Welcome to our comprehensive guide on company formation in Estonia. If you’re considering starting a business in this digital-forward country, you’re in the right place. With its advanced digital infrastructure, streamlined processes, and favourable business environment, Estonia has become a popular destination for entrepreneurs from around the world. In this guide, we will walk you through the steps of registering a company in Estonia, highlight the different business forms available, discuss the advantages of e-Residency, and provide insights into applicable taxes and accounting services. Let’s dive in!
Why Choose Estonia for Company Formation?
Estonia has gained a reputation as a hub for innovation, particularly in the tech sector. The country’s commitment to digital transformation, transparent governance, and ease of doing business make it an attractive choice for entrepreneurs. Whether you’re a resident or a non-resident, Estonia offers a business-friendly environment that encourages growth and innovation.
Types of Business Entities in Estonia
Before you begin the process of company formation in Estonia, it’s important to understand the different business entities available. The most commonly used forms of entities for doing business in Estonia are the private limited liability company (OÜ) and the public limited liability company (AS). Let’s explore these options in detail:
Private Limited Liability Company (OÜ)
The private limited liability company, also known as Osaühing or OÜ, is a popular choice for entrepreneurs due to its simplicity and flexibility. Here are some key features of the OÜ:
Share Capital: Minimum share capital for newly established company can be 0.01€, making it an accessible option for startups and small businesses.
Founder(s): One or more persons can be the founder(s) of an OÜ, and they can be residents or non-residents of Estonia.
Liability: The founder(s) or shareholder(s) of an OÜ are not personally liable for the company’s obligations.
Management Body: An OÜ must have a management board responsible for representing and directing the company.
Accounting: Monthly accounting is necessary if the company has a VAT ID or regular salary payments. Otherwise, annual reports are sufficient.
Public Limited Liability Company (AS)
The public limited liability company, also known as Aktsiaselts or AS, is suitable for larger businesses or those planning to go public. Here are some key features of the AS:
Share Capital: The minimum share capital requirement for an AS is EUR 25,000. The capital can be contributed in both cash and property.
Founder(s): One or more persons or legal entities can be the founder(s) of an AS, and they can be residents or non-residents of Estonia.
Liability: The founder(s) or shareholder(s) of an AS are not personally liable for the company’s obligations.
Management Body: An AS must have both a management board and a supervisory board. The management board is responsible for representing and directing the company, while the supervisory board oversees the management’s activities.
Audit: An AS must appoint an auditor if its registered share capital exceeds EUR 25,000 or if specific conditions are met regarding turnover, balance sheet total, or number of employees.
Other Business Entities
Apart from the OÜ and AS, Estonia also recognises other forms of business entities, such as general partnerships (TÜ), limited partnerships (UÜ), sole proprietorships (FIE), and branches of foreign companies. Each entity has its own set of requirements and characteristics, catering to different business needs and structures.
Steps to Register a Company in Estonia
Now that you have an understanding of the different business entities, let’s walk through the steps involved in registering a company in Estonia. The process can be completed online or through a notary. Here’s a general overview:
Step 1: Choose a Business Name and Activity
The first step is to choose a unique business name that reflects your company’s identity. The name should include “OÜ” or “Osaühing” and must be clearly distinguishable. Additionally, you need to define the initial area of activity for your company.
Step 2: Determine Shareholders and Contributions
Next, you need to determine the shareholders of your company and their respective share capital contributions. The contributions can be made in cash, non-monetary assets, or a combination of both.
Step 3: Establish a Legal Address and Contact Person
Companies are required to have legal address in Estonia. Contact person is required for the companies whose management team is located outside of Estonia. The contact person ensures smooth communication between local authorities and your company’s management board. You can read about our virtual office service.
Step 4: Prepare the Incorporation Documents
Now it’s time to prepare the necessary incorporation documents. These include the articles of association and any other required documents specific to your chosen business entity. You can draft these documents yourself or seek legal assistance to ensure compliance with Estonian laws and regulations.
