How to Register a Private Limited Company in Estonia

Estonia is a country on the eastern coast of the Baltic Sea in Northern Europe. The Estonian people are entrepreneurial and innovative, while the government is supportive of technology and small business. Estonia has one of the highest rates of startups per capita in Europe. It is one of the most digitally advanced nations in the world, and for a good reason - if you obtain the Estonian digital ID (also known as e-Residency) you can do almost everything online without hassle to run your company.

Doing business in Estonia

It is fair to say that the Estonian legal environment favors entrepreneurship and the entrepreneurial mindset. Foreign investors have equal rights and obligations with local entrepreneurs. All foreign investors may establish a company and conduct business in Estonia in the same way as local investors, no restrictions apply.

The Commercial Code regulates being a sole proprietor (Füüsilisest Isikust Ettevõtja - FIE). Sole proprietors provide services or sell goods under their own name and are not legal persons. Therefore, sole proprietors are taxed differently compared to limited companies. Because they are taxed differently, non-residents are not advised to register as FIE. In Estonia, for a non-resident, it would just be too expensive and not necessary considering that registering as a Private Limited Company is fairly easy and demands less initial investment.

Setting up a Private Limited Company in Estonia

By far the most commonly used form of business and most likely the most suitable for foreigners is a Private Limited Company (osaühing - OÜ), which is easy to set up, has a minimum share capital requirement of 0.01 EUR, and limits the shareholders’ liability to a maximum of €2500. This means that shareholders are not personally liable for the obligations of the company, but if the company goes bankrupt, the shareholders may still be liable for up to this amount_._

Before you start the registration process, you must determine:

• Company name (e-Business Register)
• Area of Activity: (this will be adjusted according to the actual economic activity of the company, based on yearly accounting reports)
• Address: (non-residents should use a contact person)

Registration

Holders of an Estonian ID card or e-Residency card can establish and manage a Private Limited Company fully online. If a digital ID or e-Residency card is not available, a visit to a notary in Estonia is needed to verify the foundation documents.

With over 109,000 e-residents and 28,500 companies created, the initiative has bolstered Estonia's economy by generating significant tax revenues and providing entrepreneurs worldwide with access to European markets.

You can register a private limited company electronically at the Company Registration Portal of the e-Business Register. You need the technical equipment for electronic registration (ID-card, or e-Residency card and ID-card reader).

A private limited company can be registered electronically in the Company Registration portal of the e-Business Register only, if:

• All persons related to establishment (members of the management board, founding members, etc.) are able to sign the application of initial entry and establishment documents digitally;
• The private limited company is established with a share capital contribution of less than €50 000 in which case the downpayment can be confirmed without extra documents (payment institution certificate) while submitting the application in the Company Registration Portal of the e-Business Register.

Here are the registration steps:

1. After entering the portal, select from the top of the menu “Submission of application”.
2. You will then see a list where you should choose “Registration of a new enterprise”.
3. Choose Private Limited Company
4. Then you will see additional information in connection with the foundation. To continue, click at the end of the page on "I confirm that I wish to continue with the foundation".
5. Preparing a petition for entry is divided into parts as follows: company name, persons in the entry, specifications on the right of representation, etc.

To establish the private limited company electronically under the expedited procedure, the state fee will be EUR 265.

The registrar will review the petition for entry within five working days from its arrival and in an expedited procedure, by no later than the next working day from its arrival.

Save 75% on Trademark Registration in Estonia

The EU has launched the 2024 Ideas Powered for Business SME Fund in collaboration with EUIPO and the European Commission. This initiative provides vouchers for intellectual property to small and medium-sized businesses in the EU.  Last year, over 35,000 SMEs applied for the fund, making it a major success. Grants are available on a first-come, first-served basis throughout 2024 until all funds are exhausted.

The SME Fund 2024 is designed to help small and medium businesses protect their intellectual property rights by significantly reducing trademark registration fees by 75%.  Here is a table showing the savings for Estonian entrepreneurs who register a trademark in the EU or in Estonia.

Source: https://eesticonsulting.ee/sme-fund-2024-starts-on-22-01-2024/

After the registration

Depending on the company’s area of activity and size, a varying number of additional steps must be taken. 

Bank account

First, you will have to open a bank account for the private limited company, where the company’s share capital is to be deposited. You will already have transferred this sum to the court’s deposit account or the bank’s e-start-up account when you formed the company. It is not possible to open a bank account without the company’s Commercial Register number, but for amounts up to EUR 50.000 it is sufficient to confirm the down payment by the company’s shareholders.

Activity license

If you will be operating in an area of activity subject to special requirements, you will have to apply for an activity license. Check if your area of activity belongs to the areas of activity subject to special requirements using the database of Economic Activities (EMTAK). Fill in an application or notice for operating in an area of activity subject to special requirements at the respected register.

Value Added Tax (VAT) in Estonia

If your annual turnover exceeds 40 000 euros, you will have to register as a VAT payer with the Tax and Customs Board.

If you are hiring employees

If you hire employees, you will have to register them with the Tax and Customs Board.