Company Registration in Estonia in 2024-25: Procedure & Benefits Explained

In this article, we have discuss about company registration in Estonia in 2024-25. Read the complete article to know more about procedure, benefits, requirements and more.

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    Estonia is a nation that is located in the northern part of Europe. The country is one among three Baltic regions, sharing its border with Russia and Latvia. Estonia is regarded as one of the most welcoming and fastest-growing hubs for start-ups all over the world. Estonian capital, the city Tallinn is known as the Silicon Valley of Europe with the highest percentage of startups per capita and an 

    active and economic population that is prone to entrepreneurship. Estonia has an ecosystem that is equipped with high-tech processes, a worldwide connected online resident community, and a favorable investment environment. The absence of bureaucratic restrictions makes it appealing for entrepreneurs all over the world to select a business for their company registration.

    Procedure for Company Registration in Estonia

    Procedure for Registering a Company in Estonia

    To complete the process of company registration in Estonia, one should follow the process that is outlined below:

    • Selecting a suitable name for the business. 
    • Determining the principal focus of your work. 
    • Locating the legal address and the appointment of the Contact Person for Estonia company registration. 
    • Submitting an application to register a company in Estonia. 
    • Contributing to the share capital. 
    • Additional formalities to complete for Estonia company registration. 

    Selecting a suitable name for the business 

    The initial step to registering a company in Estonia starts with selecting an acceptable name to represent the business. It is important to remember that the name of the company must be written in latin letters and without any other special characters. 

    Deciding on the main field of activity

    Once deciding on the desired brand name, the company’s applicant has to choose the principal scope of the business’s activities that it will undertake. To further facilitate this application, the applicant should select an EMTAK Code (The Estonian classification of economic activities) to determine the principal scope of the activity performed by the business. However, the company can engage in different commercial activities for the generation of revenue. 

    Finding the Legal Address and the appointment of a Local Personnel  

    The business also requires an address that is legal and can be accessed on an annual basis. The law doesn’t oblige the company to have an executive director who is a resident. However, the business must have a local contact who handles communication with the relevant authorities on behalf of the business. 

    Applying to Register the company 

    The next step is to create an online application to register a company in Estonia through the e-business portal. The process starts with preparing and signing the necessary documents as well as paying the state fees and submitting the form. The required fee for Estonia company registration is EUR 265. 

    Contributing to the share capital 

    The share capital is transferred either through transferring funds to the company’s bank account or the depository account of your Estonia company. While a share capital contribution is required, the founders can create the company without contributing share capital and instead postpone the time of the capital contribution of shares to the future. 

    Complete the required company registration formalities 

    After the application has been properly submitted, the business owner must wait for the court’s verdict on the process of application. The court generally gives a few days to render its verdict, and the decision regarding the application is typically communicated by email. The owner of the business must obtain an EU IBAN account if the company doesn’t have a bank account for business in the European Economic Area (EEA). 

    Post registration requirements

    The following formalities must be completed to register a company in Estonia:

    • Legal documentation: The company must create legal documents to continue the business’s operations. This is the agreement between the founders and contracts for employment, confidentiality agreements, etc.
    • Tax Administration and Accountability: The founding fathers must be aware of Estonia’s tax and accounting framework and rules.
    • Licensing: The licensing process is based on the kind of commercial activity that will be carried out by the business, specific licenses and permits must be acquired.
    • Registration for VAT: If the annual turnover of the business exceeds an amount of more than EUR 40,000 in the commercial activities carried out in Estonia.

    Eligibility Criteria For Company Formation in Estonia

    Features
    Types of companiesLimited liability company Public Company Private Limited Company
    Share capital for LTD Company and paid-in requirement2,500 Euros is required for an LLP 25,000 Euros is required for a public limited company The minimum share capital for a Private Limited Company is just € 2,500
    Minimum number of shareholders for Limited Company1
    The time frame for the incorporation (approx.)1-week
    Corporate tax rate0% on Reinvested
    Local director requiredNo

    The following requirements to register a company in Estonia:

    1. Registration and Digital ID: Digital ID is required fot the initial step to Estonia company registration.
    2. Legal address and contact information in Estonia is a must.
    3. Availability of the chosen company name.
    4. Requirement for banking:A bank account must be established to facilitate financial solutions.
    5. Capital requirement: A share capital of 2500 euros is required for an LLP. A minimum share capital of 25.000 euros is needed to form a public limited company.

