Foreign investors who want to open a company in Estonia will have many advantages. Apart from the developed economy, entrepreneurs will also be allowed the type of structure they want to use for their Estonian business. From this point of view, there are several types of companies that can be registered in Estonia.
Foreign companies have the possibility of operating on the Estonian market by registering branch offices and subsidiaries. The liaison office can be created with the purposes of exploring the market before starting any type of company here.
Our company formation agents in Estonia have prepared a detailed presentation on the main types of companies which can be registered here. We can also assist with professional advice and assistance on company registration in this country.
| Quick Facts | |
|---|---|
| Types of entities available for registration |
– Sole trader, – limited liability companies, – partnerships. |
|
Requirements to set up an Estonian sole trader |
– Having legal residency in Estonia, – carrying out an activity in accordance with the Estonian Classification of Economic Activities, – obtain a business license for specific operations. |
|
Types of partnerships |
– General, – limited. |
| Types of limited liability companies |
– Private, – public. |
| Other types of companies |
Commercial associations and non-profit organizations. |
| Most popular types of companies in Estonia |
Private limited liability company. |
| Legal forms available for foreign companies |
– Branch office, – subsidiary. |
| Most employed legal form by foreign investors |
The private limited liability company. |
| Full foreign ownership availability (YES/NO) |
Yes. |
| Special requirements for foreign shareholders (if any) | No, there are no specific requirements that apply to foreign shareholders. |
| Simplest type of company to incorporate |
The private limited liability company. |
| Possibility for foreign companies to act as shareholders (YES/NO) |
Yes, in branches and subsidiaries.
|
| Requirement of specific share capital |
Yes, for private and public limited liability companies. |
| Average timeframe to register a company |
Approx. one week. |
| Assistance in starting a company in Estonia (YES/NO) | Yes, we offer company formation services in Estonia. |
Estonian companies
The types of companies in Estonia are described in the Company Act, the main legislative document that regulates company formation in the country.
According to law, the following types of legal entities can be incorporated in Estonia:
- the general partnership;
- the limited partnership;
- the private limited company;
- the public limited company;
- the commercial association;
- sole proprietorship.
Foreign investors who set up companies in Estonia should be informed about all the types of structures and their particularities. Only by knowing the differences between companies, can investors choose the most suited one for their business. Furthermore, if you need assistance during the company registration procedure in Estonia, our experts can help you.
Limited companies in Estonia
The private limited company and the public limited company are the most popular business forms in Estonia. An important difference between the two lies in the minimum share capital needed to incorporate the company. While the private limited liability company is more suited for small and medium sized businesses, the public limited company is usually chosen by large corporations in Estonia.
The private limited company is not able to sell its shares to the public – this is the main characteristic that differentiates it from the public one. A minimum share capital of 2,500 EUR is needed to incorporate this company. Shareholders are liable to the extent of their contribution to the capital of the company. A private limited company must have a management board but a supervisory board is optional (mandatory only if prescribed for in the Articles of Association).
The public limited company has larger incorporation costs but its shares are freely transferable and it can be listed on the Estonian Stock Exchange. The minimum share capital for this company is 25,000 EUR. A management board and a supervisory board are directing and supervising the actions of a public limited company. This type of company must observe the accounting requirements in the country and must also appoint an auditor. If you are looking for financial-related services, please not that our team of accountants in Estonia is composed of qualified and efficiency-focused specialists. Our aim is to provide each client with the confidence that they can rely on our professionalism. We have a thorough understanding of the business environment which enables us to offer financial management solutions that are customized for each client.
Here is also an infographic on this subject:
Partnerships and other types of business forms in Estonia
The general and limited partnerships in Estonia are formed by two or more partners that have a common business goal. In the case of the general partnership, the founders are solely liable for the obligations of the company. When forming a limited partnership only one of the members is fully liable while the other is only liable to the extent of the contributions made. No minimum share capital is required for partnerships in Estonia.
The branch is a preferred business form for foreign companies looking to establish their presence on the Estonian market. Unlike the subsidiary, the branch is not considered a legal entity and it relies fully on the mother company abroad.
The sole proprietorship is the simplest business form in Estonia and it is established by a natural person who opens a business on his own. No distinction is made between the owner and the company, meaning that the individual is fully liable for the debts and obligations of this company. The sole proprietorship must be registered with the Commercial Register before engaging in any business activities.
If you need more information about the incorporation process for each company type, as well as tax obligations in Estonia and requirements for financial reporting, you may contact our company registration experts in Estonia.
Small, medium and large companies in Estonia
Even if these are not specific types of companies, the Estonian government decided to distinguish between the sizes of business in order grants various benefits. Limited liability companies are categorized into small, medium and large companies in Estonia. Among these, small and medium-sized enterprises, also known as SMEs, will benefit from several incentives offered by the authorities.
These companies are categorized as:
- micro-companies that have assets with a total value of 175,000 euros and an annual income of a maximum of 50,000 euros;
- small companies that own assets of a maximum of 4 million euros annual sales of 8 million euros and an average number of 50 employees;
- medium-sized enterprises that have either the value of assets totaling 20 million euros or 40 million in yearly sales or an average number of 250 workers;
- large companies that enter the same category as medium-sized enterprises, however, they must meet at least two of the three indicators mentioned above.
Foreign investors can now set up any type of company remotely by applying for e-residency in Estonia.
Requirements to start various types of companies in Estonia
Apart from the share capital requirements imposed on limited liability companies, there are also other requirements that must be respected when opening a company in Estonia. These are:
- at least one manager in the case of private and public companies in Estonia;
- in the case of partnerships and sole proprietorships, the manager will be one of the partners, respectively the sole trader;
- all types of companies must register with the Estonian Trade Register based on specific documents;
- all companies are subject to various accounting regulations and submission of specific financial statements.
