For some time now, I own my own company in Estonia, and I run in completely online, wherever I travel. This experience has changed my life. In this article, I describe how starting a company in Estonia can help you embrace a simpler, happier life as a location independent freelancer, digital nomad, or solopreneur.
Why Starting A Company In Estonia
Some time ago, my partner and I decided to break the chains of our 9 to 5 jobs and become digital nomads. I had a company in Spain, but managing it, complying with the tax office and fulfilling all the legal requirements was a nightmare for me.
The Spanish administration is not ready for modern types of professional like digital nomads, micropreneurs, freelancers or startups.
Managing a business there is next to impossible for a developer or designer who just wants to work, earn money and enjoy a normal life with what he or she earns.
I needed an accountant because I was not able to understand my tax duties as a professional, or even how much taxes I was supposed to pay.
The whole Spanish business system, in my opinion, seems to have been purposely designed to confuse people. I honestly won’t have been able to say how much I needed to pay on a certain quarter, or how many different documents I needed to fill and send to the Tax Office.
The Freelancer Fee
To make things worse, if you want to work as a freelancer in Spain, or found a company, you need to pay a monthly “freelancer fee“, called the “Cuota de autónomo”.
In fact, you need to pay this fee monthly even if you don’t earn any money during that month. This fee is over 340€ if you are the owner of a company.
Conversely, most other countries in Europe have the concept of “microbusiness” or “one-person company” designed to help developers, designers or freelancers to get started with their businesses.
These micro-companies usually benefit from reduced taxes or at least some beneficial conditions.
Back in Spain, I was feeling trapped. I earned a lot of money working as an iOS freelance developer for startups from all over the world. However, I was struggling with my business, due to the excessive red tape and the unfair tax system.
Life in Madrid is certainly expensive, so I had the feeling that I was working a lot (65-70 hours per week) and never earning enough money.
On a certain occasion, the government fined me because some of my customers didn’t pay the taxes from my invoices correctly. I spent a lot of time and energy trying to amend this situation, without success. As you may imagine, all these problems leave you with a feeling of helplessness.
To make things worse, I was never sure why I was paying what I was asked to. The system was obscure to me, full of cryptic rules (some of them contradicting other rules). And every time I asked my accountant, I ended up even more confused than before.
Thus, I was feeling unhappy and frustrated. I worked remotely, yes, and was free to choose my customers, but I never had the feeling that I was in control of my business or my life.
Decided to become fully location independent, I started looking for alternatives out there. However, I couldn’t find anything until a lucky series of coincidences put me on the right track.
A One Month Trip To Latvia
By the time, we were members of TechHub Madrid at the Google Campus. However, at the beginning of 2017, TechHub announced that they were closing their community in Madrid, with almost no prior advice.
To compensate us for such an abrupt end (some of us had just recently paid our yearly subscription fee), we were given a short period of time for free on any TechHub community.
For some time now, we’ve been living for at least one month every year in a foreign country, working there and living like locals. It’s quite an enlightening experience.
Thus, we thought it would be the perfect opportunity to visit another country, merge with a different entrepreneur community and know other people and cultures.
We had a look at the alternatives available and finally settled down for Riga, Latvia.
Latvia is a European country, but it’s certainly an affordable one. Also, I like cold weather and feel more comfortable in small cities. It looked like the perfect place to stay for a month.
Thus, we spent July at Riga and I fell in love with the city.
We talked to the community manager at TechHub Riga, and he told us about the micro-company figure in Latvia. Basically, a company for solopreneurs with reduced taxes, almost no paperwork, and great conditions for people starting a business.
Then I realized that there were other company models outside of Spain, friendlier to people like myself.
A company in Latvia still had some problems. Namely, I needed to stay in Latvia and operate my company there. Sometimes, I would physically need to be there to do certain things. I would also need to hire an accountant or agency to take care of the taxes, etc.
However, I talked to my friend Luke Kelly and told him about my plans. He is a designer extraordinaire and has been a digital nomad for years now.
He told me “You need to check out Estonia, they have this e-Residency program and you can own a company and operate it remotely from anywhere“.
I was intrigued, so I checked out the e-Residency program and learned that I could open my company completely online while being in control of my business and let a business service provider take care of my accounting, taxes, and compliance, for much less than I was paying to my Spanish accountant.
The e-Residency concept seemed revolutionary to me, too good to be true. The more I read about it, the more I was convinced that it was the way to go.