    Documents required for Company Registration in Estonia

    The registration of a business can be completed electronically via the electronic business portal. 

    The notary will assist in the creation of the documents necessary to register a company in Estonia:

    • Information on the founders of the company: It includes their address, visa information, passports, and any other pertinent information.
    • Memorandum of Association
    • Articles of Association that need to be notarized.
    • Board Resolution (If required)
    • Certificate of payment of an amount to share capital.
    • Bank certificate confirming the deposition of capital shares for the company.

    Types of Business Entity in Estonia

    Once the applicant has made an application for an e-residency permit, the applicant receives their digital ID, and becomes eligible to begin a company in Estonia. When starting any business in Estonia it is important to decide a legal structure to run the business. The Commercial Code of Estonia provides the following types of companies to residents of the country. 

    They are in the following order:

    1. Private Limited Company 
    2. Public Limited Company 
    3. Sole Proprietorship
    4. General Partnership 
    5. Limited Partnership
    6. Commercial Association 
    7. Branch Office

    Private Limited Company 

    Private limited companies (OU) are by far the most popular type of business entity used by those who are e-residents to establish their business in Estonia. E-residents can register approximately 21,000 businesses in Estonia and over 99 percent of them were established within private limited corporations. A shareholder in a private limited corporation is not individually responsible for the firm’s debts. An OÜ must have a minimum share capital requirement of €0.01 per shareholder.

    These are the advantages of the private limited company for residents of Estonia as the company entity for their business:

    • Simple registration process 
    • Share capital low minimum 
    • Directorship number of the founder 
    • Financial liability  

    The business has the option to register voluntarily for VAT or apply for VAT registration when the annual turnover that is tax deductible exceeds EUR 40,000.

    Public Limited Company (AS)  

    An AS is a public-liability company (AS) is a type of business entity that can provide its securities to the general public as well as foreign investors. Shareholders of these entities are liable only for the amount of their share contribution to the business. A public limited company must have a minimum share capital of 25,000 euros. 

    Sole Proprietorship (FIE)

    The concept of a sole proprietorship isn’t an extremely common type of business entity that is used by firms in Estonia and also by electronic residents. The reason for this is that sole proprietorships are not considered to be distinct legal entities within the meaning of the law.

    General Partnership

    These kinds of businesses aren’t common for e-residents, despite an easy and quick process to establish. These entities can be created electronically through the e-residency card, or by an intermediary service provider using the Power of Attorney.

    Limited Partnership

    A minimum of one general member and one limited member should be registered using a shared business name to form a Limited Partnership. The limited member has limited responsibility to the firm capped at his contribution whereas a general member has unlimited accountability for the firm’s debts.

    Commercial Association (Uhistu) 

    If the objective of the business is to promote the interest of the members via joint economic activity and the vehicle for business of commercial associations does not have a minimum capital requirement for shares when creating a commercial organization in Estonia. It is necessary to have a minimum of two founders to establish an association commercial.

    Branch Office

    Imagine a foreign corporation would like to continue to sell goods and services to the Estonian market under its name. In that scenario, you have the option to incorporate the company as a branch. It is important to note that a branch does not constitute an independent business entity that is distinct from the parent company. 

    Tax Structure For Company in Estonia

    All businesses which are registered with Estonia must be liable for corporate tax. 

    Taxes like the following are applicable:

    • Corporate Tax to be paid for in Estonia amounts to 20% of profits distributed. However, a lower net efficient rate of 14% is in effect in the event of normal dividends.
    • The rate of Branch Tax is 20 percent in Estonia.
    • The tax on capital gains can be paid at a 20% rate
    • The standard tax rate for VAT is 20 percent. A lower rate of 9 percent applies to certain items. Some items are taxed at 0%, and there are some items for which exemptions have been made available. 

