So, you have made up your mind and decided to start a business in Estonia and you are about to register a company here. But then you realize that there are actually many different forms in which you can do that. 

Should you register a branch of your existing company or start a new one? What is the difference between a private limited company (OÜ) and a public limited company (AS)? Is there a specific type for solopreneurs or freelancers?

You have come to the right place. In this article, we are going to give you an overview of all the different company types that are used in Estonia.

The main legal business forms in Estonia are:

• Private limited company (OÜ)
• Public limited company (AS)
• General partnership (TÜ)
• Limited partnership (UÜ)
• Branch of a foreign company
• Sole proprietorship (FIE)
• Non-profit organization (NPO/MTÜ)
• Commercial association (ühistu)

So, let’s have a more detailed look at some of the most common options.

Private limited company (OÜ) – the most popular company type in Estonia

Usually, the most popular choice while registering a new company is a private limited company (OÜ). 

What to keep in mind when founding an OÜ in Estonia?

Minimum share capital is 0,1€. The amount of initial capital is decided by the founders depending on the capitalization needs of the company. Capital must be paid and declared in tax office upon registration of the company. Shareholders’ personally liability is limited to the amount on their capital contribution.

The management board must include at least one person. This means that you personally can be the management board. As many countries require at least two persons to be on the management board or at least one of the directors to be local, this easy rule makes it much easier to start a business in Estonia. Therefore, many companies in Estonia (especially those that are founded by e-Residents) have only one board member and employee, the e-resident himself/herself! That’s why an OÜ is the perfect choice for the freelancers and digital nomads as well! 

OÜ is a perfect choice when setting up a small or medium-sized business as an e-resident or non-resident. Here you can also find a full guide to starting a business in Estonia that is focused on starting an OÜ.

Main facts about the private limited company (OÜ):

• The minimum share capital is 0,1 €.
• Liability is limited to the share capital that was paid into the company.
• Board must include at least 1 person and there are no special requirements for that person.
• Accounting requirements depend on the activities of the company. If the company registers a VAT number or pays salaries to employees, monthly accounting is necessary. If not, the accounting can be done once a year with an annual report.

Public limited company (AS) – for more serious business

Public limited company (AS) in Estonia is a company type and option for one or more either natural or legal persons, usually with a share subscription (but also possible without a share subscription). 

Similarly with the OÜ, the shareholders are not personally liable for the obligations of the company. For the public limited company, the minimum share capital is 25 000 € and it must have a management board and a supervisory board. 

The AS is a good option when you have multiple shareholders or investors or if you want to register a larger corporation by going public.

Main facts about the public limited company (AS):

• The minimum share capital is 25 000 €.
• Liability is limited to the share capital that was paid into the company.
• In addition to a regular management board, it requires a supervisory board (consisting of 3 members who are elected by the shareholders) and an auditor.
• Monthly accounting is mandatory.

General partnership (TÜ) and Limited partnership (UÜ)

A general partnership is a specific type of company between two or more partners. They operate under a common business name and are solidarily liable for the obligations with all of their assets. Unlike an OÜ or AS there is no minimum share capital.

The limited partnership works in a similar way as TÜ, but unlike a TÜ, there are two types of partners. A general partner is liable for the obligations, while a limited partners’ obligations are limited to their share capital deposit only. 

These company types are less common and are used only in very specific circumstances.

Main facts about the general partnership (TÜ) and limited partnership (UÜ):

• No minimum share capital.
• The members are personally liable for the obligations.
• Consists of partners – either equal (TÜ) or not equal (UÜ).

Branch of a foreign company

As always when expanding to foreign countries, it’s possible to register a branch in Estonia and run your business through it. Of course, that means you have to have an existing company in your home country (or any other country). 

If you intend to offer services or sell goods in Estonia on a permanent basis and you plan to do it with your foreign company, you have to register the company as an official branch. 

As with any other company type, you can establish the branch digitally if you have an e-residency card. If not, you can come to Estonia and do it in person or you can appoint a lawyer to officially act on your behalf if you do not wish to travel to Estonia. 

Main facts about a branch of a foreign company in Estonia:

• Share capital is not needed.
• It’s not a separate legal entity, therefore the main company is liable for its obligations.
• Board must consist of a separate director or directors of the branch.
• The main company must maintain separate bookkeeping accounts for the branch.

Sole proprietorship (FIE) – not the best option for foreign entrepreneurs

Sole proprietors are persons who are offering their services or goods under their own personal name and are not legal entities. It however creates a different taxation system for these persons and therefore it is not a good option for foreign entrepreneurs and e-residents. 

Even if this option seems appropriate for freelancers it’s actually not because sole proprietors are fully liable for any obligations and the tax logic behind this option is not suitable to foreigners. Solopreneurs and freelancers have much more to win from establishing a one-man private limited company (OÜ).

Main facts about sole proprietorship (FIE):

• Share capital is not needed.
• The person is personally liable for the obligations.
• No shareholders and no board.
• Accounting requirements depend on the activities exactly as with an OÜ. If the FIE registers a VAT number or pays salaries, monthly accounting is necessary. If not, the accounting can be done once a year with an annual report.

Non-profit organization (NPO/MTÜ)

With a non-profit organization, the main goal can’t be to earn profit, therefore the taxation applying to NPO’s is a bit different. Overall, a non-profit organization works similarly to a private limited company (OÜ), meaning that it can still hire employees, open a bank account, and have expenses. But it can’t distribute profits amongst its members. 

Also, with this type of company, there’s an extra requirement – at least half of the board members must reside in Estonia, Switzerland, or EEA. Non-profit organizations are regulated by the official Non-profit Associations Act.

In conclusion about company types in Estonia – choose the right one!

Although there are many different Estonian company types, you can be sure that a private limited company (OÜ) is a safe and right choice in 90% of the cases. 

But if the nature of your business is more complicated and you are not sure which company type would be the best for your business, there’s always an option to order a legal consultation and let a local professional take a look at your case.

In case you have found your answers, just follow these easy steps to register your company in Estonia.