The first stage in establishing a company is selecting the form of business. The primary forms of business in Estonia are private limited company (OÜ), public limited company (AS) and sole proprietor (FIE). Deciding which type of business to set up depends on the business area of activity and related risks.
E-residents and non-residents are allowed to establish all forms of business. The most common form of business preferred by non-residents is private limited company. The moment you establish your private limited company and it is registered in the Central Commercial Register, the established company becomes tax resident in Estonia. This differs from sole traders who are obliged to apply for tax residency at the local tax department.
When selecting the type of business to set up, we recommend taking into account the liability of owners including any representatives. Private limited company, public limited company and commercial association owners and shareholders are not personally liable for any obligations of the company whereas not-for-profit association and limited partnership owners are jointly and severally responsible for any breaches of obligations.
With responsibility comes the right to represent the company. Private limited company, public limited company and non-profit association are all represented by board members. How the company is represented will be agreed in the article of association.
Comparison of different forms of business
|Trading partnership||Limited partnership||Private limited liability company||Public limited liability company||Commercial association|
|Number of owners||At least 2 natural or legal persons||At least 1 general partner and 1 limited partner, natural or legal persons||At least 1 natural or legal person||At least 1 natural or legal person||At least 2 natural or legal persons|
|Liability of owners||Partners are liable||General partner is liable with all assets. Limited partner is liable to the extent of the capital contribution.||Liability is limited to the capital contribution||Liability is limited to the capital contribution||No personal liability|
|Capital||According to the partnership agreement||According to the partnership agreement||At least 2500 EUR||At least 25000 EUR||At least 2500 EUR|
|Representative||Partners||General partner||Management board. At least 1 member.||Management board. At least 1 member.||Management board. At least 1 member.|
|Accounting||Annual report. Audit in certain cases||Annual report.||Annual report. Audit in certain cases||Annual report. Audit in certain cases||Annual report. Audit or internal audit|
|Distribution of profits||According to the partnership agreement||According to the partnership agreement||According to the holding or articles of association||According to the holding or articles of association||According to the articles of association|
Other forms of business
|Non-profit Association||Sole trader|
|Number of owners||At least 2 natural or legal persons||1 natural person|
|Liability of owners||According to the articles of association||Sole trader is liable|
|Representative||Management board. At least 1 member.||Sole trader|
|Accounting||Annual report. Audit in certain cases||Income tax return once a year|
|Distribution of profits||Upon liquidation of a non-profit association, the liquidation proceeds are paid out to the members according to the articles of association||Normally only to
the business owner