    Advantages of registering a company in Estonia

    The following are some benefits of registering a company in Estonia:

    Tax Benefits 

    Estonia provides a unique method of taxation for company registration in Estonia. One of the advantages that are part of Estonian fiscal system is that the profits made by the business aren’t subject to taxation at the moment of earning. 

    Full Online Registration process

    One of the biggest advantages for entrepreneurs when company registration in Estonia is the complete online registration and administration process provided by the Estonian government. 

    Benefits of a single EU market

    Estonia is also part of a single European Union market which gives the Estonian business with registered name accessibility to the largest economies in the world. The members and their citizens enjoy the advantages of traveling throughout the bloc and reaping the economic benefits with no obstacles. 

    Conducive business environment

    Estonia has always performed very well in the ease-to-do-business indexes (such as the World Bank’s Ease of Doing Business Report) as one of the most favored nations worldwide, offering the right conditions for business to flourish and grow. Estonia is also ranked as the best jurisdiction having the most efficient tax system of the OECD countries.

    Initial stages of registering a Company in Estonia

    To register a company in Estonia all founders must have electronic residency digital ID cards from Estonia as well as Latvian, Belgian or Estonian ID cards as well as Lithuanian as well as Estonian mobile IDs and be individuals who are not public. If the company’s founder doesn’t possess any of these documents, he has to go to a notary public in Estonia to check the validity of these documents.

    This is the process to be an e-resident in Estonia:

    • A web-based application: The applicant has to fill out an online form and pay for the application fee which could range from EUR100 to EUR120. 
    • Picking the appropriate service: If the board of management is not located in Estonia, the management board of the Estonian company is not located in Estonia.
    • Online Registration of a company through the e-Business Register: The applicant must decide on the structure of the company and pay the required state fee of EUR265 for company registration in Estonia.
    • Application for business banking: The applicant needs to apply for commercial banking through Fintech partners who will handle all financial needs of the business.
    • Network worldwide: When you join the community of e-residents, the applicant can access the worldwide network of the e-resident community. This allows them to increase their business’s reach.

    Conclusion

    When choosing a location to establish your business there are a lot of things to think about. Estonia offers an appropriate amount of resources, which makes it an excellent choice for people whose businesses are in a blueprint phase. Estonia has low taxes and is an international digital leader and is simple to conduct business in.

    Additionally, Company registration in Estonia allows the establishment of a legally-enforceable entity within the EU which makes it much easier for you to start a business.

    If you want to register a company in Estonia, contact our business formation experts from OnDemand International. Our business formation specialists can help you register a company in Estonia without having to go through any difficult processes because they have experience in business establishment across the globe.

    FAQs

    What is the cost to establish a business in Estonia?

    The cost of state registration for incorporation of a company within Estonia costs EUR265. The fee is payable by Estonia’s e-Business Registry of Estonia at the time of the online registration of the company.

    How long does it require to establish a business in Estonia?

    It usually takes 3 to 5 weeks to create a business in Estonia.

    Do Estonian firms require resident directors?

    There isn’t a requirement to choose the position of resident director. The only requirement is to choose a local service provider to manage correspondence on behalf of the business.

    Do I have to go to the Estonia Business Registry to incorporate my business?

    The company registration process through Estonia Business Registry can be completed online, without the need to physically be in the office. The founders of the company must have their Estonian E-resident ID at the time of company registration.

    How many members and founders are required to sign up for the Estonian Public Limited Company (AS)?

    The Estonia Public Limited Company (AS) should be registered with at least one founding member and at least 3 persons of the supervisory board when it is time to register

    Are there any minimum capital requirements for business formation in Estonia?

    The minimum share capital needed in a private-liability corporation (OU) for Estonia amounts to EUR2,500. The capital required for the registration of a public limited corporation (AS) can be as high as EUR25,000.

    Which is the most efficient kind of business in Estonia?

    The most effective option for registration of a company in Estonia would be a Private Limited Company (OU) since this form of business offers the advantage of limiting liability for the founders equal to the shares of capital that are invested in the company. The tax structure is advantageous for foreign investors as compared to sole proprietorship businesses.