I've had companies in a few different jurisdictions, including a Delaware C Corp[1] and currently an OÜ through Estonia's e-residency program.
Yes, it is fantastic and delivers on all of the promises. The only potential headache is that you must collect your e-residency card from an embassy which, depending on your location, might require travel to a nearby country.
I used Xolo but there are lots of agents in the directory. I like and recommend Xolo. No idea what the supposed issue with banking is, all of the agents have banking relationships and you can also use Revolut and Wise. My bank account was opened same day as the company.
Your details are published on the public register. The moment your registration is published you'll get lots of emails offering services, like banking (some people pretend to be Revolut but are actually just sending you affiliate links). Don't publish an email address you care about.
[1] The problem with forming a U.S. company is that all of the formation agents are layers on top of a convoluted nightmare. The formation agent can do their best to abstract away the complexity but the moment you have to peak behind the curtain you'll find yourself face to face with something very scary. The Estonian e-residency program is integrated all the way through.
The U.S. is not a great place for offshore business registration mostly because the reporting requirements around taxation for foreign-owned businesses are so severe. It's just a lot of useless paperwork.
You said you are from Germany but not where you are now. If you are still in Germany, forget it. Just because you incorporate outside of Germany does not exempt your from any taxes (and its beauraucracies) in Germany. That is, even with an estonian corporation, you will owe german corporate taxes (plural - one goes to the state one to the county - a.k.a. Körperschaftsteuer and Gewerbesteuer). That implies you will have to do the same tax paperwork as with a german GmbH and file them official with the tax authorities (Steuererklärungen, Umsatzsteuerjahresabschluss) and the Bundesanzeiger (Jahresabschlussbilanz). Nothing gets easier with that setup.
You're not wrong, but you're missing the best part.
Estonian company does not pay taxes (*). As long as the money stays within the company he's golden. The company can pay for his car, his apartment/office, etc.
It is only when he decides to withdraw the money the problem occurs.
What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay taxes over there.
Here's the tricky part.
Estonia is part of Schengen Area. Which means you can travel there and back without passport. There's no paper trail of your arrangements. You can easily create a reality in which you reside there for majority of time.
But again, that's not the selling part of Estonian LTD. Which is - it's extremely easygoing and as long as money stays in the company you're not paying taxes.
I still live in (and don't plan to change it) in Germany. So I guess the whole thing doesn't really work for me. The goal of the whole operation would have been to make bureaucracy easier, but that doesn't seem to work. So ... it's a no do, unfortunately.
Exactly. I'm German and simulated the constellation some year's ago. Verdict was, if you are inside the EU it won't pay out. The Estonian model is for people trying to participate in the EU market from outside.
It is about where the actual "effective management" is considered to be located: If you live in Germany permanently, the tax office can decided to tax you as if you were a Germany company - and yes, most of the times they do it.
If you travel regularly and have an office in Estonia and you make the effective management decisions there, you are obliged to Estonian tax system only.
Not answering your question directly but accounting and taxes are a thing everywhere. EU rules make accounting for companies quite complicated.
Focus on your business, open the smallest and simplest entity you can to validate your product before spending time and money optimizing or scaling things.
That being said, I’m familiar with GmbHs in Germany and I would advise against going this route unless funding is available. Try a sole proprietorship instead if possible.
I professionally have been helping folks set up and maintain e-Residence and businesses, and all said here in the comments so far tracks: Estonia is absolutely unsurpassed qua administrative ease (this giving you a clear and lasting business advantage), the tax advantages are real, and the jurisdiction only gets better.-
Banking and being scrupulous on your personal taxes at your place of personal residence are issues, but nothing insurmountable, far from it.-
Can also confirm it is great. The community is also quite nice and helpful. Also worth noting, because that comes up all the time, is that Estonia has a digital data embassy in Luxemburg, so if god forbid, russia would take increase its aggression, there is a copy of everything that would keep running your business. The main issue germans have is you cannot really get rid of german accounting as long as generating the business value there while living there. Once getting used to how smooth things can be, I could not bear having to deal with the german bureaucracy in any other area of life.
Oh there will be a lot of issues in the future because Germany says thst your company is in Germany because you work from there. So you have to do taxes in Estonia and in Germany. And prepare for a lot of tax issues if you dont have a good tax advisor.
I collected my Estonian non-citizen id card from Madrid. I found their income reports misleading and highly subjective. Plus you have to pay someone to dump the data in Estonian. You are subject to fines on a phone line. Not much security from an owner POV. I finally closed the entity which was much more expensive than opening.
At the end, these kind of stuff is done so they can charge entrepeneurs heftly and throughly with invoices on services which could not be needed if you were in their jurisdiction.
Not worth it.
PD. I forgot to add the ID card is valid for 5 years or so so you might run out of identity while your company is running, risky business.
It is mentioned a bit in other comments: be aware that in the country where you live, the tax authorities can argue that your 100% owned company in country X is managed by you. This means it is taxable in your country. It is then up to you to counter their point of view…
> As somebody from Germany, establishing a company is a bit tedious and bureaucratic.
I'm fairly sure the German tax authority will claim that you have a local German branch office since you live and work there.
That might be OK tax wise?
But I'd recommend starting with the tax situation in Germany.
Having limited liability through some kind of corporation can be nice.
But on the other hand, it becomes harder in Germany to pay out a varying salary as profits fluctuates throughout the year since the German tax authorities will see that as an illegal dividend payment from your company.
From this perspective it can be easier to set up some kind of sole proprietorship. Easier accounting etc and can pay out profits easier. But you get the personal liability.
This is not hard advice, just some things to point out that it gets complicated fast. So I'd recommend spending a few hundred euros on getting advice from a tax professional to begin with.
Idk where you are coming from but I am Greek and compared to Greece there is ZERO bureaucracy. You send your documents pretty much whenever you like, you don't get fined for stupid things and you just need to prepare the financial report once per year. We are talking about a very clear and flat system. 20% tax on dividend and for good tax payers it can go as low as 14% as far as I remember. The only "bureaucracy" things is that you have to travel all the way to your country's Estonian embassy to get your e-residency card.
Last but not least, don't count on Estonian banks. They don't like e-residents and even if they like them today, don't trust them.
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I've been running a saas like this for the past couple of years.
I'm using Xolo which do the accounting and local representative. 99% of my bureaucracy is uploading pdf invoices to the Xolo system. Once a year I have to spend like one hour on the anual report. That's pretty much it.
Every 5 years you have to renew your digital id. It costs a little money and if you are in the EU there will be a pickup location not far away (I had to travel internationally).
I also have to deal with my personal taxes but that's another matter.
This worked, (took 6 weeks I believe), but then I had to travel to another country (which had an Estonian embassy) to collect it.
Then I would have had to travel to Estonia itself to register the actual business and bank account (something like that -- it was a while ago).
(There are "done for you" business services, but from what I recall they were quite expensive, and I think would have still required the travel.)
It was theoretically doable, but due to life circumstances I wasn't able to travel at the time, so it didn't work out.
Meanwhile a few days ago, finally worked up the courage, and registered a business in the UK via a formation agent.
It took 25 minutes and $150. (Business was registered within 2 business days.) From the comfort of sitting on mine own ass, on the other side of the sea. So... yeah xD I like this way a bit better so far.
Please read up on what a permanent establishment means from a tax perspective. Most countries tax laws, especially EUs unambiguously state that the Estonian company will be taxed as if it was a company in your primary residence country.
The e-residence website repeats this many times, with many examples focusing on Germany.
I once asked a similar question but from the Indian side of things. People here mention how double-taxing might be an issue from a more german-Estonian side of things, but I wonder what are people's thoughts on the Indian-Estonian side of things
Admittedly, US makes LLC's much easier to form as compared to EU. But I sort-of like the EU's privacy perspective for the most part and feel like if I do ever end up making a business, having an EU/Estonian company might make more sense but it also charges a lot in the start compared to the US counterpart.
What are people's thoughts and is there any real tangible value from say a non EU citizen perspective in creation of an EU company as compared to US company when there is a sizable difference in the amount of money needed to form a company?
I hope EU really simplifies the business creation and some stock market related things as well as it does feel to be a little bit fractured. I had heard that there were some proposals regarding that, Let's hope that those start to take place.
(Also although EU feels good for privacy, it's a little concerning to me on how Chatcontrol was denied but then it was asked again in a rare occurence which makes me wonder about the privacy aspects of EU, I do think that EU cares about privacy somewhat more than the current US govt but it should also work on anti-measures to prevent such laws from being passed by giving privacy as a right for example, so to me, the EU's chatcontrol feels a bit concerning and I think that EU citizens might agree with that as well.)
What are you comparing it to in Germany? Have you tried services like https://www.firma.de that don't make it much more complicated than the Estonian option these days. I have not tried it myself, but I have friends who had good experiences with it.
If some bureaucracy is what keeps you from realizing the idea or not, then the idea, and the earningspotential seems quite bad. If you are going to start a company, make sure there is some good earningspotential. That way, a bit of bureaucracy in the begining will not be so tough, especially when the money comes rolling in.
So I think the fact that you worry about bureaucracy signals that maybe you should rethink your idea.
For hobby projects, don't bother with a company. It is possible in any country to earn money on the side as a hobby. Sure, if you live in the EU, the taxes will eat away most, if not all the profit, but it's a hobby and learning opportunity.
Once you tested, and see potential for serious money, just pay someone to start the company for you. Easy peasy!
