Expenses for a light entrepreneur - take these into account for light entrepreneurship

The costs of a light entrepreneur consist mostly of billing fees for billing services, insurance and other natural costs of the activity.

In this article, we will go into more detail about what kind of expenses are included in light entrepreneurship and which expenses are tax deductible.

The biggest cost for a light entrepreneur is the invoicing fee

What makes a different kind of light entrepreneurship to other forms of entrepreneurship is the outsourcing of invoicing, taxation and accounting to a separate invoicing service. The invoicing service takes care of a large part of the entrepreneur's obligations on behalf of the light entrepreneur.

Registering for the billing service is almost always free, but it is not completely free to use billing services. In fact, billing services capture a certain share of the non-VAT portion of the income to be billed.

The amount of the invoicing fee varies

The prices of billing services depend on the billing company itself. It is not only the price that is different, but also the coverage of the service that may differ. In general, billing service providers charge between 4% and 7% of the invoice amount net of VAT.

Some billing service companies use a fixed price instead of a percentage. For example, a fixed price could be around €50 per bill. This may seem like a large amount for smaller bills, but for larger bills, €50 is a small percentage.

The percentage charged is not always fixed, but can change depending on the amounts billed. Some providers may use a higher percentage at the beginning. Then, once the light entrepreneur has reached a sufficiently high level of billable amounts, the percentage decreases.

Insurance

Insurance is another cost for the light entrepreneur. The cost of insurance is, once again, the sum of many factors. Some billing services include all the necessary insurance, others do not.

YEL insurance i.e. self-employed persons' pension insurance is the most common compulsory insurance for light entrepreneurs. For all light entrepreneurs, insurance is compulsory only if the necessary conditions are met. The annual cost of YEL insurance starts at around €2000 and increases as the entrepreneur's income increases.

But as mentioned, YEL insurance only becomes relevant when the required conditions are met. A light entrepreneur should also have other insurances depending on the sector of activity. For example, a light entrepreneur may have accident insurance, motor insurance, health insurance, etc.

Read also what a light entrepreneur should know about their insurance.

Other entrepreneurial expenses

In addition to these so-called compulsory costs, a light entrepreneur also faces other costs. Depending on the type of business, a light entrepreneur may have to buy a computer, a car or other equipment. In addition to these, there are ongoing costs such as internet access, telephone connection and marketing costs.

According to Procurement, especially for a start-up light entrepreneur, you need to be aware of the sales margin you can achieve through your own activities. Expenses are determined by the activity of the business. The costs may seem prohibitive, but fortunately many of them can be deducted from your tax bill.

Tax deductions

As a light entrepreneur you are entitled to apply for tax deductions from their personal taxes. A tax deduction is an expense that is deducted from taxable income.

For tax purposes, a light entrepreneur is a private individual who receives a salary and pays an advance withholding tax on it. The income earned as a light entrepreneur is added to the income from, for example, a full-time job.

A light entrepreneur can claim a tax deduction for, among other things, these expenses:

1. Travel expenses
2. Work equipment, tools and room
3. YEL insurance and health insurance contribution
4. Education and training expenditure

Travel expenses can be charged to the customer but are also tax deductible. All kinds of work equipment, such as computers, work chairs or even pens, are also tax deductible.

The YEL insurance, which a light entrepreneur usually obtains through his invoicing service, is tax deductible. All self-employed people need to take care of their skills, and therefore both training and learning materials are tax deductible.

Surprising expenses - be prepared for them

Entrepreneurship, and life in general, can offer surprises. Surprising moments are best encountered when you are prepared for them.

In addition to the certain costs mentioned above, the entrepreneur must be aware that costs can arise from unexpected things. We have listed some of the unexpected costs that you should be prepared for.

Rising prices

The recent rise in prices has not been lost on anyone. As well as affecting the grocer's final bill, price rises also affect the day-to-day life of the entrepreneur.

For example, do you produce products to order for which you need material? Do you need a car for your operations, and fuel costs have risen significantly? Are you paying more for something else than before?

In a changing economy, both traditional and light entrepreneurs need to be ready to adapt. Whether it's raising their own prices or changing their operating model, entrepreneurs need to have a plan in place for rising costs.

Equipment or intermediate equipment

A hardware failure does not always announce itself in advance, so it's a good idea to be prepared. For many entrepreneurs, a single piece of equipment, such as a computer, can be an indispensable tool, so a breakdown can bring work to an immediate halt.

A breakdown can mean an investment of thousands of euros, but if it's an even bigger piece of equipment, it can run into tens or thousands of euros.

The customer does not pay for the service

It is unfortunate but entirely possible that, for one reason or another, the client does not pay for the work done for them. The reason for non-payment may be, for example, the client's insolvency or a criminal offence. This can lead to additional costs for the entrepreneur if and when the costs of the work cannot be covered by income.

Large orders

Even a light entrepreneur may receive an order or a commission that surprises him or her with its size. This can result in additional costs that are not incurred in projects of a normal size. For example, the amount of materials or other things to be purchased may be higher for large jobs. It is good to be prepared for such situations.

Revenue streams are interrupted

Sometimes it can also happen that the market is dry and there are no jobs to be found. For the ordinary entrepreneur, this is costly, but for the light entrepreneur it is easier. When there are no jobs, the light entrepreneur does not have so many costs. The great thing about being a light entrepreneur is that you only have to pay for the work you do.

The costs are lower for a light entrepreneur

For light entrepreneurs, the costs are quite moderate and are determined by the income collected. That's what makes being a light entrepreneur so easy and risk-free - you only pay for your successes.

Registering for Kevyesti.fi is completely free and the threshold for becoming a light entrepreneur is low. We walk alongside you and support you with your expenses.