Foreign investors can also use limited liability companies to set up other types of businesses such as holding and offshore companies. There are very employed types of companies because of the tax advantages they offer.
Those who do not want to register a new company can simply purchase a shelf company in Estonia.
Our company formation specialists can guide investors through the registration procedure of any type of company if you are interested in starting a business in Estonia.
Documents related to opening a company in Estonia
Once the type of Estonian company is selected, the most important part will be preparing the documents which will be filed with the Trade Register for the actual incorporation.
No matter the type of structure chosen, the future company owner’s identification papers are required. Then, a specific application form which is released by the Companies Register must be filed in the case of sole traders and partnerships.
When it comes to opening a limited liability company, the Memorandum and Articles of Association must be prepared. These must be drafted in accordance with the requirements of the Company Act and must contain specific information, such as the object of activity of the business, the share capital, the number of shares issued, their value and their distribution among the shareholders. All companies must have a registered address in Estonia in order to be considered a resident business.
Once registered with the Trade Register, the company must also register for taxation and value added tax and obtain the necessary licenses and permits which will allow them to operate on the Estonian market. We can also assist with EORI registration in Estonia. We can also handle the VAT registration procedure in Estonia.
The main differences between company types in Estonia
Opening a company in Estonia implies complying with several procedures, however, until the business registration begins, an investor is required to choose the company type.
Foreign investors have two choices from this point of view:
- to operate as natural persons as sole traders or members in partnerships;
- to operate as legal persons by incorporating a private or public company.
There are several differences between the types of companies available in Estonia, some of them quite important.
The first and most important refers to the documents to prepare. If in the case of a sole trader and partnership, one only requires an application form, respectively a partnership deed. In the case of companies, the documentation is more complex and will also take longer to prepare by at least a few days. Even son, the Estonian company formation procedure has been streamlined, as most of the steps are now simple to complete online. Furthermore, Estonia was the first country in the world to enable e-residency and through which foreign entrepreneurs could set up Estonian businesses directly from their countries of origin.
Other aspects to mind when choosing the type of company in Estonia is the number of participants in the business. If in the case of a sole trader, the entrepreneur is required to work alone, in the case of a partnership, there must be at least two members.
In the case of private and public companies, the number of shareholders and/or stockholders depend on several factors, among which are the size of the business and whether it will trade its shares on the Stock Market. The simplest way of making a decision is to draft a business plan through which various development stages are considered.
Other differences between non-corporate and corporate business forms reside in the obligations these have upon registration. Corporate forms are required to appoint directors whose details must be shared with the Companies Registrar.
The mandatory share capital is one of the most important differences when choosing a type of company in Estonia. While non-corporate forms are not required to abide by specific rules, private and public companies must meet specific requirements.
Do you want to open a company in Estonia? Get in touch with our specialists and let them be your guide through the legal procedures of starting a business in this country.
Licensing requirements for different types of companies in Estonia
Licensing is one of the main aspects to consider no matter the type of company you decide to create in Estonia. The requirements for obtaining a business license depend on the industry to operate in and are issued by various authorities that regulate different business fields.
Some of the most stringent requirements apply to the financial sector, and in Estonia, banking and insurance companies are at the forefront. However, Estonia is also a leading cryptocurrency destination in Europe.
Our company registration consultants can offer more information on the licenses to obtain when setting up a business and also on how to obtain e-citizenship in Estonia.
The startup – a special type of company in Estonia
In the past few years, startups have become a trend in countries around the world. However, these are not legal forms with their own specific registration particularities, they can take different forms (the private limited liability company is preferred in most countries in Europe) and benefit from support from various organizations ranging from angel investors to financial institutions and even from the government.
Another aspect that differentiates startups from traditional companies is the innovative character.
Creating a startup in Estonia has several advantages, among which:
- Estonia is a perfect destination for innovative enterprises;
- it is one of the most technologically advanced countries in the world;
- it has an educated population that relies on e-services, so many of these companies can enter this sector;
- Estonia’s public administration has digitized most of the services offered to the general population and companies.
You can create a startup in Estonia in just a few days, so if you are considering it, our agents can help you.
Starting a business in Estonia is not difficult, which is why we invite you to contact us for a personalized offer.
We also have a short video presenting the main types of Estonian business forms:
Estonia’s performances in numbers
Did you know that Estonia is one of the countries in which the simple registration of a company takes less than one day? Here are some interesting facts offered by Investinestonia.com:
- 98% of the companies created in Estonia were incorporated online;
- 99% of financial transactions are completed online;
- 98% of the tax declarations are filed online;
- Tallinn is one of the largest startup hubs in Europe.
We mentioned earlier the possibility of buying a ready-made company. These companies have all the incorporation documents in place, however, these can be amended in order to comply with the requirements of the new owner. Our company registration advisors in Estonia can offer guidance in all the aspects related to buying a ready-made business, including with due diligence procedures which will help them make the right decision, so do not hesitate to contact us.
For detailed legal information and legal consultancy, we recommend our partner law firm in Estonia.
Companyincorporationestonia.com is a part of Bridgewest.eu, an international network of specialists in offshore company formation and setting up offshore bank accounts, which has affiliated partners throughout the world, including Dutch lawyers who can provide local legal assistance to foreign investors, and also company formation specialists in countries like Luxembourg, Switzerland, Belarus or Lithuania who can handle all needed legal procedures when opening a company in the related country. We can also recommend our partners from Slovakia, who are experts in company incorporation matters and can help you start a company in this country. In case you are interested in starting a business in an Asian country, such as Thailand or Malaysia, our consultants from ThaiCompanyFormation.com can handle the company formation procedure for you.