Company Formation in Estonia: Guide for US Entrepreneurs

Company formation in Estonia has become incredibly accessible for American entrepreneurs and expats. Estonia offers a tech-driven environment where you can establish and run a company completely online, even as a non-resident.

To explain Estonia’s appeal, we’ll outline the benefits of the country’s pioneering e-Residency program, walk through the steps to create a company in Estonia, and answer frequently asked questions about the process. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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Why Start a Business in Estonia?

So, what is it about Estonia that hails it as one of the most entrepreneur-friendly countries? There isn’t just one motive.

Here’s a quick overview of some of the fundamental reasons Estonia business opportunities stand out for Americans:

• 100% Digital Administration: Estonia offers a fully online government system. You can register a company, file taxes, manage banking, and submit reports without paperwork, which makes running a business much more efficient.¹
• e-Residency Program: With e-Residency, foreign founders can get a secure digital ID and run a company remotely. They can sign documents, access government portals, and manage Estonian businesses from anywhere in the world.
• Access to the EU Market: Estonian companies are considered EU companies, giving them access to the entire single market. You can work with EU clients, open EU bank accounts, and benefit from EU trade rules.
• Business-Friendly Tax System: Estonia does not tax retained profits. You only pay when distributing earnings, typically at a flat rate of 22%.¹ This allows founders to reinvest in their businesses tax-free.
• Supportive Startup Ecosystem: Estonia is home to one of the highest numbers of tech unicorns per capita in Europe.¹ Tallinn was ranked the top city for startups in 2025 due to its strong digital infrastructure and active support network.²
• Equal Treatment for Foreigners: Foreigners have the same rights as Estonian citizens when opening and running companies. You don’t need a local partner, and English is widely used in business and legal settings.²

Whether you’re a tech startup seeking a European base or a freelancer looking for a legitimate business structure, Estonia’s business climate makes it an attractive choice for U.S. workers and expats.

Estonia’s e-Residency: A Digital Gateway for Entrepreneurs

One of the biggest enablers of Estonia’s appeal is the e-Residency program. Launched in 2014, e-Residency is a first-of-its-kind initiative by the Estonian government that provides anyone in the world a digital ID and access to Estonia’s online services.²

Importantly, e-Residency does not confer citizenship or physical residency in Estonia; it’s not a travel visa. Instead, it’s a secure digital identity that lets you authenticate yourself online and legally sign documents from America or anywhere else in the world.

Benefits of e-Residency in Estonia

• Remote Company Management: You can start and run the company from anywhere. There’s no requirement to live in Estonia or even visit. Entrepreneurs from over 180 countries have taken advantage of this; as of July 2025, over 126,000 people have become e-Residents, and they have founded more than 36,000 Estonian companies through this program.²
• Ease of Digital Signatures: The digital ID allows you to sign contracts, annual reports, and other official documents with the same legal validity as a handwritten signature.
• Secure Online Access: Logging in with your digital ID means your identity is verified instantly by Estonian state systems. You can access government portals (for registering companies, filing taxes, etc.) and also private services such as online banking or fintech platforms that support Estonian digital ID login.
• Community and Network: As an e-Resident, you become part of a global network of entrepreneurs and digital nomads who are also running Estonian companies. There are active communities and resources to share knowledge on operating internationally. The e-Residency program itself provides a marketplace of service providers (for accounting, legal, etc.) familiar with assisting foreigners.

How to Obtain e-Residency

The application process for e-Residency is fairly straightforward:

1. Apply Online: You fill out a form on the official e-Residency website and pay a state fee of €150. You’ll need to provide a copy of your passport, a passport-style photo, and a short description of why you want to become an e-Resident.²
2. Background Check: After submission, Estonian authorities (Police and Border Guard) conduct a background check for security. This typically takes a few weeks. For reference, approval rates are high. Invest in Estonia reports that approval rates were 94% in 2024.²
3. Pick Up Your Digital ID: Once approved, you’ll receive an email notification, and then you must then pick up your e-Residency kit in person. During the application, you choose one of the worldwide pickup locations; this could be an Estonian embassy or consulate near you, or a specialized center. When you go to pick it up, you’ll present your passport and have your fingerprints taken to verify your identity. You’ll then receive your e-Residency kit, which includes your digital ID card, a USB card reader, and instructions.
4. Start Using E-Services: With your digital ID in hand, you install the required software and can immediately start using Estonian e-services. The kit provides PIN codes: one PIN for authentication to log in and one PIN for digital signing. Now you’re ready to register a company online, open a bank account, and more as an e-Resident business owner.

Steps to Create a Company in Estonia As a Non-Resident

Now that you’ve acquired or at least applied for e-Residency, you can form your Estonian business. Fortunately, this is another straightforward process.

