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Sole Proprietorship in Estonia

Updated on Wednesday 05th February 2020

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Foreign entrepreneurs who want to open companies in Estonia have various choices when it comes to choosing the structure of their future business. One of the simplest ways of starting a business in Estonia is by registering a sole proprietorship or sole trader (FIE). This business form is available for single company owners and come with several advantages, but also with full responsibility related to the business’ debts and obligations.

Our company formation agents in Estonia can help investors who want to set up sole proprietorships in this country. We can also assist with the registration of other types of companies.

What is the Estonian sole proprietorship?

 
A sole proprietor in Estonia is essentially a one man business, a business owned and run by an individual who bears full responsibility for the business and is liable with all of his or her assets. This type of company is preferred by foreign investors who want to work on their own, who plan to run small scale businesses, like engaging in consulting services, or who want to keep their business at a family level.
 
There are certain advantages that make this business form attractive for business people in Estonia, but investors should consider each and every one of them carefully before making any business decision. Our Estonian company formation experts can help you know everything about the sole proprietorship in Estonia, the liabilities that come after engaging in such business activity and all about the registration and taxation procedure.
 

Requirements for foreign investors setting up Estonian sole traders

There are several aspects which need to be considered when opening a sole proprietorship as a foreign citizen in Estonia. This business form is governed by the Company Law in Estonia, and the following requirements must be met when registering it:

  • -          the foreign citizen must first obtain a residence permit in Estonia, this can be obtained remotely now;
  • -          the foreigner must relocate to Estonia prior to starting the business and registering with the Trade Register;
  • -          the registration of this business form implies submitting an application form with the Companies Register in Estonia;
  • -          the sole trader must also register for taxation and social security reasons, while VAT registration is necessary only under certain conditions.

Opening a company in Estonia is not complicated, no matter the chosen business form, however, the sole proprietorship takes only a few days to register, which is one of its greatest advantages.

Documents required to register an Estonian sole proprietorship

The list of documents related to the registration of a sole proprietorship in Estonia is not extensive, as the future business owner will only need their ID or passport and the application form released by the Trade Register. The sole trader will also need to submit proof of their registered address in Estonia. Also, before registering the sole trader, a foreign investor must obtain a personal identification number.

It is useful to know that since Estonia has introduced e-residency, the personal identification number is issued together with the residence permit.

Our Estonian company formation advisors can help foreign investors who want to register as sole traders here. They will explain the requirements related to the documents they need to prepare before going to the Trade Registrar.

Establishing a sole proprietor in Estonia

 
A sole proprietor is a natural person that engages in economic and business activities. For this purpose, the sole proprietor (individual) must be registered at the Estonian Commercial Register before engaging in any business activities. Any individual who is interested in establishing a sole proprietorship in Estonia must begin by filing an application. The registration application is submitted at the Commercial Register or with the help of an Estonian notary. 
 
If the language is an issue, our experienced Estonian company incorporation agents can help you make the necessary arrangements. A sole proprietor does not require any complex business incorporation documents, such as the Articles of Association. One condition for establishing a sole proprietorship in Estonia is that the person or persons involved in the business activity have a registered place of residence in Estonia. Another step that needs to be accomplished is to open a bank account for the sole proprietor
 
Usually, the name of the sole proprietorship will include the name and the surname of the business owner. Other names can be selected, however, in this case, you might need to observe the existing trademark legislation in Estonia. 
 

Accounting requirements for sole traders in Estonia

Once the sole proprietorship is taken into evidence by the Companies Register, it no longer needs to register with the Tax and Customs Department, as the information will be forwarded electronically. However, there are other accounting requirements which need to be respected by the Estonian sole trader.

These requirements are:

  • -          the sole proprietor is required to maintain the accounting books of the business;
  • -          VAT registration is mandatory only if the annual turnover of the business is 40,000 euros;
  • -          if registered for VAT, the business owner must file VAT returns with the Tax Department;
  • -          personal income tax returns must also be filed by the sole proprietorship in Estonia.

Our local agents can assist with the registration for taxation of sole traders and other types of companies in Estonia. We also offer accounting services to those who need help in bookkeeping matters in Estonia.

Licensing requirements for sole traders in Estonia

It is important to know that there is no specific business license issued to sole proprietorships in Estonia, however, for certain activities, it is possible for an authorization to be required. For example, those who open small catering businesses as sole traders are required to obtain a food processing license.

The advantages of a sole proprietor in Estonia

One of the main advantages that make this business form suitable for entrepreneurs is that business activities can commence in a very short amount of time. Another advantage that might be important to some foreign investors is given by the lower incorporation costs when compared to other existing business forms in Estonia. The costs generally include registration fees and notary fees. In terms of annual taxation, the sole proprietorship has another advantage: it does not have to be registered as a VAT payer unless the annual turnover exceeds a certain amount.
 
The sole proprietor will have to observe the current legislation for personal income tax and will have to comply with the employment law if he or she desired to hire any other employees.

FAQ on sole proprietorships in Estonia

1.Does a sole trader need a share capital?

No, there are no share capital requirements when opening a sole proprietorship in Estonia.

2. How much does it cost to register a sole trader in Estonia?

The business start-up costs of a sole trader in Estonia are not high, and the investor only needs to consider the registration fee which needs to be paid with the Trade Register and the notary fees when drafting and authenticating the application and the signature.

3. How long does it take to register a sole trader in Estonia?

The company formation process of a sole trader in Estonia takes 2 or 3 days.

4. Can I hire employees if I am a sole trader in Estonia?

Yes, it is possible for a sole trader to have employees.

 
Please contact our Estonian company incorporation consultants if you want to know more about the sole proprietorship and about doing business in Estonia. If you are interested in setting up a business, we can also help you register other types of companies in Estonia.
 
 

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