Establishing a company in Estonia – legal types of entities
According to the commercial code, there are six forms of business entities in Estonia:
Private Limited Company (OÜ)
Public Limited Company (AS)
Branch of a foreign company
Prior to establishing an enterprise, it is essential to assess and choose the type of an undertaking which is the most appropriate for you in legal and economic terms. This choice will affect not only the amount of necessary equity capital, but also the legal status of the enterprise and other business-related issues.
It is mandatory to register the company with the Commercial Register of Estonia in order to commence business and operate in Estonia.
Private limited liability company (OÜ)
Equity capital
When establishing a private limited liability company, the minimum share capital is EUR 2500. The share capital contribution may be done by three different ways:
- Monetary contribution (100% in cash). Disadvantage is your “money frozen” for 1 week. 100% non-monetary contribution. A non-monetary contribution may be a whatsoever property or pecuniary right appraisable in money and transferable to the public limited company to which a claim may be subjected. Appraisal by an auditor is required.
- More than one-half (EUR 1251) in cash and the remaining (EUR 1249) by a non-monetary contribution. In such a case no auditor’s appraisal is required.
The private limited liability company in Estonia may not sell its shares to public.
Founders
One or more persons can be the founder/s or shareholder/s of a private limited liability company and they can be both natural persons and legal entities. The founder may be a resident or non-resident of the Republic of Estonia.
Incorporation documents shall be signed before a notary. All founders and Board members are required to be present.
Liability
Status
Management body
A company must have a management board which is a directing body of the private limited company that represents and directs the private limited company. The board consists of one or more directors; directors can be only natural persons. A member of the management board need not be a shareholder. At least 50% of board members of the management board must be residents of the European Union, Switzerland, Norway, Iceland, or Liechtenstein.
A private limited company must have a supervisory board, if the share capital is greater than EUR 25,000 the management board has less than three members, or if prescribed by the articles of association of the private limited company.
Accounting
Audit
- annual turnover exceeds about EUR 650 000
- balance sheet total exceeds EUR 330 000
- number of employees is 10 or more
Public Limited Liability Company (AS) or Joint Stock Company
Equity capital
Founder
Status
A public limited liability company is considered a legal entity.
Liability
The founder/s or shareholder/s of a public limited liability company is not personally liable for the obligations of the company. A public limited liability company is liable for the performance of its obligations with all of its assets.
Management body
The supervisory board must plan the activities of the public limited company, organise the management of the public limited company and supervise the activities of the management board. The supervisory board must notify the general meeting of the results of a review. The supervisory board must give orders to the management board for organisation of the management of the public limited company. The supervisory board must have three members unless the Articles of Association prescribe a greater number of members.
Audit
General partnership (TÜ) or Limited partnership (UÜ)
There are two types of partnership in the Republic of Estonia. The main difference is range of liability.
Equity capital
Founders
Status
Liability
At limited partnership one member is a general partner being in charge with the partnership’s management, instead bearing unlimited liability for the company’s losses and at least one limited partner who is liable to the extent of his contribution but does not play any role in the company’s management.
For both general partnerships and limited partnerships, there needs to be an agreement between the partners.
Sole proprietorship (FIE)
A sole proprietor is a form of business that is best suited to those who are going into business alone or with their family.
Equity capital
There is no minimum capital requirement.
Founder
One or more persons can be the founder/-s of a sole proprietorship and they may be a resident or non-resident of the Republic of Estonia.
Liability
Sole proprietorship has unlimited liability for debts incurred in business.
Branch of a foreign company
A branch is an independent unit or part of a foreign undertaking conducting business in the territory of the Republic of Estonia on behalf of the foreign undertaking. A branch is not a separate legal person, and the foreign company will be responsible for the branch’s activities and liable for its obligations.
Management body
A company has to appoint a director or directors for the branch. The place of residence of at least one of the directors must be residents of the European Union, Switzerland, Norway, Iceland, or Liechtenstein.
If more than one director has been appointed for the branch, the branch may generally be represented by any one of them.
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