Top 5 Mistakes to Avoid When Starting a Business in Estonia
- incortrust
- Dec 4, 2024
- 2 min read
Starting a business in Estonia can be one of the best decisions for international entrepreneurs. Thanks to Estonia’s digital-first approach, e-Residency program, and low bureaucracy, it's become a hub for startup founders and business owners from all over the world. However, even with a favorable environment, there are some common mistakes that can slow you down or cost you money.
Below are the top 5 mistakes to avoid when registering a company in Estonia — and how to do things right from the beginning.
1️⃣ Choosing the Wrong Business Structure One of the most common mistakes new entrepreneurs make is choosing the wrong legal form. In Estonia, the most popular and practical choice is the private limited company (OÜ). It offers flexibility, limited liability, and access to EU business opportunities. Tip: Don’t register as a sole proprietor (FIE) unless you have a very small operation. For most foreign entrepreneurs, company registration in Estonia as an OÜ is the smartest move.
2️⃣ Not Understanding Tax Obligations Estonia has a unique corporate tax system — you only pay taxes on distributed profits. However, this doesn’t mean you can ignore VAT registration, payroll taxes, or EORI numbers for trade. Many founders forget about monthly reporting, VAT thresholds, and payroll registration, leading to penalties or warnings from the Estonian Tax and Customs Board. Tip: Get professional accounting services in Estonia from day one to stay compliant and avoid surprises.
3️⃣ Ignoring the Importance of a Legal Address and Contact Person To legally register your business, you must have an Estonian legal address and an official contact person listed in the Commercial Register. Many founders skip this step or use unreliable providers, which can delay the setup. Tip: Use a trusted virtual office in Estonia that includes mail forwarding, a business address, and a professional contact person.
4️⃣ Failing to Understand e-Residency Limitations While Estonia’s e-Residency is a powerful digital ID that allows you to manage your company remotely, it’s not a residence or a visa. It does not automatically give you the right to live or work in Estonia physically. Tip: Use e-Residency for remote business management, but don’t confuse it with tax residency or immigration rights.
5️⃣ DIY Approach Without Local Guidance Trying to navigate Estonian business laws on your own can be risky. From legal contracts to regulatory filings, it's easy to overlook details that could harm your business long-term. Tip: Work with experts who provide legal support, assist with business consulting, and help you comply with Estonian and EU laws from the beginning.
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