The most common business type for startups and SMEs is the Private Limited Company, known in Estonian as osaühing (OÜ). This is equivalent to an LLC and offers limited liability to its owners. Below, you’ll find a step-by-step breakdown for how to register an OÜ online:

1. Choose a Company Name

Select a unique name that meets Estonian business naming requirements. It needs to be distinguishable from existing companies, use the Latin alphabet, and end or begin with a reference to the legal form of the company.²

2. Prepare Required Details

During registration, you’ll provide your company’s business activity (EMTAK code), legal address, contact person, and shareholder info.

• EMTAK code: Select the category that best matches your main business. This is for classification only and won’t limit your operations.
• Contact person and address: If no one on the board lives in Estonia, you must appoint a local contact person.¹ This person handles official communication but does not manage your company. Many founders use a service provider for this.
• Shareholders and board members: One person can be both the sole owner and director. There are no residency or nationality requirements.

3. Submit the Application

Log in to the Company Registration Portal using your e-Residency digital ID. The form is available in English and guides you through each step. You usually won’t need to upload extra documents unless your situation is unusual.

4. Pay the State Fee

The government fee is €265 for online registration.³ You can pay by credit card or bank transfer. If you use a service provider’s API, other payment methods might be offered, but the fee remains the same.

5. Sign the Application

You and your contact person must digitally sign the form. Both parties can sign remotely using their ID cards, and no printing or mailing is required.

6. Get Confirmation

Once submitted, the application is reviewed by the Estonian Business Register. Most approvals now happen within hours, and your company details appear in the public registry once confirmed.³

At this stage, your OÜ is a legal entity and you’re ready to do business!

Post-Registration Steps

After the company is formed, you still have a few additional details to take care of:

• Share Capital Contribution: You can start an OÜ with only €0.01 per shareholder; most founders choose a symbolic amount like €1. There is no need to deposit funds before registration. You simply declare the amount and treat it as paid once the company is formed. Although you must eventually transfer the declared capital into your business account, the amount is so small that it poses no barrier.³
• Open a Bank Account: You’ll need a business bank account after registration. Estonia does not require a local account; any account in the EEA is acceptable. Many e-Residents use online platforms like Wise, Revolut, or N26, which offer IBANs without a physical visit. Traditional banks may require in-person verification, but some allow remote onboarding.
• Register for VAT (if needed): If your company’s revenue is expected to exceed €40,000, VAT registration is mandatory. The standard VAT rate rose to 24% in July 2025.³ You can register online once your business is formed.
• Hire an Accountant or Use Software: Even small or inactive companies must file an annual report with the Business Register. Many founders use Estonian accountants or digital services that specialize in supporting e-Residents. Prices often start around €100 per month. You can also use accounting software, but if you’re unfamiliar with Estonian standards, it’s worth getting professional help.

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Business Structures in Estonia: OÜ and Other Options

For most foreign entrepreneurs, the Private Limited Company (OÜ) is the go-to structure when forming a company in Estonia.

Let’s briefly discuss why, and the other structures that might be applicable:

• Private Limited Company (OÜ): The OÜ is the most common business type for locals and e-Residents. It offers limited liability, meaning your personal assets are protected. Only one founder is required, and share capital can be as low as €0.01. Suitable for startups, consulting, and most small businesses.
• Sole Proprietorship (FIE): A sole proprietorship is simpler to set up but offers no liability protection. Profits are taxed as personal income, and you’re fully responsible for any debts.
• Public Limited Company (AS): An AS requires €25,000 in capital and is designed for larger businesses, especially those planning to raise capital from many investors or list on a stock exchange. This form is not used by small or one-person startups and involves more complex governance.³
• Partnerships: Estonia allows both General and Limited Partnerships, but they are uncommon for foreign founders. General partners have unlimited liability, while limited partners are only liable up to their investment.
• Non-Profits and Foundations: You can also register non-profits (MTÜ) or foundations (Sihtasutus) for charitable or community purposes. These are not designed for business activities and follow separate legal requirements.

Taxation and Financial Considerations

Estonia’s tax system is a consequential draw for American entrepreneurs, particularly for those who want to reinvest profits for growth.

Here are some fundamental details about taxes when doing business in Estonia:

• Corporate Income Tax: Estonia does not tax retained profits. You only pay tax when profits are distributed, usually as dividends. The current rate is 24%, up from 22% as of July 2025. This setup allows small companies to grow without immediate tax costs. Since tax is only triggered by distributions, filings are simple and tied to those events.³
• Value Added Tax (VAT): If your business earns over €40,000 per year, you must register for VAT. The standard rate is 24% as of July 2025. VAT applies to most goods and services, with some reduced rates. If your clients are outside the EU, VAT may not apply. Filings are monthly and online.
• Personal Taxes: If you take a salary from your Estonian company, it’s taxed in Estonia at a flat 22%, along with social taxes.³ However, many e-Resident founders do not pay themselves a salary from Estonia. Instead, they take dividends or pay themselves from another country. Estonia has tax treaties, including with the U.S., to prevent double taxation.¹ As an American, you will not pay Estonian tax on dividends, but must follow U.S. tax laws.
• Social Security and Payroll: Employers in Estonia must pay 33% in social tax and around 0.8% in unemployment insurance on employee wages. But if you do not live or work in Estonia, these do not apply.
• Annual Reporting: All Estonian companies must submit an Annual Report once per fiscal year.⁴ This includes basic financials, and it must be filed online in Estonian. There is no yearly income tax return, but the report is required even for inactive companies.

