The Ultimate Guide to Incorporating Your Company in Estonia

Incorporating your business as a legal entity is a necessary step for many startups. In some cases, it can even be a prerequisite for receiving grants or other funding. However, incorporating your company in another country also has several advantages. If you’re thinking about incorporating your company in Estonia, this guide will walk you through the pros and cons of doing so, the different ways to incorporate, and the key considerations for finalizing your decision. We’ll also provide details on the different types of companies that are available and the steps you need to take to incorporate your business as one of them.

What Are the Advantages of Incorporating Your Company in Estonia?

One of the main reasons to incorporate in Estonia is the benefits it offers to early-stage startups. If you plan to raise funding from venture capitalists or private equity investors, you will likely be asked to sign a shareholders’ agreement. The shareholders’ agreement is a contract between the shareholders that outlines their rights and responsibilities. If you decide to incorporate in Estonia, you will be able to sign shareholders’ agreements with your investors quickly and easily. This is because Estonia’s laws are very friendly toward shareholders and do not require a complicated contract between shareholders and the company. Most other countries’ laws make it very difficult for shareholders to be bound by their agreement with the company.

How to Incorporate Your Company in Estonia

If you are still convinced that Estonia is the right place to incorporate your company, you will need to follow these steps to get it done: – Choose a Name – Your first step is to pick a name for your company. You will want to make sure that the name you choose is not already in use by another company. You can do this by searching the name on the internet, checking the Estonian government business register, or hiring a trademark attorney. – Register the Company Name – Once you’ve found a name that is not already in use, you need to register it. You can do this by filing a name reservation application with the Estonian Companies Registration Office (ECRO). This can be done online, and once your application is accepted, you can use the company name immediately. – Open a Bank Account – Next, you need to open a bank account for your company. You can open an account at any Estonian bank, but some banks are better for startups than others. A good choice for a startup account is a SEB account, as this bank specializes in serving startups and entrepreneurs. – Obtain an Employer Identification Number – You need an Employer Identification Number (EIN) from the IRS before you can open your Estonian bank account. Your EIN can be obtained online, by phone, or by mailing in a paper application. – Apply for a Tax Identification Number – You also need a Tax Identification Number (TIN) from the Estonian Tax and Customs Board. You can get your TIN online by filling out an application. – Create Shareholders Agreements – Next, you will need to finalize your shareholders’ agreements. To do this, you need to list the names and percentages of the ownership of each shareholder and any investment partners (if applicable). You will also need to sign your agreement in front of a notary and send it to the ECRO for filing. – Apply for Business Registration and Employer Health Insurance – You also need to apply for business registration and employer health insurance. You can do this online or at any Estonian police station. – Open a Commercial Bank Account – You will need to open a commercial bank account for your company and have your EIN and TIN handy.

  • Obtain Commercial Insurance – You need to obtain commercial insurance to cover your business’s liability. You can obtain commercial insurance online at any insurance company. – Make a Profit and Loss Statement – You also need to create a profit and loss statement for your company. You can create one online with Quickbooks or Google Sheets.

Key Considerations When Deciding to Incorporate in Estonia

As with any business decision, there are several key factors that you should consider before deciding to incorporate your company in Estonia. These include the tax and regulatory environment, the ease of incorporating there, the cost of setting up and maintaining your company, and whether there are any other reputational or financial benefits to incorporating in Estonia. – Tax and Regulatory Environment – The first and most important thing to consider is the tax and regulatory environment in Estonia. This can vary significantly depending on the type of company you choose. – Ease of Incorporating – Another important factor is the ease of incorporating in Estonia. While it may seem complicated, you can complete the process in a few days. – Cost – How much it costs to set up and maintain your company is another important factor to consider. Although it will vary based on the type of company you choose, it is generally less expensive to set up and run a company in Estonia than it is in many other countries. – Reputational and Financial Benefits – Finally, you should consider any reputational and financial benefits that may come with incorporating in Estonia. For example, investors may see your company as more credible or trustworthy if it is incorporated in the EU because it is subject to the same regulations as businesses in other EU countries. Additionally, some investors may be more likely to invest in your
business if it is based in the EU.

Company Types in Estonia

There are several types of companies that you can incorporate in Estonia. The type you choose will determine the amount of taxes you have to pay, the ease with which you can raise money, etc. – Private Limited Liability Company (Osaühing) – A private limited liability company is the most common type of company in Estonia. This type of company (often abbreviated as OÜ) is owned by one or more individuals who are called shareholders. The shareholders are responsible for the company’s debts and other obligations. – Public Limited Company (Aktsiaselts) – A public limited company (often abbreviated as AS) is a company whose shares are offered to the public. This means that any person can buy shares in and own a portion of the company.

Bottom Line

Incorporating your company in Estonia can be a great decision for many companies. In addition to being a low-cost option, Estonia offers several benefits to early-stage startups, such as a low tax rate and flexible shareholder agreements. If you’re thinking about incorporating your company in Estonia, make sure to consider the tax and regulatory environment, the ease of incorporating there, the cost of setting up and maintaining your company, and any reputational and financial benefits that may come with it before deciding to go ahead with the decision.