of tax benefits intended for small entrepreneurs.

Light entrepreneurs can choose between two models

  • Without a business ID: Traditional model where you don’t have your own business ID, and you use the invoicing service’s ID.
  • With a business ID: Light entrepreneurship with a business ID where you have more independence and can benefit from tax reliefs for small entrepreneurs.

The decision of which model to choose depends on your preferences and circumstances. Some prefer the traditional model because they don’t want to handle the bureaucracy related to a business ID. Others prefer having their own business ID because of the independence and tax benefits.

Choosing between the two models should be based on your needs. Consider factors such as the frequency of your invoicing, the turnover you expect, and the importance of tax benefits for you.

To summarise

Light entrepreneurship is an intermediate step between an employment relationship and entrepreneurship. It’s a way to test entrepreneurship without having to establish a business right away. YEL insurance is mandatory if certain conditions are met. Different invoicing services offer different services and insurances. Consider your own circumstances and preferences when deciding on light entrepreneurship vs. sole proprietorship.