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Foreign investors who come to Estonia will benefit from one of the most advanced business incorporation procedures in Europe considering most the actions can be completed online. Furthermore, it is also possible to set up an Estonian company remotely. The only thing that has not changed in the past few years is the Company Law which provides for the types of legal entities entrepreneurs can choose form. Among these, the private limited liability company (OU) remains the most popular.
If you want to open a company in Estonia and decide for an OU, you can rely on our company registration agents for assistance in its incorporation. In case you need assistance for setting up a company in Thailand, we recommend our partners - ThaiCompanyFormation.com.
The Estonian OU
An Estonian OU is a term used to designate a private limited liability company in this country and the abbreviation comes from the word OsaühingIt. The OU is the most popular type of company established in Estonia because they are less expensive and easier to run, and therefore make a good choice for small and medium-sized businesses.
With a vast experience in company incorporation matters, our agents in Estonia can help foreign investors who want to open limited liability companies in this country. In case you are interested in opening an LLC in Greece, we can put you in contact with our partners.
The features of an Estonian OU
A private limited liability company in Estonia must have a unique name and must contain the legal form of the company. The founder may choose between English or an Estonian name.
Establishing an Estonian OU implies the existence of one or several shareholders. There are no special requirements regarding the shareholders’ citizenship or residence. They are not personally liable for the company’s activities. However, a new change in the legislation for 2023 implies a new minimum share capital of only 1 EUR.
Requirements for opening a limited liability company in Estonia in 2023
There are two types of limited liability companies in Estonia: the private and the public one. The main difference between the two business forms resides in the minimum share capital required to register the company. According to the Estonian Company Law, the private company (OU) requires a minimum share capital of 2,500 euros (the government plans to abolish this requirement), while the public company (AS) requires a minimum share capital of 25,000 euros. Another difference between the two business forms resides in the fact that in the case of a public company, the director cannot be a shareholder in the business.
Even if both types of structures are easy to register, foreign investors will usually choose the private limited liability company because of the multiple purposes it can be used for.
For example, the OU is the perfect solution for those operating fintech companies in Estonia. As a matter of fact, Estonia is a European leader in terms of digital technology considering that around 90% of the administrative tasks with the authorities are completed online.
You can obtain more information about the benefits of setting up an OU in 2023 from our company formation specialists in Estonia. We can also assist with EORI registration in Estonia.
The Articles of Association of an OU in Estonia
The main documents that need to be filed upon the establishment of an Estonian limited liability company are the Articles of Association which are the most important papers that need to be filed upon the registration of any corporate entity in this country. These documents must contain the following information:
- the name of the company (which must have been previously reserved), and the date of its incorporation;
- information about the shareholders, such as their names, residence addresses and the number and types of shares held in the company;
- information about the directors, their names and addresses, and information about their appointment and removal;
- detailed information on the share capital of the company and its distribution among the shareholders;
- the main object of activity of the OU and other operations to be completed (where applicable);
- the legal address of the company (it must have a registered address in Estonia);
- other information, as established by the shareholders.
The Articles of Association must be filed with the Companies Register upon the incorporation of the company. These documents can be amended whenever required by following the guidelines imposed by the Registrar.
Our Estonian company formation specialists can assist with the preparation of all documents necessary to incorporate an OU. Furthermore, we can also help when amendments must be made in the company.
We are at your disposal with various services related to starting a private limited company in Estonia.
Trading name reservation in Estonia
The first step that needs to be completed before starting the registration of an OU in Estonia is securing a trading name. The procedure can be completed online by submitting an application form with at least 3 name proposals. Our agents recommend the desired name to be first of the list.
Once it is approved, the Companies Register will issue a trading name reservation certificate which will be used to complete the incorporation procedure.
The trading name is one of the changes that can be brought to a company in Estonia, and our consultants can help with this procedure.
Registered address requirements for an Estonian OU
As mentioned above, one of the main requirements when establishing a private limited liability company in Estonia is to have a legal or registered address in this country. This will imply for the company to be considered a domestic business. The importance of having a registered address in an Estonian city is related to its tax treatment and access to various tax exemptions and investment aids offered by the government.
The registered address can be secured through the purchase of a property, a rental agreement or a virtual office (the last option is available when one of the other two are not possible). Also, the virtual office is a temporary solution until a permanent one is found.
Our local agents can offer virtual office services to foreign investors interested in setting up a business in Estonia.
Managing an Estonian OU
The private limited company in Estonia has simple management requirements. The established Estonian OU must be run by an Estonian management board that acts as an executive and representative body. At least half the number of board members must be residents of Estonia, Switzerland or an EU country.
At least half of the members should have residency in Estonia or any other EU country or Switzerland. It is not required for the managers to also be shareholders and can be appointed among the employees. It is the board’s duty to organize an annual general meeting of the shareholders.
How to register an Estonian limited liability company in 2023
The company formation process of an OU in Estonia in 2023 must follow the next steps:
finding a legal address for the company in the Estonian city it will operate in;
reserving a trade name with the Estonian Companies Register (the name must be unique);
having the company’s incorporation documents prepared and filed with the Trade Register;
appointing the company’s directors and filing their personal information with the Trade Register;
opening the company bank account and depositing the share capital;
applying for the necessary business permits and licenses with the competent authorities.
Our Estonian company formation consultants can draft the incorporation documents of your OU. They can also help in preparing the other documents needed for starting a business in Estonia.
We have also created a scheme with the requirements related to the creation of an OU in Estonia:
The uses of an Estonian OU
The OU is the private form of the limited liability company, as there is also the public limited liability company (AS). As a private company, the OU can be used for various purposes and is most suitable for small and medium-sized businesses. This is also why it is so popular among foreign investors interested in setting up a company in Estonia.