By becoming an e-Resident, you get an ID card issued by the Estonian government with a cryptographic chip allowing you to authenticate and sign documents.
Furthermore, with that ID, you can create a company in Estonia and operate it remotely.
I did read a lot about the e-Residency program. A lot. I realized how easy it was to open and operate a company there. I also contacted some digital nomads who were successfully running their businesses in Estonia.
Finally, with all the information in my hands, I decided to do it. I was decided to found my company in Estonia!
Thus, the plan was simple. We would quickstart our digital nomad lifestyle by moving to Riga. At the same time, we would start a company in Estonia after becoming e-Residents. Next, we will travel the world as digital nomads, operating our companies remotely.
Moving To Riga
By the end of July, before traveling back to Madrid, we went to the PMLP Office in Riga to register as -physical- residents in Latvia. I will talk about this process in another post.
Next, we talked to our Airbnb host and asked her if she would be interested in extending the rental contract for six months.
Turns out, she was very kind and understanding, and we got to an agreement. We had a place to live in Riga, and we were official residents in Latvia.
Then, the next step, probably one of the most difficult ones, was cutting the ties with Spain.
We told our household in Madrid that we were moving, and I started a decluttering project to get rid of all my stuff. It was a hard process for me, especially getting rid of my piano.
Becoming e-Residents in Estonia
The next step, before starting your company in Estonia is becoming an e-Resident. The e-Residency program opens the doors to a whole new world of possibilities, from accessing a series of services online to digitally sign documents from your laptop.
I talk extensively about how to become an e-Resident, how to apply, the requisites, and the whole process in this article: “The Process of Becoming an Estonian e-Resident“.
Service Providers for Starting a Company in Estonia
There are many providers out there, but it’s important to find the right one for your business. Accountancy, taxes, and all that kind of stuff is boring for us, entrepreneurs. We just want to focus on doing what we love and growing our business.
I encourage you to have a look at Companio. It offers the most complete service while taking care of all the dull accountancy stuff. You just need to upload your purchase and sales invoices monthly and connect your bank account for invoice matching. Easy and hassle-free.
Yes, you could do your accountancy yourself, but I honestly think that your time -like mine- is worth more than the monthly fee you pay to a professional company to manage your bookkeeping in a fraction of the time.
One of the main selling points of Companio is the fact that it supports companies with multiple owners, employees -even outside of Estonia- and payrolls, and businesses that require specific licenses to operate (such as crypto-companies). Other providers allow single-owner companies, don’t support employees or charge significantly higher fees.
The Four Steps for Starting your Company in Estonia
I mentioned that you need to be an e-Resident before registering a company in Estonia, but you can actually start the process right away before even applying for e-Residency. Here’s how to do it.
Looking for the name of your company
You can start the process by going to the registration assistant. First, you need to check that the name of your company is not already registered, or there’s no European trademark with a similar name.
The name of your company should be unique and distinctive from other company names. It should also be different from any registered European or Estonian trademark unless you get explicit and notarized consent from the owner.
The fact that you can just look for the name of your company easily on a website, coming from Spain, was another shock for me. In Spain, before starting a company, you need a “Negative name query report” in order to make sure that the company name’s still available.
This report costs you money. In Estonia, it is as simple as searching for it on a website or asking for that information from your service provider.
If there’s a similar trademark name or a matching company name, you will be asked to provide another name. If there’s no similar trademark, but there are some similar company names that may present some problems in the registry, you will receive a warning. Otherwise, you will be able to continue to the next step.
Filling in your company data
Next, you will be asked to fill in some information about the shareholders, board members, and company data.
First, you need to add the data of the members of the company. For each person you add, you decide if it’s going to be a shareholder, member of the board, or both. You can also specify that this person will be the representative of the company (for accountancy and business-related subjects).
If the members of the company have their e-Resident IDs already, that’s good news. They will be able to enter them and sign the company registration right away. If not, don’t worry, you will be able to add their birthdate to make sure the signatures are issued to the right person.
Then you need to specify the activity of your company, and also its means of communication (such as email and phone number).
Overview and payment
Next, you will be taken to a screen to verify that all the information is correct. Make sure to check that everything’s correct.
If you need to change anything, you will be able to do so by going back using the buttons at the bottom left. If, on the contrary, everything looks fine to you, just proceed to payment.