Here's what I've seen. First you’ll need a service provider (you can’t really avoid it) we tried grouhub,Manuel the guy was very kind. 500€ for the incorporation and he referred us to get the bank account . On the other hand, don’t incorporate too early. If you’re still validating, you’re just paying overhead for nothing(180€/month).
On initial capital: you can set it at €10k as it helps if you plan to structure/share ownership more seriously later, but plenty of people start smaller and adjust when needed.
You're going to make life much harder for yourself, not easier, because you'll still need German legal advice but now you need an expensive multi-national lawyer/firm. Anyone cheaper will refuse to touch it.
Germany cares about where the management of your company actually happens, not just where the entity is incorporated. So you're not going to avoid German bureaucracy, it's going to be worse not better.
I was an e-resident for 10 years, had a company and paid all taxes, but this year they refused to prolong it due to my nationality. So, I don't recommend Estonia at all, they can easily screw you over at any time. :(
Since I'm looking for a replacement atm, what's the best US state to register a simple and cheap LLC for a foreigner?
I'm in a similar situation — building a SaaS (API proxy for LLM cost optimization) and evaluating Estonia vs UK LTD. Leaning towards UK for Stripe compatibility but the 0% tax on retained profits in Estonia is very tempting. Would love to hear from anyone who's used both.
I have a limited company and a nonprofit registered in Estonia and am about to register another company. I C
can't recommend it enough. It's how it should be everywhere and the polar opposite of how it is in Italy, where i am based.
curious how much of the appeal is still there vs a few years ago
feels like a lot of these “global founder” setups sound great in theory but get messy in practice
Even the simplest of jurisdictions will cost you $3000-5000 of yearly up keep for no revenue. Don’t be deluded with the incorporation cost, later on you’ll discover lots of required things that are not very obvious now like banking fees, mailbox, accountants, some form, VAT, etc..
So until you have $5.000 of yearly revenue (or guaranteed incoming revenue), do not incorporate. Just remind your users that your service is not free and they have to pay up at some point after the beta.
Once you hit that threshold, you can consider incorporating. No one can help you in that. There are three factors here: Where you live, What your passport is (where you are from) and where your income is coming from. Based on these three, you’ll be able to determine which jurisdiction is most suitable. It’s not the one with the least taxes because at this stage, 5% or 40% tax on profit is irrelevant.
Why aren’t European people starting businesses in the US as pass through entities?
It doesn’t make sense to me why Europeans don’t use registered agents or foreign corporation state registrations to do business as US entities in order to get up and running quickly.
Europeans complain about the difficulty starting a business can just start a business as a US entity, you’re just using the US system as the financial layer.
At the point where you’re making enough money for edge cases or moving to a more favorable jurisdiction then you can afford to because you’re in business now
122 comments
Yes, it is fantastic and delivers on all of the promises. The only potential headache is that you must collect your e-residency card from an embassy which, depending on your location, might require travel to a nearby country.
I used Xolo but there are lots of agents in the directory. I like and recommend Xolo. No idea what the supposed issue with banking is, all of the agents have banking relationships and you can also use Revolut and Wise. My bank account was opened same day as the company.
Your details are published on the public register. The moment your registration is published you'll get lots of emails offering services, like banking (some people pretend to be Revolut but are actually just sending you affiliate links). Don't publish an email address you care about.
[1] The problem with forming a U.S. company is that all of the formation agents are layers on top of a convoluted nightmare. The formation agent can do their best to abstract away the complexity but the moment you have to peak behind the curtain you'll find yourself face to face with something very scary. The Estonian e-residency program is integrated all the way through.
> reporting requirements around taxation for foreign-owned businesses are so severe.
What exactly are you referring to? This doesn't match my experience at all.
It is only when he decides to withdraw the money the problem occurs.
What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay taxes over there.
Here's the tricky part.
Estonia is part of Schengen Area. Which means you can travel there and back without passport. There's no paper trail of your arrangements. You can easily create a reality in which you reside there for majority of time.
But again, that's not the selling part of Estonian LTD. Which is - it's extremely easygoing and as long as money stays in the company you're not paying taxes.
If you travel regularly and have an office in Estonia and you make the effective management decisions there, you are obliged to Estonian tax system only.
Focus on your business, open the smallest and simplest entity you can to validate your product before spending time and money optimizing or scaling things. That being said, I’m familiar with GmbHs in Germany and I would advise against going this route unless funding is available. Try a sole proprietorship instead if possible.
Banking and being scrupulous on your personal taxes at your place of personal residence are issues, but nothing insurmountable, far from it.-
At the end, these kind of stuff is done so they can charge entrepeneurs heftly and throughly with invoices on services which could not be needed if you were in their jurisdiction.
Not worth it.
