Setting up a company in Estonia
According to the commercial code, there are six forms of business entities in Estonia:
As per the Estonian Commercial Code, there are 6 forms of business entities available in Estonia, each with its own unique characteristics.
Foreign investors are accorded the same rights and responsibilities as local entrepreneurs when it comes to establishing a business in the Republic of Estonia.
Here are the primary types of business entities and their key attributes:
Private Limited Liability Company (OÜ):
To avoid plagiarism, here’s a rephrased version of the text about setting up a private limited liability company in Denmark:
Equity Capital
When establishing a private limited liability company in Denmark, a minimum share capital of EUR 2500 is required. There are three ways to contribute to the share capital:
- A monetary contribution, which involves providing 100% of the capital in cash. The disadvantage is that the funds are temporarily locked for one week.
- A 100% non-monetary contribution, where the contribution can be in the form of property or a pecuniary right appraisable in monetary terms and transferable to the company, subject to appraisal by an auditor.
- More than half (EUR 1251) in cash and the remaining (EUR 1249) through a non-monetary contribution. In this case, an auditor’s appraisal is not required.
It’s important to note that shares of a private limited liability company in Denmark cannot be sold to the public.
Founders
A private limited liability company in Denmark can be founded by one or more individuals or legal entities, and these founders can be residents or non-residents of Denmark. Incorporation documents must be signed before a notary, and the presence of all founders and board members is required.
Liability
The founders or shareholders of a private limited liability company in Denmark are not personally liable for the company’s obligations. Each shareholder’s liability is limited to their respective contributions. The company is liable for its obligations with all its assets.
Status
A private limited liability company in Denmark is recognized as a legal entity.
Management Body
Every company in Denmark must have a management board, which serves as the governing body representing and directing the company. The board may consist of one or more directors, who must be natural persons. Shareholdership is not a prerequisite for becoming a member of the management board. At least 50% of the board members must be residents of the European Union, Switzerland, Norway, Iceland, or Liechtenstein.
If the share capital exceeds EUR 25,000, the management board must be complemented by a supervisory board or as specified in the company’s articles of association.
Accounting
Monthly accounting is mandatory for companies with a VAT ID or regular salary payments. Otherwise, it suffices to submit annual reports once a year, no later than six months after the end of the fiscal year.
Audit
Audit requirements apply if the registered share capital surpasses EUR 25,000. Otherwise, an audit is necessary if at least two of the following conditions are met:
- The annual turnover exceeds approximately EUR 650,000.
- The balance sheet total exceeds EUR 330,000.
- The company employs 10 or more individuals.
Public Limited Liability Company (AS) or Joint Stock Company
Equity Capital
The required minimum share capital for a public limited liability company is EUR 25,000. Equity capital can be contributed in the form of both cash and property. This capital is divided into shares, which can be publicly traded or offered for sale. Shares must be registered and recorded in the Estonian Central Register of Securities. The rights associated with registered shares are conferred upon the individual listed as the shareholder in the share register.
Founder
One or more individuals or legal entities can serve as the founder(s) or shareholder(s) of a public limited liability company in Estonia. These founders can be either residents or non-residents of the Republic of Estonia.
Status
A public limited liability company is legally recognized as a distinct entity.
Liability
The founder(s) or shareholder(s) of a public limited liability company in Estonia are not personally responsible for the company’s obligations. The company itself is liable for fulfilling its obligations with all of its assets.
Management Structure
A public limited company in Estonia is required to have both a management board and a supervisory board. The management board functions as the directing body representing and managing the company. Membership on the management board does not necessitate being a shareholder, and it can comprise one or more directors who must be natural persons. The supervisory board’s members must not be part of the management board, and at least 50% of the management board members must be residents of the European Union, Switzerland, Norway, Iceland, or Liechtenstein.
The supervisory board is responsible for planning the company’s activities, overseeing its management, and reporting the results of its review to the general meeting. It also issues instructions to the management board for the organization of the company. Typically, the supervisory board consists of three members, unless the Articles of Association specify a greater number.
Audit
Mandatory appointment of an auditor is required for the company.
General Partnership (TÜ) or Limited Partnership (UÜ)
Equity Capital
There is no specific minimum capital requirement. In a limited partnership, profits are distributed among members based on their respective contributions, similar to how it operates in a general partnership.
Founders
A limited partnership is formed by two or more individuals or legal entities who come together for business purposes.
Status
Both types of partnerships are legally recognized entities.
Liability
In the case of a general partnership, the partners bear joint and several liability for the partnership’s debts and obligations. As general partners, they hold full responsibility for managing the company.
In a limited partnership, there is at least one general partner who assumes the responsibility for managing the partnership and bears unlimited liability for the company’s losses. Additionally, there must be at least one limited partner whose liability is limited to the extent of their contribution, and they do not partake in the management of the company.
For both general partnerships and limited partnerships, it is essential to have a formal agreement among the partners.
Sole Proprietorship (FIE)
Equity Capital: No minimum capital requirement.
Founder: Sole proprietors can be individuals, either residents or non-residents of Estonia.
Liability: Sole proprietorships have unlimited liability for business debts.
Branch of a Foreign Company
- A branch operates as an independent part of a foreign enterprise in Estonia, representing the foreign company’s interests.
- Management Body: A director must be appointed, with at least one director being a resident of certain countries.
Each business entity type has specific legal and economic implications. Therefore, it is crucial to carefully consider your business objectives and needs before selecting the most appropriate form for your venture.
Registration with the Commercial Register of Estonia is a prerequisite for commencing business operations in Estonia.
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