A private limited company is the most common form of business in Estonia. The advantages of a private limited company are:
- easy and quick registration;
- no required share capital;
- no personal liability of the shareholders for the obligations of the private limited company.
As of 1 February 2023, there is no statutory requirement for a minimum share capital. When setting up a private limited company, the founders are free to decide how much capital they need. This gives a great deal of freedom to decide on the share capital on the basis of the planned activities of the private limited company and the actual need for capital. However, the founders of a private limited company are liable for any damage caused to the company by the incorrect assessment of contributions or the start-up costs. If the amount of the share capital decided on is lower than 2,500 euros and the bankruptcy proceedings are terminated by abatement without declaring bankruptcy, the court will, at the request of the interim trustee, order the shareholder to pay an amount between the share capital of the private limited company and 2,500 euros, if the trustee fails to satisfy their claim for fees and expenses at the expense of the other assets of the debtor.
What should be done before setting up a private limited company?
Before setting up a private limited company, find out the answers to the following questions:
- What field of activity are you going to operate in? You need to choose your principal activity by using the official Estonian Classification of Economic Activities – EMTAK.
- What will be the business name of the private limited company? Check the suitability of your chosen business name via the name query of the e-business register.
- Who are the shareholders and who are the board members?
- What is the amount of the contribution of shareholders?
- Where will the registered office of the private limited company be? What will be its address?
- What will be the structure of governance of the private limited company?
What documents do you need to set up the private limited company?
In order to establish a private limited company, a memorandum of association shall be signed and the articles of association confirmed. The memorandum of association is signed by the founders. If only one person is the founder, they shall sign a foundation resolution. The memorandum of association and the articles of association approved thereby shall be notarised.
When establishing a private limited company in expedited procedure, document templates may be used that are available in the information system of the commercial register. In such cases, the template of the articles of association replace the notarised memorandum of association and the articles of association annexed thereto.
Members of the management board shall be appointed. The notarised consent of all members of the management board to being a member of the management board must be enclosed to the application for entry in the commercial register, unless such consent is included in the application. If the private limited company is founded by expedited procedure and includes members of the supervisory board and an auditor, their digitally signed consent to being a member of the supervisory board or an auditor is also required.
Upon incorporation, the share capital must be paid in full, as a monetary or non-monetary contribution, before the company is registered. Proof of a monetary contribution must only be provided to the Commercial Register if the contribution exceeds 50,000 euros. If the contribution is less than 50,000 euros, it is sufficient for the management board to confirm that the contribution has been paid to the private limited company. In the case of a non-monetary contribution, the contract for the transfer of the contribution to the private limited company must be presented, together with documents proving the value of the contribution. The value of the non-monetary contribution must be assessed by an auditor if the share capital of the private limited company is at least 25,000 euros or if the nominal value of the share received by way of a non-monetary contribution is at least 25,000 euros.
If you are establishing a private limited company with the help of a notary, they will prepare an application for the establishment of a private limited company, a memorandum of association, and articles of association.
How to register a new private limited company?
1. You can register a private limited company electronically via the e-commercial register portal.
A private limited company can only be registered electronically in the e-commercial register if:
- all persons involved in the establishment (board members, founders, etc.) will be able to digitally sign the initial application and incorporation documents;
- the private limited company is established with a financial contribution made electronically through the e-commercial register portal in the course of drawing up the application, if the amount of the contribution exceeds 50,000 euros; for smaller contributions, the confirmation of the board of the contribution is sufficient.
A detailed guide for establishing a private limited company on the e-commercial register portal
2. Establishment of a private limited company through a notary.
In order to quickly set up a private limited company through a notary, see what documents are needed to set up a company. Notary’s offices also have templates of the documents required to establish a private limited company.
How much does it cost to establish a private limited company?
The state fee for the registration of a private limited company is 200 euros. If you wish to set up a private limited company via the e-commercial register electronically in an accelerated procedure, the state fee payable is 265 euros. The amount of the state fee can later be transferred to the establishment expenses of the private limited company.
When establishing a private limited company at a notary’s office, a notary’s fee must be paid in addition to the state fee for the registration. The exact amount of the notary’s fee depends on the size of the share capital and the number of founders. Value added tax is added to the notary’s fees.
Contributions to a private limited company may be either monetary or non-monetary. In the latter case, the contribution to the share capital may be, for example, made in the form of equipment, computers, or other assets the financial value of which can be determined.
How long does it take to register a private limited company?
The registrar will review the petition for entry within 5 working days from its arrival and in expedited procedure, by no later than the next working day from its arrival.
What must be done after registering a private limited company?
Depending on the field of activity and size of the business, there are a number of other steps to be taken.
- If you are starting an activity in a field of activity subject to special requirements, you must apply for an authorisation or licence from the local government or a respective state authority.
- If the planned annual turnover of your private limited company exceeds 40,000 euros, you must register as a taxable person for the purposes of VAT with the Tax and Customs Board.
- If you are going to hire employees, you must register them in the employment register of the Tax and Customs Board on the day they commence working.
Please note! A company established can immediately be registered as a taxable person for the purposes of value added tax in the e-commercial register portal in the course of establishment and employees can also be registered during the process.