PD. I forgot to add the ID card is valid for 5 years or so so you might run out of identity while your company is running, risky business.
> As somebody from Germany, establishing a company is a bit tedious and bureaucratic.
I'm fairly sure the German tax authority will claim that you have a local German branch office since you live and work there.
That might be OK tax wise?
But I'd recommend starting with the tax situation in Germany.
Having limited liability through some kind of corporation can be nice.
But on the other hand, it becomes harder in Germany to pay out a varying salary as profits fluctuates throughout the year since the German tax authorities will see that as an illegal dividend payment from your company.
From this perspective it can be easier to set up some kind of sole proprietorship. Easier accounting etc and can pay out profits easier. But you get the personal liability.
This is not hard advice, just some things to point out that it gets complicated fast. So I'd recommend spending a few hundred euros on getting advice from a tax professional to begin with.
https://denationalize.me/emigrate/goodbye-estonia-how-a-popu...
I'm using Xolo which do the accounting and local representative. 99% of my bureaucracy is uploading pdf invoices to the Xolo system. Once a year I have to spend like one hour on the anual report. That's pretty much it.
Every 5 years you have to renew your digital id. It costs a little money and if you are in the EU there will be a pickup location not far away (I had to travel internationally).
I also have to deal with my personal taxes but that's another matter.
In 2023 tried to register a business in Estonia.
I had to first get the e-residency.
This worked, (took 6 weeks I believe), but then I had to travel to another country (which had an Estonian embassy) to collect it.
Then I would have had to travel to Estonia itself to register the actual business and bank account (something like that -- it was a while ago).
(There are "done for you" business services, but from what I recall they were quite expensive, and I think would have still required the travel.)
It was theoretically doable, but due to life circumstances I wasn't able to travel at the time, so it didn't work out.
Meanwhile a few days ago, finally worked up the courage, and registered a business in the UK via a formation agent.
It took 25 minutes and $150. (Business was registered within 2 business days.) From the comfort of sitting on mine own ass, on the other side of the sea. So... yeah xD I like this way a bit better so far.
The e-residence website repeats this many times, with many examples focusing on Germany.
https://learn.e-resident.gov.ee/hc/en-gb/articles/3600025428...
The whole e-residence thing only makes sense if you are from a non-EU country which doesn’t model its tax code on the OECD model.
People do get away with it until they get audited.
Admittedly, US makes LLC's much easier to form as compared to EU. But I sort-of like the EU's privacy perspective for the most part and feel like if I do ever end up making a business, having an EU/Estonian company might make more sense but it also charges a lot in the start compared to the US counterpart.
What are people's thoughts and is there any real tangible value from say a non EU citizen perspective in creation of an EU company as compared to US company when there is a sizable difference in the amount of money needed to form a company?
I hope EU really simplifies the business creation and some stock market related things as well as it does feel to be a little bit fractured. I had heard that there were some proposals regarding that, Let's hope that those start to take place.
(Also although EU feels good for privacy, it's a little concerning to me on how Chatcontrol was denied but then it was asked again in a rare occurence which makes me wonder about the privacy aspects of EU, I do think that EU cares about privacy somewhat more than the current US govt but it should also work on anti-measures to prevent such laws from being passed by giving privacy as a right for example, so to me, the EU's chatcontrol feels a bit concerning and I think that EU citizens might agree with that as well.)
So I think the fact that you worry about bureaucracy signals that maybe you should rethink your idea.
For hobby projects, don't bother with a company. It is possible in any country to earn money on the side as a hobby. Sure, if you live in the EU, the taxes will eat away most, if not all the profit, but it's a hobby and learning opportunity.
Once you tested, and see potential for serious money, just pay someone to start the company for you. Easy peasy!
Germany cares about where the management of your company actually happens, not just where the entity is incorporated. So you're not going to avoid German bureaucracy, it's going to be worse not better.
Since I'm looking for a replacement atm, what's the best US state to register a simple and cheap LLC for a foreigner?
So until you have $5.000 of yearly revenue (or guaranteed incoming revenue), do not incorporate. Just remind your users that your service is not free and they have to pay up at some point after the beta.
Once you hit that threshold, you can consider incorporating. No one can help you in that. There are three factors here: Where you live, What your passport is (where you are from) and where your income is coming from. Based on these three, you’ll be able to determine which jurisdiction is most suitable. It’s not the one with the least taxes because at this stage, 5% or 40% tax on profit is irrelevant.
It doesn’t make sense to me why Europeans don’t use registered agents or foreign corporation state registrations to do business as US entities in order to get up and running quickly.
Europeans complain about the difficulty starting a business can just start a business as a US entity, you’re just using the US system as the financial layer.
At the point where you’re making enough money for edge cases or moving to a more favorable jurisdiction then you can afford to because you’re in business now