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 265 or 200.
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: Intrinsically, the company’s profits for an accounting period is not taxed. The moment of corporate income taxation is shifted until the distribution of profits, for example, in the form of dividends. Dividends distributed suffer a tax of 25% (20/80).

FIE

Set up: At the notary or online.
Founder: Resident individual of Estonia.
The amount of set up state fee: EUR 20.
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 suffers taxes of 33% and 20%.

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 200.
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: Intrinsically, the company’s profits for an accounting period is not taxed. The moment of corporate income taxation is shifted until the distribution of profits, for example, in the form of dividends. Dividends distributed suffer a tax of 25% (20/80).

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