Overall, Estonia’s tax system is transparent and entrepreneur-friendly. In fact, the Tax Foundation has repeatedly ranked Estonia first for tax competitiveness.⁴

Opening a Bank Account for Your Estonian Company

As noted earlier, you do not necessarily need a bank account in Estonia itself, but you do need a financial account that can serve your company’s needs.

Here are your main options:

• Estonian Bank Accounts
• European Fintech Options
• Payment Processors

When opening any account, you’ll usually need to provide proof of your company details, including the registration certificate, which you can download from the Estonia e-Business Register, identification for the account signatories (your passport, perhaps your e-Residency card), and in some cases, a brief description of your business activities for risk assessment.

Make sure the company’s board member applies for the account, as they will verify you have authority.

One thing to note is that Estonia uses the Euro, being part of the Eurozone. This simplifies currency concerns for European transactions. If you’re dealing with international currencies, you may consider multi-currency accounts or services to minimize FX fees.

Lastly, if you truly cannot obtain an account anywhere (which is rare), Estonia does allow a company to operate without a local bank account as long as you can conduct transactions.¹ But practically, you will want at least an online business account in the EEA to operate smoothly.

Final Thoughts

Starting a business in Estonia can be one of the easiest ways for non-EU entrepreneurs, especially Americans, to establish legal registration in the European market.

Bear in mind that while starting a company in Estonia is quick and straightforward, you still need to put in the work and research. You’ll need to decide on factors such as the proper structure and service providers, as well as what tax implications there will be for you in both Estonia and your home country.

Whether your goal is to run a remote tech startup, manage consulting clients across borders or establish a side business with minimal red tape, Estonia makes it possible.

Frequently Asked Questions

Can an American and non-resident start a company in Estonia?

Yes. Estonia allows foreigners to fully own and manage companies. Through e-Residency, you can register and run a business online without living in Estonia. You do not need a local partner or director, and you can be the sole owner and board member.

Foreign investors have the same rights as locals. You will need a local contact person and address, which many service providers offer. Estonia’s system is built to support international entrepreneurs.

How long does it take to register a company in Estonia?

Once you have your e-Residency card, online company registration can be completed in one business day. Filling out the form and signing it digitally may take just a few hours.

If you still need to apply for e-Residency, allow three to eight weeks for processing and pickup. After that, most registrations are approved within 24 to 48 hours, though rare cases may take a few days.

How much does it cost to register a company in Estonia?

The state fee to register an Estonian company online is €265. If you still need to apply for e-Residency, expect an additional €100 to €150, depending on your pickup location. In total, government fees are typically €365 to €415.

Optional costs include a contact person and virtual address service, usually €100 to €200 per year, and setup help from service providers, which may range from €300 to €500.

Ongoing expenses like accounting or banking will vary, but for formation alone, €265 plus the e-Residency fee covers the basics.

Do I need to visit Estonia in person to open my company?

No, you do not need to travel to Estonia to form or manage a company. You can apply for e-Residency online and pick up your digital ID at a nearby Estonian embassy or pickup location. Company registration, document signing, and reporting are all handled digitally.

What is the minimum share capital required for an Estonian company?

For a Private Limited Company (OÜ), the minimum share capital is just €0.01 per shareholder, making it accessible to nearly anyone.

The old €2,500 minimum was removed in 2023. Other types of entities (like a Public Limited Company, or AS) still require €25,000, but for most entrepreneurs, an OÜ is the simplest and most affordable option.

What taxes will my Estonian company have to pay?

Estonia taxes distributed profits at 22% in 2025, but retained profits are tax-free, allowing you to reinvest without corporate tax. If annual revenue exceeds €40,000, you must register for VAT and file monthly returns. VAT is currently 22% and refundable on eligible business purchases.

If you don’t employ staff in Estonia, there’s no payroll tax. If you do, expect a 33% social tax and personal income tax withholding. Most e-Resident businesses bypass this by working with international contractors. Dividends to non-residents are not taxed in Estonia, so personal tax will depend on your home country.

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Sources:

1. Why An Estonian Bank Account Is Not Necessary For Most e-Residents
2. Double Taxation Agreements
3. Contact Person and Legal Address
4. Estonia’s Startups