Amon the uses of an OU in Estonia, we remind the following:
- it can be used as a shelf company which can be bought by local or foreign entrepreneurs quite quickly;
- it can also be used as a subsidiary company by foreign enterprises interested in having a presence in Estonia;
- it can be used for opening online shops and other types of e-commerce companies in Estonia;
- it can be used for creating joint ventures with foreign or other local companies;
- the OU can be turned into an AS by increasing its share capital if it is to be used for trading on the Stock Exchange.
The OU is one of the most versatile business forms in Estonia. Our local advisors can offer more information on the uses of this type of company.
Shelf companies are usually registered as OUs in Estonia
As mentioned above, one of the most common uses of an OU company in Estonia is that of a shelf or ready-made company. These are already incorporated companies with or without a history which are kept on a shelf and are ready to be purchased by foreign investors usually.
There are several advantages offered by a shelf company registered under the form of an OU, among which the fact that the company comes with a registered address, an incorporation certificate, a tax identification number and a trade name. In most cases, the Estonian company will need to be registered for VAT and certain amendments will be required upon the purchase.
A disadvantage of the shelf company is that it is usually more expensive than the registration of an OU from scratch.
The holding company is one of the preferred business options of foreign investors coming to Estonia. Because of the many tax advantages the holding company offers, setting it up as a private limited liability company can significantly increase the advantages of overseas entrepreneurs deciding to create it.
The holding company is also a good choice for multinational companies seeking to own shares in other companies.
The Estonian holding company offers great tax advantages, so if you want to open a such a company through a limited liability company, you can rely on our agents.
The OU as a subsidiary company in Estonia
The OU can be used for various purposes and foreign companies interested in expanding their operations in Estonia will usually choose it to create subsidiaries.
The subsidiaryis an independent business entity from the parent company which allows for complete independence and more options in terms of activities to be completed. The OU is the suitable entity for a subsidiary because it requires a small share capital to start with and because the parent company will be the sole shareholder in the company.
The OU can be set up in a matter of a few days, however, it is necessary to know that the licensing procedure can take longer, especially when special approvals are needed.
If you are interested in opening an Estonian company and need advice, do not hesitate to ask for the support of our team. We can assist with the entire business registration process and we can advise on the licensing procedures.
•the total share capital of the company is over 400,000 EEK (approx. 28,000 EUR);
•the management board has less than three members;
•the annual turnover exceeds 10 million EEK and there are more than ten employees in the Estonian OU;
•the balance sheet is over 5 million EEK (approx. 700,000 EUR) and there are more than ten employees of the Estonian OU.
The supervisory board’s duties are to overview the company’s activities and those of its management. The general meeting will receive the results of a review. The supervisory board must have three members unless the Articles of Association prescribe a greater number of members. A member of the supervisory board must be a natural person with active legal capacity.
We are at your service if you are interested in starting a business in Estonia.
Why open an OU in Estonia?
Apart from being suitable for most types of activities, the OU has other advantages among which the low registration fees. In terms of business start-up costs, it should also be mentioned that the maximum share capital of an Estonian OU is 25,000 euros, which can be increased in time. Also, the responsibility of the shareholders is limited to the amount of money put in the business.
At the level of 2023, the private limited liability company in Estonia is the most popular business form among local investors. Given the fact that it implies the same registration requirements for foreign entrepreneurs, these can also benefit from similar advantages of Estonian nationals.
The creation of anEstonian OU in 2023 implies the same procedure as it did in the past few years, thus it is one of the most stable legal entities under which one can do business in this country.
It takes only one week to create aprivate limited company in Estonia.
For more information regarding the establishment of a limited Liability company in Estonia please watch the film below:
Reporting requirements for an OU in Estonia
As mentioned above, limited liability companies in Estonia must pay their taxes with the tax office in the city they are registered in. Before paying these taxes, they are required to prepare and file annual returns based on which they will be assessed for taxation.
- have its accounting records prepared and kept in Estonian;
- file an annual report;
- file salary declarations every month;
- file monthly VAT reports (if the company is registered for VAT).
In order to file salary declarations, the company must also be registered for social security and insurance purposes.
Also, depending on the activities to complete, it must obtain the necessary business licenses and permits with relevant authorities. These and other obligations related to the creation of a private limited liability company in Estonia in 2023 can be explained by our company incorporation representatives.
Taxation of the OU in Estonia
The OU will be taxed on its worldwide income in Estonia, however, it is good to know that this country has one of the most advantageous taxation systems in the European Union.
The following taxesneed to be considered whensetting up an OU in Estonia:
- the corporate tax which is levied at a rate of 20% (the tax is calculated as 20/80 of the net dividends received by the company);
- the dividend tax rate was reduced starting with the 1st of January 2019 and is now set at 14%;
- the VAT is levied at a standard rate of 20%, however, 9% and 0% reduced rates are also available;
- the social contributions a company must pay are the 33% social tax and the 0.8% unemployment insurance tax on the gross salary of an employee.
From an economic point of view, compared to 2022, a more robust expansion is anticipated for 2023, with a projected 2.8% growth, led by a recovery in export demand, private consumption, and an improved labor market, according to the European Commission. For 2024, the economy is set to go forth and increase by more than 2%.
Income that is subject to taxation can come from both active and passive sources, such as business and employment income, capital gains, rents and royalties, interest, dividends, certain insurance payouts, pensions, etc. Unless a tax exemption is available, any income received by a subject to tax. If you need help in dealing with taxes, feel free to use our accounting services in Estonia.
The experts at CompanyIncorporationEstonia.com offer high quality company formation services at very competitive prices. I would definitely recommend them. We have benefited a lot from the advice they gave us and the answers to our questions.