Estonia Company Registration: Procedure & Benefits Explained

How to Register your Company in Estonia?

• Choose an appropriate name for the business.
• Confirm the availability of the company name you are interested in.
• Establishing the legal office address.
• Submitting a business registration application.
• Create an new a bank account for the firm you have just created.
• Completing the required paperwork for registering a business.

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.

Quick Facts About Company Registration in Estonia

Eligibility Criteria For Estonia Company Registration

The following requirements to register a company in Estonia:

• Registration and Digital ID: Digital ID is required for the initial step to Estonia company registration.
• Legal address and contact information in Estonia is a must.
• Availability of the chosen company name.
• Requirement for banking: A bank account in Estonia must be established to facilitate financial solutions.
• 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.

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. 

1. Apply for e-Residency

What is e-Residency? Estonian e-Residency is a government-issued digital identity available to anyone in the world interested in managing a location-independent business online. It allows for easy access to Estonia’s advanced digital infrastructure.

Steps to Apply:

• Visit the official e-Residency website.
• Complete the online application form, providing necessary identification documents such as a passport copy.
• Pay the state fee (currently €100).
• Wait for the background check to be completed (usually takes about 30 days).
• Once approved, you will receive a notification to collect your e-Residency kit (digital ID card, card reader) from your chosen pick-up location, typically an Estonian embassy or consulate.

2. Choose a Company Name and Check Availability

Choosing a Name:

• Your company name should be unique and comply with Estonian business naming regulations.
• It must include an indicator of the company’s legal form (e.g., OÜ for a private limited company).

Checking Availability:

• Use the e-Business Register to check if your desired company name is available and does not conflict with existing registered names.
• It is advisable to have a few alternative names in case your first choice is unavailable.

3. Obtain a Legal Address and Contact Person

Legal Address:

• A legal address in Estonia is mandatory for your company registration. This can be a physical office or a virtual office address provided by a service provider.

Contact Person:

• If you do not reside in Estonia, you must appoint a local contact person. This person, typically provided by virtual office service providers, will handle official correspondence with Estonian authorities.

Providers:

• Many e-Residency service providers offer packages that include a legal address and contact person services. Popular providers include LeapIN, 1Office, and Xolo.

4. Register Your Company Online at the Company Registration Portal

Using the e-Business Register:

• Visit the Company Registration Portal.
• Log in using your e-Residency digital ID.
• Fill out the online registration form with details such as company name, legal address, contact person, and share capital (minimum €2,500 for a private limited company, though it does not need to be paid up immediately).
• Submit the application and pay the state fee (typically €190).

Processing Time:

• Company registration is usually completed within 1-5 business days.

5. Receive Confirmation

Confirmation Documents:

• Once the registration is complete, you will receive a confirmation email with the company registration code and other relevant documents.
• These documents will be accessible through the e-Business Register portal.

Digital Signatures:

• All company-related documents can be signed digitally using your e-Residency card, ensuring secure and efficient business operations.

6. Open a Bank Account

Choosing a Bank:

• Opening a business bank account is essential for your company’s financial transactions.
• Options include traditional Estonian banks like LHV and SEB, as well as fintech solutions such as Wise, Payoneer, and Holvi, which cater to e-residents.

Application Process:

• Some banks may require a physical visit to Estonia, while others can be done entirely online.
• Prepare necessary documents such as proof of identity, company registration certificate, and a business plan.

Financial Statistics:

• Estonia’s banking sector is highly digitalized, with over 99% of banking transactions conducted online, reflecting the country’s commitment to digital innovation.

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: You must register 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.

Documents Required for Company Registration in Estonia

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

1. The notary will assist in the creation of the documents necessary to register a company in Estonia:
2. Information on the founders of the company: It includes their address, visa information, passports, and any other pertinent information.
3. Memorandum of Association
4. Articles of Association that need to be notarized.
5. Board Resolution (If required)
6. Certificate of payment of an amount to share capital.
7. 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

1. 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.

2. 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. 

3. 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.

4. 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.

5. 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.

6. 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.

7. 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 office. 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.