What business form should I choose?

Posted April 24, 2017

The most common business forms in Estonia are

a private limited company (OÜ),
a joint-stock company (AS)
and a sole proprietor (FIE).

OÜ

Set up: At the notary or online.
Founders: One or several persons, both legal entities and individuals, including residents of foreign countries.
The amount of set up state fee: EUR 350 or 250.
Articles of association: Required.
Liability: Limited, shareholders incur liabilities of the company within their contributions to the share capital (but not less then 2500 euro).
Share capital: EUR 0,01 and above.
Duty to make capital contribution immediately upon set up: Available.
Accounting procedures: Accounting records should be maintained under the principle of accrual method, that recognizes income when it is earned (for example, when the terms of a contract are fulfilled) and expenses when they are incurred. There is need in organizing the accounting procedures.
Annual financial statements: Annual report for the business year.
Performance results: In 2025, company profits are not subject to taxation, meaning the tax rate is 0%. Distributed dividends are taxed at a rate of 28.20% (22/78). Between 2026 and 2028, a 2% security tax will be introduced, which will be levied on profits before taxation.

FIE

Set up: At the notary or online.
Founder: Resident individual of Estonia.
The amount of set up state fee: EUR 50.
Articles of association: None.
Liability: Unlimited liability within their personal property.
Share capital: No capital.
Duty to make capital contribution immediately upon set up: No capital.
Accounting procedures: There is no need for accounting procedures pending receipt of VAT (KMKR) number and prior to employment. Accounting may be maintained by cash-basis method, that recognizes income when it is received and expenses when they are paid for.
Annual financial statements: Costs and revenues return once a year.
Performance results: The result of entrepreneurship is subject to taxes at rates of 33% and 22%. If the second pension pillar is activated, contributions to the pension fund amount to 2%, 4%, or 6%. Between 2026 and 2028, a 2% security tax will be introduced.

AS

Set up: At the notary.
Founders: One or several persons, both legal entities and individuals, including residents of foreign countries.
The amount of set up state fee: EUR 250.
Articles of association: Required.
Liability: Shareholders incur liabilities of the company within their contributions to the authorized capital.
Share capital: EUR 25,000 and above, with shares registered in the Estonian Central Register of Securities.
Duty to make capital contribution immediately upon set up: Available.
Accounting procedures: Accounting records should be maintained under the principle of accrual method, that recognizes income when it is earned (for example, when the terms of a contract are fulfilled) and expenses when they are incurred. There is need in organizing the accounting procedures.
Annual financial statements: Annual statements for the business year, the audit is mandatory for joint-stock companies (AS), which have more than two shareholders.
Performance results: In 2025, company profits are not subject to taxation, meaning the tax rate is 0%. Distributed dividends are taxed at a rate of 28.20% (22/78). Between 2026 and 2028, a 2% security tax will be introduced, which will be levied on profits before taxation.

Can you not decide which business form to choose? Come to us for a consultation!