5 Types Of Company In Estonia: Pros & Cons

In this article, the different types of company in Estonia has been briefly described. Along with that the pros and cons of the businesses have also been discussed.


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    types of company in estonia

    Whether you are a premature entrepreneur or an experienced business owner looking to kick-start your business in Estonia can be a compelling task to do. But selecting the right types of company in Estonia is an important decision that can impact the success and growth of the business.

    There are several types of legal entities you can choose from when starting a business in Estonia, including sole proprietorship, private limited company, public limited company, general partnership, and limited partnership. 

    Each type has its advantages and disadvantages, and it is important to consider several factors such as liability, tax obligations, and potential for growth before making a decision. 

    In this article, we will provide an overview of the different types of business entity in Estonia and their pros and cons, as well as important factors to consider when choosing a legal entity for your business. 

    Numerous types of legal entity in Estonia 

    There are several types of business entity in Estonia that can be chosen when starting a business, such as:

    1. Sole Proprietorship (FIE)

    A sole proprietorship, commonly called FIE (fuusilisest isikustettevotja) in Estonia is the type of business that is the most simple to establish since it requires only one person to create it. In a sole proprietorship, the owner is privately responsible for all losses and penalties of the business.

    FIE is the most types of company in Estonia for individuals who operate independently (e.g. freelancers) or in conjunction with family members (e.g. family-owned restaurant). Due to its low initial costs, it could be a better option for freelancers. 


    • Easy to start and manage
    • Low costs and administrative burden
    • No corporate income tax
    • There is no need for Articles of Association
    • No minimum share capital requirements


    • Unlimited personal liability
    • Limited access to financing
    • Limited potential for growth and expansion

    Things to consider before selecting a sole proprietorship among the types of legal entity in Estonia 

    • The owner’s assets are at risk in case of business failure.
    • Suitable for small-scale, low-risk businesses.
    • The company has to be registered for the VAT ID and begin paying value-added tax.
    • May not be fit for enterprises with numerous owners or those seeking to raise capital from investors.
    • Must apply for a license to operate or provide the government with a notice.

    2. Private Limited Company (OÜ)

    A privately-owned limited liability corporation (OU or osauhing) is the most prevalent types of company in Estonia that our customers and e-residents form in the nation. 

    The main reason why most entrepreneurs decide to establish an OU is the fact that it’s an entity with limited liability. The owners and the shareholders of the company are not personally responsible for any losses when they have completely paid for their share capital.

    The minimum share capital is small, and it can be controlled completely from a remote location – ideal for remote teams as well as digital nomads. 


    • Limited liability for shareholders
    • Easier access to financing and capital
    • Potential for growth and expansion
    • Minimum share capital EUR 0.1 from February 2023 onwards
    • No maximum share capital
    • Share capital may also be non-monetary


    • Higher costs and administrative burden
    • Corporate income tax of 20% on profits
    • More complex legal requirements

    Things to consider before selecting a private limited company among the types of company in Estonia 


    • Suitable for medium to large-sized businesses
    • You must establish a bank for a business account which is where you’ll transfer the capital stock of your business when your company’s creation is completed. 
    • You are able to apply for the Estonian VAT number.
    • Every founding member must have an e-Residency card in case the company is created electronically.

    3. Public Limited Company (AS):

    A public limited company (AS – Actsiaselts) is a type of business that can sell its shares to the public as well as foreign investors. A public limited company is similar to a private limited company but the only difference is that, unlike a private limited firm, an AS can offer its shares to the public.

    Additionally, purchasers of these shares have limited liability. Due to the high entry costs, it isn’t the most commonly used type of company found in Estonia The majority of AS companies are large in both size and revenue.


    • Access to a larger pool of investors
    • Greater potential for capital and growth
    • The business is generally controlled by the general meeting
    • Board members may be working under the terms of a board member’s agreement
    • Limited liability for shareholders


    • It is essential to have a management and a supervisory board, which could create more bureaucratic processes.
    • Costs of entry for high-end companies – minimum share capital requirements are EUR25,000.
    • A resident board member is required to be registered
    • You must make a physical trip to the notary office in Estonia

    Things to consider before selecting a public limited company among the types of company in Estonia


    • Suitable for large-scale, high-risk businesses
    • VAT registration is required when your annual tax-deductible turnover in Estonia exceeds EUR40,000.
    • All shares in the firm are needed to be enlisted with the Estonian register of securities.
    • Your company will require an auditor that regularly looks over your paperwork.
    • Requires strict regulatory compliance and transparency.

    4. Partnership-Based Firm (TÜ & UU)

    There are two kinds of partnership firms that you can create in Estonia, one is a general partnership firm (TU – Taisuhing) and the other is a limited partnership firm (UU usaldusuhing). 

    Both are very rare kinds of businesses in Estonia although they are easy and quick to establish. The primary distinction between both is the level of liability the owners or both be liable for. 

    The two partnerships general partnerships (TU) or limited partnership (UU) can be created electronically with your electronic residency card. If you do not want to make use of your Estonian electronic ID, then you may form one through a notary or by utilizing a service provider, such as Odint Consulting by utilizing an Act of Attorney.


    General Partnership (UU)

    General partnerships are firms in which two or more additional people hold and manage the corporation jointly.



    • Low costs and easy to set up
    • Flexible management structure
    • The founders of both companies can run the company on their own.
    • No corporate income tax
    • Simple and fast registration


    • Unlimited personal liability for partners
    • Potential for disputes between partners
    • Limited potential for growth and expansion

    Things to consider before selecting a General Partnership in Estonia


    • Suitable for small-scale, low-risk businesses
    • The company must apply for a VAT identification number and begin paying value-added tax. 
    • Needs a greater level of faith and understanding between members
    • Not recommended for businesses seeking to raise capital from investors.

    Limited Partnership (UÜ)


    A limited partnership is identical to a general partnership but has a minimum of one general partner who is privately accountable for the losses and duties of the firm and one or more limited partners who have specified liability.



    • Limited liability for limited partners
    • No minimum share capital requirements
    • Flexible management structure
    • No corporate income tax


    • Unlimited personal liability for a general partner(s)
    • Potential for disputes between partners
    • Limited potential for growth and expansion

    Things to consider before selecting a Limited Partnership among the types of business entity in Estonia


    • Suitable for small-scale, low-risk businesses with a clear division of roles between partners
    • If you are registering the business using your e-Residency Card within the Estonian Business Register the founders must be carrying the card.
    • Demands a high level of confidence and greater understanding among members
    • Not recommended for businesses seeking to raise capital from investors.

    5. Branches


    A branch is a form of business structure in Estonia that allows foreign firms to establish a presence in the country. A branch is not a separate legal entity but rather an extension of the foreign company. 


    A branch can be a cost-effective and flexible way for foreign companies to establish a presence in Estonia, but it also comes with risks and limitations. Foreign companies should carefully consider establishing a branch as a legal entity in Estonia as the head office will be accountable for all the debts and obligations of its branch.



    • A branch can be a cost-effective way for a foreign company to establish a presence in Estonia without having to set up a separate legal entity.
    • Establishing a branch in Estonia can provide foreign companies with access to the local market and customer base.
    • A branch can be set up relatively quickly and does not require the same level of administrative work as setting up a separate legal entity.


    • A branch is not a separate legal entity, so the foreign company is fully liable for the branch’s operations and financial obligations.
    • Any issues with the branch can reflect negatively on the foreign company’s reputation.
    • A branch may be limited in the types of business activities it can undertake in Estonia.

    Consideration while choosing a branch office among the types of legal entity in Estonia


    • As Estonia’s branch doesn’t offer limited liability protection, foreign companies may be exposed to potential risks and liabilities.
    • Foreign companies should assess the market potential in Estonia to determine if it is worth the investment to establish a branch.
    • Foreign companies should consider the tax implications of establishing a branch in Estonia.
    • Foreign companies must comply with Estonian laws and regulations when establishing a branch.
    • Obtaining necessary permits and licenses is required.


    Estonia provides a favorable business environment for entrepreneurs and startups with a supportive startup ecosystem, an efficient tax system, and easy company registration procedures. By selecting the appropriate legal entity for your business, you can enjoy the benefits of doing business in Estonia and take your business to new heights.

    It’s recommended to seek professional advice from OnDemand International experts to help entrepreneurs and business owners make an informed decision that aligns with their specific needs and goals. 


    The most common legal entity for establishing a business in Estonia is a private limited company (osaühing or OÜ).

    Yes, foreigners can set up a business structure in Estonia. Estonia has a liberal and straightforward company registration process that is open to foreign entrepreneurs.

    Tax obligations depend on the legal entity type. For example, private limited companies have a 20% corporate income tax rate, while sole proprietors are taxed on their income tax rate.

    The liability protection varies among legal entities. Private limited companies offer limited liability protection, while sole proprietors possess limitless liability.

    Yes, a legal entity in Estonia can be owned by a single person. A sole proprietorship is the only legal entity type that allows for single ownership.

    Registration requirements depend on the legal entity type. Private limited companies, for example, must register with the Estonian Business Register and provide certain documents, such as the articles of association and the appointment of the management board.