Step 5: Register Your Company
Once you have all the necessary documents prepared, you can proceed to register your company. This can be done electronically through the Company Registration Portal of the e-Business Register or through a notary.
Step 6: Open a Business Bank Account
To operate your company effectively, it’s essential to open a business bank account. Estonia offers various options for business banking, including traditional banks and fintech companies. Consider factors such as accessibility, fees, and services offered when choosing the right banking partner for your company.
Step 7: Fulfil Additional Requirements
Depending on your business activities, you may need to obtain specific licenses or permits. Some areas, such as financial services, tourism, education, or construction, require additional authorisation or notice of economic activity. Ensure compliance with local regulations and seek professional advice if needed.
Congratulations! You have successfully registered your company in Estonia. Now, let’s explore the benefits of e-Residency and the available support services for your business.
Leveraging e-Residency for Global Business
Estonia’s e-Residency program allows entrepreneurs to establish and manage an EU-based company entirely online, regardless of their location. Here are some key benefits of e-Residency:
Digital Identity: With e-Residency, you receive a government-issued digital identity that grants access to Estonia’s transparent digital business environment. This digital ID card enables secure digital signatures and authentication.
Global Reach: E-Residency enables you to do business worldwide without the need for physical presence or traditional bureaucracy. You can sign documents online, manage your company remotely, and access digital services seamlessly.
Application Process: Applying for e-Residency involves submitting the required documents, including a copy of your government-issued ID, a passport-style photo, a motivation statement, and the applicable state fee (EUR 100-120). The process typically takes 6-8 weeks.
Accounting and Legal Services
Running a successful business requires proper accounting and legal support. Estonia offers a range of services to assist you in these areas. Let’s explore some of the essential services available:
Accounting Services
Efficient financial management is crucial for the success of your company. You can choose from various accounting services to meet your specific needs:
Comprehensive Accounting: Experienced accountants handle day-to-day bookkeeping tasks, including reconciling accounts, managing invoices and expenses, processing payroll, and generating financial reports.
Annual Financial Statements: Ensure compliance and gain valuable insights with expert preparation of your company’s annual financial statements. This comprehensive service covers reporting and documentation requirements.
VAT Registration: If your company’s annual turnover exceeds EUR 40,000, VAT registration is obligatory. Professional assistance can guide you through the process and ensure compliance with local requirements.
EORI Number Application: For businesses involved in international trade, an EORI (Economic Operator Registration and Identification) number is essential. Experts can assist you in applying for an EORI number, simplifying customs procedures and cross-border transactions.
Legal Services
Navigating the legal landscape is crucial for any business. Qualified lawyers can provide assistance with various legal matters, including:
Drafting Legal Documents and Contracts: Ensure the legality and clarity of your business agreements with professionally drafted legal documents and contracts.
Licensing Requirements: Certain business activities may require specific licenses. Legal experts can guide you through the licensing process and ensure compliance with regulations.
Company Dissolution or Sale: If you decide to dissolve or sell your company, legal assistance is crucial to ensure a smooth transition and compliance with legal requirements.
Virtual Office Services
Owning a company in Estonia requires a local business address and a contact person. Virtual office services offer an affordable and flexible solution for entrepreneurs, providing the following benefits:
Cost-effectiveness: Renting or purchasing physical office space can be expensive. With virtual office services, you can choose the level of service you need, from access to meeting rooms to a dedicated private office space.
Professional Image: Registering your company with a well-known business address enhances your professional image and instills confidence in clients and partners.
Congratulations! You now have a comprehensive understanding of the process of company formation in Estonia. From choosing the right business entity to registering your company and leveraging the benefits of e-Residency, Estonia offers an ideal environment for entrepreneurs. Remember to seek professional advice when needed, whether it’s for accounting, legal, or virtual office services. With Estonia’s digital-forward approach and supportive business ecosystem, you’re well on your way to establishing a successful company in this innovative country.
If you have any further questions or need assistance with company formation in Estonia, don’t hesitate to reach out to our experienced team. We are here to support you on your entrepreneurial journey.
