If you were to name two things Estonians are proud of, it'd be their entrepreneurial spirit and advanced system of digital governance. Put these two things together and it's no surprise that the process to register a business in Estonia is a simple one, most of which can be completed in only a few minutes online.
Despite being a small country, Estonia has a developing economy, a simple tax system, and typically pro-business governments. It’s a great place for expats to live and build their own enterprises, whether they work in high tech startups or more traditional segments such as manufacturing, or the service industry.
If you’re thinking of setting up a business in Estonia, you need to know how. Here’s our simple guide to starting a new enterprise in Estonia.
Choosing your business type is an important step. Consider what you’d like your business to be in the future as well as what will suit you right now. Taking local advice can help if you’re not sure which route to take.
Estonian law allows for several different types of corporate structure:
- Private limited company
- Public limited company
- Sole proprietor
- General partnership
- Limited partnership
- Commercial association
The private limited company, known in Estonian as *osaühing, but more commonly abbreviated to OÜ, is the corporate structure frequently used for people working alone or in small groups. Similar to the public limited company (in Estonian, *aktsiaselts or AS), the liabilities of the founders is limited to the amount of share capital paid in.
Because the OÜ structure is the most simple and commonly used, it's possible to set up this type of business using an expedited procedure in which all documents are submitted online and signed digitally. You can even do this without having the share capital upfront, although the business owners must promise to pay the capital pledged when it's called upon. To register digitally you must have the Estonian digital residence card (issued to all residents upon application), or be an e-resident, holding a digital residence card.
Aside from these company types, you can set up as a sole proprietor in Estonia under the FIE registration. In this case you need to register, and the liabilities associated with the business are yours. However, because the alternative for sole traders is to register quickly and easily as an OÜ, this is far more common. In this way, liabilities are limited to the initial investment.
The partnership options include a general partnership (where the partners are wholly liable for any debts accrued by the company), and a limited structure, in which at least one partner might be liable only to the extent of their initial investment.
A commercial association is created to allow the founders and members to collaborate in their mutual interests. This isn't such a common format for expats setting up a business in Estonia.
If you're starting a business in Estonia as a resident of the country, then you'll find that much of the administration of your business is done using your digital residence card. With this, you can sign documents and pay your taxes, all online. It's also the simplest way to create your business.
However, if you're not a resident of Estonia you can actually still set up a business there, by becoming an e-resident. This unusual system allows you to get a digital residence card, and create a business, including accessing services such as banking within Estonia. Although this is a fairly new system, it has proved popular and is well supported by government and investment agencies.
To start a private limited company you must commit share capital of at least EUR 2,500 (although it can be more than this). In some cases you don’t need to pay the share capital immediately when you set up your business, although you may be unable to withdraw any profits from your business until you do so.
If you're registering a OÜ business and you (and any other shareholders) are able to sign documents digitally, then you can do so online through the company registration portal. You'll also need an e-reader for your residence card, which is easily found in Estonia. Follow the process on the portal to create the articles of association according to the available template and pay the registration fees, which are in the region of EUR 145. Then all you have to do is digitally sign the documents and you're done. Most of the information online is available in English, including the forms and explanation of the registration procedure.
If you can’t sign documents digitally then you can set up your company through a notary who will prepare the documentation for you. This is a more expensive option, as there will be a legal fee to pay on top of the state registration fee. If you're working through a notary, you'll need to prepare:
- Memorandum and articles of association
- Application forms
- Bank certificate confirming you've paid the minimum share capital
- Certificate proving you've paid the state fee for registering a business
The notary will take your details and register your business using these documents, which will take two or three days. You'll have to provide your ID documents, signatures, and further information such as the registered address of the business (which can be a home address in some cases).
If you'd rather operate as a sole proprietor (FIE), this can also be done electronically so long as you have a digital ID card. The state fees in this case are lower at only EUR 13. You can also open your FIE business through a notary in much the same way as described above - although you'll also be liable for notary fees if you choose to take this route.
If your company turnover will be high, you might need to register for VAT. This is mandatory if your company annual taxable turnover exceeds EUR 16,000, and could be beneficial if your turnover is lower than this in certain circumstances. This is a requirement regardless of the type of company structure you select.
You'll have to pay taxes on your earnings in Estonia, which can be done electronically using your ID card. If you have a limited liability business you'll pay taxes through your business, at the point of submitting your annual accounts. This is treated separately to any personal tax liability. In the case of a sole proprietorship, your business earnings are taxed along with your personal affairs as one entity.
Estonia’s government has been welcoming foreign investors and entrepreneurs for some time, and have a series of initiatives to help you settle into the country. The Estonian Investment Agency provides a wealth of information and useful contacts for new business owners. The e-Estonia initiative encourages people from outside Estonia to get digital residency which allows them to open businesses and access services in Estonia. The government backed Startup Estonia aims to bring more startup entrepreneurs into the country.
Aside from these options there are numerous local networking and support groups, as well as incubators and events for budding entrepreneurs. You'll find a helping hand in the local chamber of commerce for your country, which will include members who have already moved to Estonia to start their businesses. For example, the British Estonian Chamber of Commerce or the American Chamber of Commerce, which are both active in networking, government lobbying and helping businesses to navigate the Estonian ecosystem.
Once you’re in Estonia and ready to get going, look for local networking events on sites such as Meetup, Eventful and Eventbrite. Here you can meet like minded people and build your customer and business contact book.
Although starting a business can be a daunting task, Estonia really is a great place to take that leap. With some planning, and a little bit of good luck, your business will get off to a flying start.
When starting your business, if you find the need to send or receive money from abroad at the least possible cost, consider using TransferWise. Not only does their real mid-market exchange rates generally beat the banks, but since your money is received and sent locally in both the sending and recipient currency, all those nasty international fees magically disappear. Give it a try.