Independent Entrepreneur
There is no definition of an independent entrepreneur in the legislation. For instance in the Finnish Business Income Taxation Act the activity of an independent entrepreneur is defined extensively as profession or business activity. A trader usually refers to an individual (private trader) or a company carrying on business activity. The term private trader is in practice used interchangeably with trade or business name (in Finnish: toiminimi). The ambiguity around the definitions of the concepts means that a decision between an employment relationship and entrepreneurial activity needs to be made on a case-by-case basis.
The main characteristics of an independent entrepreneur are the purpose of making profit, the financial risks, the extent of the business activity and the generality thereof, publicity, independence and risk of losing the invested capital.
Consequently, it is not always clear whether the relationship in question is that of an independent entrepreneur or if it is a contract of employment. For instance, the relationship between a principal and a sub-contractor may be perceived as a relationship between an employer and an employee. The determining factor is the true nature of the work conducted, not the label given to it. In order to constitute independent entrepreneurial activity, the business must be carried on independently, not under the management and supervision of an employer or other principal. It is recommendable to pay attention to these circumstances as the employer must comply with various statutory obligations, e.g. payment of employer’s contributions such as tax withholding and social security payments, should the relationship be considered a contract of employment. In addition, the employer must adhere to regulations regarding payment of salary to employees during days taken off due to illness and protection of employees from unfair or wrongful dismissal. The employer of a sub-contractor may protect its position in respect of such payments by including a clause in the agreement obliging the sub-contractor to indemnify the employer for all payments arising out of the relationship in case the relationship is determined to be a contract of employment rather than that of an independent entrepreneur.