Set up an LLC in Estonia in 2023
Estonia has emerged as a popular destination for entrepreneurs and investors looking to set up a company in Europe.
The country’s favorable business climate, low bureaucracy, and supportive government policies make it an attractive option for those looking to open a limited liability company in Estonia.
An LLC in Estonia is a flexible and simple legal entity that offers a range of benefits to its owners, including limited liability protection and ease of doing business.
To register a limited liability company in Estonia, certain eligibility criteria must be met. Moreover, the country’s digital infrastructure and e-residency program make it easy for business owners to manage their company affairs remotely from anywhere in the world.
In this article, we will discuss the step-by-step procedure to register a limited liability company in Estonia, the types of legal entities available, the costs involved, and the various taxes that must be paid.
Why register a limited liability company in Estonia?
Intending to register a limited liability company in Estonia has become an increasingly popular option for entrepreneurs and businesses around the world.
Down below are some of the reasons to register a limited liability company in Estonia:
- Estonia has an innovative e-Residency system that permits foreigners to set up and operate a business completely online.
- Registering an LLC in Estonia is relatively straightforward and can be done quickly and easily.
- The setup costs for an LLC in Estonia are fairly low corresponded to other European nations.
- Estonia has a straightforward and fine tax system, with a flat corporate tax rate of 20%.
- Estonia is a member of the European Union, which provides companies registered there with access to the EU market.
Overall, planning to set up an LLC in Estonia provides companies with a range of advantages, making it an appealing choice for investors and enterprises intending to create an existence in Europe.
Step-by-step Procedure to Open a Limited Liability Company in Estonia
Here’s a step-by-step procedure to open a limited liability company in Estonia:
Step 1:- Select a unique name for your company that is not already in use by other firms in Estonia.
Step 2:- You need to prepare the articles of association, along with a copy of the shareholder’s passports and proof of their residence.
Step 3:- You need to have a registered business address in Estonia, and it could be a physical address or a virtual office address.
Step 4:- You can register the company online through the Estonian Business Register’s website.
Step 5:- You will need to pay a state fee of 265 euros for the registration of the company.
Step 6:- You need to register your company for taxes with the Estonian Tax and Customs Board.
Step 7:- Open a bank account for your LLC in Estonia. It can either be done online or by visiting a bank branch.
Keep in mind that the process to open a limited liability company in Estonia can take several weeks to complete, depending on the workload of the authorities and the completeness of the application documents.
Document Required to Set up an LLC in Estonia
Down below are some prominent documents required for LLC incorporation in Estonia:
- Articles of Association, a memorandum of association, and a shareholder resolution.
- The personal identity documents of all shareholders must be provided, including their passports or national ID card.
- The Firm should possess a registered legal address in Estonia, which can be a physical or virtual office.
- At least one director should be appointed who is accountable for the management of the firm.
- The least share capital for an LLC in Estonia is €2,500, which should be deposited in a bank account.
- Certain types of businesses require a license or permit to operate in Estonia.
- A registration application should be presented to the Estonian Commercial Register, along with all required documents and fees.
Eligibility Criteria to Open a Limited Liability Company in Estonia
To open a limited liability company in Estonia, you must meet the following eligibility criteria:
- The firm should possess a minimum of 1 founder who can be an individual or a legal entity.
- You should possess an enlisted office in Estonia where the official mail and documents can be delivered.
- The least share capital needed to set up an LLC in Estonia is €2,500.
- You should appoint a management board of a minimum of 1 member who is answerable for the day-to-day operations of the firm.
- The firm should possess a legal business activity, and it cannot entertain activities that are illegal or unethical.
- The founder(s) should possess legal capacity, which implies they must be at least 18 years old and not be legally incapacitated.
It is important to note that these eligibility criteria may vary based on the legal entity type chosen for LLC incorporation in Estonia.
Type of Legal Entities for LLC Incorporation in Estonia
There are several types of legal entities for LLC incorporation in Estonia, including:
Private Limited Company (OÜ)
This is one of the prominent forms of legal structure in Estonia. It requires a least share capital of €2,500, and its owners have limited liability.
Public Limited Company (AS)
This form of legal structure is suitable for larger businesses and needs a least share capital of €25,000. The owners of a public limited company have limited liability.
Limited Partnership (UÜ)
A limited partnership consists of two types of partners: general partners who manage the business and have unlimited liability, and limited partners who contribute capital but have limited liability.
General Partnership (TÜ)
A general partnership is identical to an LLP, as every member possesses complete liability.
That’s why it is crucial to select a suitable form of legal structure to set up an LLC in Estonia.
Cost to Register a Limited Liability Company in Estonia
The cost to register a limited liability company in Estonia can vary depending on several factors such as legal fees, government fees, and additional services required.
Here is a breakdown of the estimated costs to open a limited liability company in Estonia:
- State fee: The government fee for registering an LLC in Estonia is €265.
- Notary fee: Notary fees can range from €150 to €300, depending on the notary you choose and the complexity of the registration process.
- Legal fees: Legal fees for incorporating an LLC in Estonia can vary depending on the legal firm and services required. The fees can range from €500 to €1,500.
- Virtual office and other services: If you require a virtual office or additional services such as accounting or tax registration, these can add to the overall cost.
Overall, the estimated cost of registering an LLC in Estonia can range from €840 to €2,000 or more, depending on your requirements.
Various Taxes to Set up an LLC in Estonia
When you plan to set up a limited liability company in Estonia, several taxes need to be considered:
Corporate Income Tax: The standard corporate income tax rate in Estonia is 20%. This tax is imposed on the company’s profits and is settled every year.
Value Added Tax (VAT): VAT is applicable on the sale of goods and services in Estonia. The standard VAT rate is 20%, but there are reduced rates of 9% and 0% for certain goods and services.
Social Tax: This tax is levied on the wages paid to employees and is currently set at a rate of 33%. The workers are liable to pay this tax.
Unemployment Insurance Tax: This tax is payable by the employer and is set at a rate of 1.6% of the employee’s gross salary.
Planning to set up an LLC in Estonia can be a smart business move for entrepreneurs looking to expand their operations in Europe. It is also crucial to be aware of the taxes associated with running a business in Estonia, such as corporate income tax and social security contributions. By meeting the eligibility criteria entrepreneurs can establish a strong presence in the European market and take advantage of the country’s growing economy.
If you are even considering registering a Limited liability company in Estonia, you should consult with the business experts of Odint Consultancy to incorporate an LLC in the country.
The least share capital required to set up an LLC in Estonia is €2,500.
Yes, foreigners can open a limited liability company in Estonia. The procedure is identical for Estonian residents.
No, it is not necessary to visit Estonia to register an LLC. The whole process can be completed remotely.
The process for LLC incorporation in Estonia usually takes around 2-3 weeks from the submission of all necessary documents.
Yes, an LLC in Estonia can be used for international business activities. Estonia has a favorable tax system and is a member of the EU, making it an attractive location for conducting business with other EU countries.