Estonia is a country on the eastern coast of the Baltic Sea in Northern Europe. The Estonian people are entrepreneurial and innovative, while the government is supportive of technology and small business. Estonia has one of the highest rates of startups per capita in Europe. It is one of the most digitally advanced nations in the world, and for a good reason - you can do almost everything to run your company online without hassle.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
Doing business in Estonia
It is fair to say that the Estonian legal environment favours entrepreneurship and the entrepreneurial mindset. Foreign investors have equal rights and obligations with local entrepreneurs. All foreign investors may establish a company and conduct business in Estonia in the same way as local investors, no restrictions apply.
The Commercial Code regulates being a sole proprietor (Füüsilisest Isikust Ettevõtja - FIE). Sole proprietors provide services or sell goods under their own name and are not legal persons. Therefore, sole proprietors are taxed differently compared to limited companies. Because they are taxed differently, non-residents are not advised to register as FIE. In Estonia, for a non-resident, it would just be too expensive and not necessary considering that registering as a Private Limited Company is fairly easy and demands less initial investment.
Setting up a Private Limited Company
By far the most commonly used form of business and most likely the most suitable for foreigners is a Private Limited Company (osaühing - OÜ), which is easy to set up, has a minimum share capital requirement of EUR 2,500, and limits the shareholders’ liability. This means that shareholders are not personally liable for the obligations of the company, but the company is liable for its obligations to the extent of its own assets.
Before you start the registration process, you must determine:
- Company name (e-Business Register)
- Area of Activity
Holders of an Estonian ID card or e-Residency card and a growing number of EU member states’ ID cards can establish and manage Private Limited Company fully online. If an ID or e-Residency card is not available, a visit to a notary in Estonia is needed to verify the foundation documents.
You can register a private limited company electronically at the Company Registration Portal of the e-Business Register. You need the technical equipment for electronic registration (ID-card and ID-card reader).
A private limited company can be registered electronically in the Company Registration portal of the e-Business Register only, if:
- all persons related to establishment (members of the management board, founding members, etc.) are able to sign the application of initial entry and establishment documents digitally;
- the private limited company is established without an immediate share capital contribution or with a monetary contribution made electronically in the course of preparing an application in the Company Registration Portal of the e-Business Register.
Here are the registration steps:
- After entering the portal, select from the top of the menu “Submission of application”.
- You will then see a list where you should choose “Registration of a new enterprise”.
- Choose Private Limited Company
- Then you will see additional information in connection with the foundation. To continue, click at the end of the page on I confirm that I wish to continue with the foundation.
- Preparing a petition for entry is divided into parts as follows: company name, persons in the entry, specifications on the right of representation etc.
To establish the private limited company electronically under expedited procedure, the state fee will be EUR 190.
The registrar will review the petition for entry within five working days from its arrival and in expedited procedure, by no later than the next working day from its arrival.