We often get asked which type of business can one run as an e-resident. Sometimes, we even receive business plans or detailed business idea descriptions with a question, is e-Residency a good solution for me?
The answer to this question very much depends on individual circumstances, but some businesses are better suited to e-Residency than others — learn the most commonly applied based on real case studies in our blog.
It is also important to understand that companies registered by e-residents are EU companies like any other company created within Estonia’s trusted business environment. There is no legal distinction for an "e-Residency company" or "virtual company", it's simply an EU company registered in Estonia. The most common form of business is a private limited company (OÜ in Estonian). There are no additional restrictions to the business activities of companies registered through e-Residency, as long as they are in accordance with legislation.
Companies registered by e-residents do have some things in common though - the majority of these companies are run remotely entirely online, and the main business activity is happening outside Estonia. Most companies registered by e-residents offer business and other management consultancy services, computer programming, IT consultancy services. Those are business activities that do not require a fixed location to operate.
This also means that those are companies that operate cross-border and need to consider not only Estonian regulations but regulations of other countries where they operate. A good example here is company taxation. A company registered in Estonia must pay taxes where it is a tax resident under international rules, not automatically in Estonia. It is easier to comprehend all the international rules if the company is only selling services online.
Ukrainian resident registered a company in Estonia as an e-resident. The company provides consulting services to companies in Ukraine, Estonia and Sweden.
Here one needs to consider Estonian regulations, Ukrainian regulations, treaties between those countries and requirements for foreign companies to sell their services in Sweden in case the services are not sold there on a temporary basis.
Entrepreneurs dealing with physical goods have to consider more regulations, for example, import and export rules for the goods. This may mean additional cost for consultation and administration activities.
No need to be intimidated by it though. In Estonia, we have many companies offering consulting and other business services with good value. Many of them are listed on our Marketplace. A good resource also to learn about doing business in Europe is Your Europe portal.
Regardless of the complexity of running a global company that offers physical goods or a larger company with offices globally, there are many who have still decided to register their main office in Estonia. They are not the average e-resident, but they do benefit from the e-solutions and legal framework that enables remote business management. You can also learn more in our blog on who benefits from e-Residency.
You may want to ask, what is the benefit then of running an Estonian company an e-resident?
In Estonia, the majority of administrative activities can be done online thanks to the digital services and legal framework in place, so there is no need to travel to the country where your company is registered just to handle the paperwork.
Estonia is part of the EU and companies registered in Estonia can benefit from the EU regulations such as the free movement of goods and services. The business environment is already mostly accessible in English as well and it is constantly being improved.
Estonia's business environment is transparent and trusted. For example, key details about all Estonian companies, including their ownership and financial data, is publicly available and verified through the use of digital identities. This means one can also easily conduct due diligence online for potential partners.
Estonia also ranks pretty high on the Ease of doing business (18-th from 190 countries).
Estonia understands that global business is not only for large corporations anymore and is taking steps to help smaller companies and freelancers to do business globally too, one of the examples being the e-Residency project itself.
Want to know more how other e-residents run their businesses?
Ready to register your company and run it as an e-resident?
1. Define your business
Prepare answers to the following questions:
1. Are you a multi-shareholder company? You'll want to consider a few things before you proceed.
2. What is your field of activity?
3. Where will the permanent establishment of your company be?
4. Will you make your share capital contribution now or defer the payment into the future?
2. Choose your business structure
The private limited company (or OÜ, "osaühing" in Estonian) is the most common form of business in Estonia, and the one established most often by e-residents. Here's an article to better understand OÜ business structure, or, check out this article of different forms of businesses.
It's worth noting, your company can only be registered online in the Company Registration Portal if all co-founders have an Estonian e-Residency digital ID card or an Estonian, Latvian, Finnish or Belgian ID card or an Estonian or Lithuanian mobile ID. Be sure to address this in advance of company registration, if necessary, or prepare to use a notary.
Some e-residents have told us, that they want to operate as sole traders (also known as a sole proprietorship) rather than opening a limited company. This may be the most convenient solution for them in other countries, but a sole proprietorship is not recommended for e-residents because it comes with additional obligations more suitable for residents of Estonia. The information regarding sole proprietorship is also not as readily available in English yet as information about operations of a private limited company.
Now you are ready for the next steps. Our article, 5 steps how to start a company online will guide you forward.