How to incorporate a legal entity in Estonia?

Trisha Banya
Aug 23, 2022
1 min read

Updated: Sep 30, 2022

15 minutes and 33 seconds.

That is how long it takes to start a business in Estonia from scratch. Estonia currently holds the world record for incorporating a company the fastest. The general ease of the procedure, time and cost of incorporating a business in Estonia is unparalleled as 98% of all companies in Estonia can be established online from anywhere in the world. In Europe, Estonia also ranks as

#1 in unicorns per capita,

#1 in VC investments per capita,

#1 in companies registered per capita and

#1 in OECD tax competitiveness.

Incorporating a company in Estonia is an excellent way to access the European market or operate globally with less friction. Here are the steps you need to take to incorporate your Estonian company online.

PART 1: WHAT YOU NEED TO KNOW BEFORE YOU START YOUR BUSINESS

STEP 1: Identification

What kind of Identification Document do you have? The first step is to check what kind of digital identity you have that will allow you to incorporate a company online. Who can incorporate an Estonian company online? 1. 'I have an have an Estonian ID card.' If you have an Estonian ID card then you can easily use the online Company Portal at www.rik.ee to incorporate an Estonian company online. 2. 'I have an Estonian e-residency card.' You can also incorporate an Estonian company online through the online Company Portal if you have an Estonian e-residency card. To learn more about how to be an Estonian e-resident, check out this article here 3. 'I hold an ID card from Finland, Latvia or Belgium.' Estonia is great at encouraging entrepreneurship regionally. Therefore, if you have a Finnish, Latvian or Belgian ID-card or Smart-ID you can incorporate an Estonian company and compile online Company Portal applications yourself. However, kindly note that these applications can only be signed using Estonian, Latvian ID-cards or Estonian, Lithuanian Mobile-ID. Unfortunately it is not currently possible to sign these applications using the Finnish ID card, as these are not considered to have the same security level as Estonian ID-cards. 4. 'I don’t have any of the two ID cards.' If you do not have any of the digital identities listed above, you are not left out. You can still register an Estonian company online through a third-party service provider. The service provider can start a shell company online and then transfer this to you. This is a quick and easy process. An appropriate third party provider can be found on the e-resident marketplaces here. OR Alternatively, if you do not want to exercise any of the above options of digital incorporation, you could physically visit a notary public in Estonia to help you prepare and submit your application to incorporate an Estonian company in the analogue way. If you do not want to physically travel to Estonia to visit a notary, you can appoint someone to do this process for you. In the analogue alternative there are additional costs involved such as a legal fee for the drafting of the power of attorney, courier fees, translation fees, notary fees, etc.

STEP 2: Legal Form of the Business

What form of a business would you like to incorporate?

There are various forms of business entities available in Estonia. The form of a business entity you choose to register depends on the kinds of business activity you want to conduct.

Private limited liability company (osaühing, OÜ)

The is by far the most common company form registered in Estonia. One reason why it is preferred is because of the benefit of limited liability of the founders and shareholders. Limited liability company in essence means that the company becomes a separate legal person under the law after it is registered. This means that in case the company fails or faces financial challenges your personal assets or property as a shareholder or founder are not threatened by company´s debts. The company is regarded as a separate person under the law, distinct from you as a shareholder or a founder. Only if you have unpaid share capital, you personally have legal responsibility for the debts of the company limited to the amount of share capital contribution you as a founder have not paid. If you have already paid in the share capital in full, then in general you will not be liable for the company´s debts. This company form is appropriate for almost any type of for-profit businesses.

2. Public limited liability company (aktsiaselts, AS)

A public limited company is another common form of business. It is similar to the private limited company, in that, limited liability also exists for the shareholders. However, in public limited companies there is there is generally no restriction on who can own shares in the company. Public companies usually do not have control over who can buy and sell shares in their company. This company form is good for large established businesses that have the resources to meet and maintain the regulatory requirements of going public. It is also good for companies wishing to raise capital by listing on the stock exchange.

STEP 3: Choose the Business name

What will your company be called?

The next step is to choose your business name under which the company will operate. Your business name should be distinct and should not match any of those already registered in the Company Portal. You can use the free online search tool on the online Company Portal to find out if your preferred business name is available for registration. If it is available then this is great news, and you can proceed to the next step! If it is not available, you may have to choose a different business name instead. In case the preferred business name is registered as someone else´s trademark you can also check the Nice classes in which the trademark is registered and in case there is no match with your area of activity you may still try to register the referred business name by simply adapting the business name slightly by adding additional words to the initial preferred choice.

STEP 4: Get an address for your business

Where will your business be situated?

You need a Legal Address in Estonia to start your company. If you already have a physical address in Estonia, you could use this. However, if do not have one, then you can use a virtual address. A virtual legal address costs between 30-150 EUR/month approximately. Service providers can be found at the e-residency marketplace here

STEP 5: Shareholders and Management Board

Who are your shareholders and Management Board Members?

If you are starting a private limited company, you need at least one shareholder and one management board member. Management Board members may also be shareholders in the company, but they do not have to be.

If at least half of your management board members do not reside in Estonia, then you are also required to give a contact name and address in Estonia.

STEP 6: Share Capital Contribution

How much do you have to contribute as a shareholder? If you are starting a private limited company, your total share capital contribution should be minimum 2500 euros. If you decide on a company share capital of less than 25,000 euros and you are a private individual, then you can choose not to pay this the share capital contribution upfront when establishing the company but postpone this payment. However, you will still be responsible for your share of the amount.

Once you’ve determined all the 6 steps, you are now ready to go through the registration process. See this PART II to guide you if you are opening a company online by yourself. If you are using a third-party provider, please see the options available here

A visual and explainer video can be seen below: