How To Register a Company in Estonia

Estonia is one of Europe’s smallest countries which is located at the shores of the Baltic sea. Estonia’s economy is the 7th freest in the 2022 index having several industrial sectors such as engineering, textiles, telecommunications, electronics and so on.

The country is one of the business-friendly countries in the world with a low flat-rate income taxation, freedom for foreigners which allows them to own businesses and land in the country. Estonia is considered to be a very good place to start a company.

Before registering a company in Estonia, you will first need to consider choosing a business structure for your company. Business structures are carefully chosen depending on the niche you are operating in. These structures determine the limited liability the owners and shareholders of the company benefit from.

Here are the five forms of business structures on Estonia

This is the most common business structure for both Estonian residents and E-residents. This type of company has its capital share divided into private limited company shares. The capital share must be at least €2,500. In a private limited company, the shareholders’ liability is limited to their paid and unpaid share capital.

This type of business structure has the highest minimum capital requirements. In this company, a wide number of shareholders can be appointed as there is no maximum number for shareholders.

The shareholders do not have any liability for the company’s obligations. The minimum share capital must be at least €25,000 and must be registered in the Estonian Central Register of Securities.

This type of company structure consists of two or more partners who have joint and full liability for any incurred debts in the company. There is no required minimum capital.

This is similar to the general partnerships and the limited liability company. This type of structure consists of both the general and limited partners.

While the general partners are entitled to manage the company’s operation and bear unlimited liability for the company’s debts, the limited partners are not obligated to manage the operations of the company and they enjoy limited liability which extends to only the deposited share capital.

This is a commonly used legal structure for foreign companies looking to expand their business footprint into Estonia. The Estonian law requires that a resident director is appointed. All debts incurred by the branch company are directed to the parent company.

Now that you are aware of the different business structures used in Estonia, you can now proceed with the Company Registration.

Before you begin your company registration, it is mandatory that you decide on the appropriate legal structure that suits your business. In most cases, a private limited company is the most commonly used business structure as it offers ease of incorporation, continuity and offers protection from personal liability.

In order to choose the appropriate legal structure, it is advisable to put the company’s activity, tax obligations and the nationalities of shareholders and directors into consideration to help guide you.

The company name you intend to use has to meet certain criteria in order for it to be approved. The criterias are uniqueness, meaning and lack of obscene words. Your proposed name should be unique to only your company. That is, the name you choose must not be used by another company. It should be meaningful,  it should give a clear description of what goods and services you are selling.

It should also be short, simple, easy to spell and remember. It should not contain words that are absurd or offensive. You can only make use of Latin characters. It is advisable to choose at least three names to give you a better chance of having at least one of them approved and prevents delay to the registration

After deciding on the company name. You can also verify that no other company bears the name you have chosen by conducting a name search on the Estonia Company Registration portal. This also limits delay to the registration. The proposed name should be submitted to the Estonian company registrar, the Centre of Registers and Information system for approval.

The next step in company registration is to have a registered office address in Estonia and a local contact person. A local contact person is simply an individual appointed by the owner of a company to be available 24-hours a day and seven days a week for the purpose of responding in-person within 30-minutes to complaints regarding the condition and conduct of the occupants of the building and taking necessary actions to resolve any complaints.

The local contact person may be the owner or the owner’s agent.

In Estonia, you can easily register your company in two ways. Either through a notary whereby the notary helps you submit your Estonian company registration document on your behalf, or through an online portal.

-Registration through an online portal. This registration will require the individual to possess an Estonian identification number or an E-residents card. Estonian online company registration makes use of the Estonian e-business Register. This is an advanced tool that helps entrepreneurs to easily register new businesses online without going to any official body.

The e-residency card allows non-Estonian citizens to gain access to the e-Business register and make use of digital solutions when establishing a company in Estonia.

Along with the Estonian identification card or the e-residency card, you are to attach other required documents such as the completed article of association and a document that specifies the nature of the company’s activities and its main source of income.

-Company registration through a Notary.

Company registration through a notary takes 2-3 days. The following are the steps taken during registration through a notary.

1. The founders must meet the notary. A notary is an authorized individual that performs certain legal formalities such as verification of company documents, and verification of identity and signature.

2. The notary will then prepare the required documents which are: an application for company establishment, the articles of association and the memorandum of association. However, the Notary offices usually provide applicant companies with the sample of the required documents.

3. The founders will open an Estonian corporate bank account in the company’s name and deposit the share capital. Also a bank statement confirming the deposit of the share capital should be forwarded to the notary.

4. Payment of the notary fee and state fee by the founder. Then the notary forwards the application and all essential documents to the Commercial Register.

After the company registration has been approved, the next step is to open an Estonian corporate bank account. You can as well choose to open any bank account within the jurisdictions of the European Economic Area. The corporate bank account is where the contributed share capital of the company is deposited into. This can be done in installments or at once.

Firms can opt to make use of a fintech company. Financial Technology (fintech) is simply a new technology designed to help companies, business owners and consumers manage and utilize their financial operations, processes and lives. With the use of special software and algorithms that are commonly used on smartphones and computers.

After the capital share has been deposited, proof of payment is necessary which will be submitted to the Estonian Business Register for verification. The bank statement should be in Estonian and be properly signed or notarized.

The accounting standards in Estonia are mainly defined by the Accounting Act of the Republic of Estonia and the guidelines are issued by the Accounting Board of the Republic of Estonia. Annual reports are to be submitted to the Estonian Business Register within six months after the end of the financial year.

Taxes are levied only on distributed profits at a rate of 14% to 20%. This depends on how the dividends are paid. Dividend is a share of profits and retained earnings that a company pays out to its shareholders and owners. However, profits that are reinvested back into the company will not be taxed.

Note that a separate registration for tax is not required as your tax identification number will be provided during your company registration. However, you will need to create an e-services account using the Estonian tax number.

This grants you online access to the e-Tax and e-Customs portal. This portal aids you in the registration of the company, register your employees in the employment register, pay and submit your Value Added Tax.

One main advantage of registering your company in Estonia is income tax. The Estonian corporate tax system allows companies to reinvest their profit back into the company without being taxed.