Becoming an Estonian e-Resident
That’s all! If all the members are e-Residents, the company registration will take around 48 hours on average!
I talked about the Process of Becoming an Estonian e-Resident before. If some of the company members are not e-Residents yet, they need to apply at the official e-Residency website. Once their applications are approved, they will need to wait until all of them have their ID card in their hands. It usually takes 3-4 weeks, so be patient!
You can go directly to the official e-Residency application website and register as an e-Resident in a few clicks. You will need to fill in some information about you, your citizenship, date of birth, personal data, and upload some pictures of your ID or passport and your face.
Signing the company registration and services contract
Finally, when all the members have their e-Residency cards, they will be able to digitally sign the company registration and services contract. This step is important to guarantee the consent of all the members and the fact that they have their e-Residency IDs.
Then, after this step is complete, they will proceed to enter the company in the business registry. Easy, right?
The registration process is really fast. You are asked to confirm your company email and sign the application in the e-Business Registry. In just 24 to 48 hours, your company will be registered, and you will receive the official document that contains the registration code of your company.
This registration code, alongside the name and address of your company, identifies your company, and you should include it on every invoice you issue to your customers.
Then, you just need to open your bank account.
Opening your Bank Account
When it comes to open your bank account, you have two options:
- Open a bank account in a traditional Estonian bank such as LHV.
- Use an online banking provider such as Wise or Revolut Business.
Edit: Today, online business solutions work so well that I can hardly think of reasons why a location-independent business owner would need a traditional Estonian bank account. My advice would be to open your company’s bank accounting with Revolut Business, Wise, or similar providers.
In our case, as we were staying in Riga, which is only 4 hours away from Tallinn, and LHV had no fees for non-residents back then, we decided to travel there and open a bank account in LHV. We traveled by bus. As we were already in Latvia when we started the process, we actually did the trip before the company was even registered.
As you can see, you have a lot of flexibility when it comes to when and how to meet the bank representatives.
Once we got to the bus station, we got into a cab, and some minutes later we arrived at the LHV headquarters, where we meet Marje.
Marje was really nice to us, making the whole experience a pleasure. In Your Company In Estonia, they help you contact the LHV representatives to be pre-approved and arrange a meeting prior to your visit to Estonia.
I have found more problems opening bank accounts in my home town in Spain. However, Estonian banks are making it much harder for non-residents to open bank accounts for their companies, usually requiring a “strong connection” with Estonia.
We left the bank, and I met a startup that was looking for an iOS developer. The meeting was very positive, and some days later I was joining the startup. We got back to Riga after visiting Tallinn.
I would call that a well-spent trip.
Once the process of starting a company in Estonia is complete, the fun begins! Here are the next steps you might want to take once you are all set.
The Big Day: Issuing your First Invoice
The most exciting event, once everything is ready, is when the big day comes. You issue your first Invoice!
I can hardly describe with words how amazing it feels. I will write a post on how to issue your invoices, register your expenses, etc. However, I still have this first invoice engraved in my mind.
If forced to choose a word, it would be: freedom.
I had my business in front of me, at the dashboard. I could issue invoices with just some clicks and get paid. Also, I could upload expenses, sales invoices, and control every aspect of my business.
Additionally, I understood all I saw. The cash in and cash out operations are simple and easy to understand, and the tax system is crystal clear. You don’t pay any taxes for the money your company earns. You just pay taxes when you distribute salaries or dividends.
That’s all you need to know to get started.
VAT Number and Operating in the EU
As part of the registration process, you get a European VAT number. You can use this VAT number to issue your invoices, and for your business-related expenses, from paying at the gas station on a business trip to the subscription fee of your hosting provider.
Additionally, in Your Company In Estonia, they take care of registering you as an employee (Board member) of your company so you can assign yourself salaries. It’s all super easy.
Getting a Debit Card
Once you open your account at LHV, you can get a debit card. This card has a very low monthly fee (2€). It gets issued to the official address of your company, and then the person of contact there sends it to your location of choice.
Note: debit cards on most online banking solutions are completely free.
Thus, once your debit card arrives, you have everything you need to run your business.
You have a European company, and a registered VAT number to operate in the European Union, an Estonian bank account, and a debit card.
Your business is ready. And the best part, you don’t have to worry about invoices or taxes. You can focus on what you do best: working, finding new customers, and growing your company.
In this article, I describe how starting a company in Estonia changed my life. If you are a freelancer, digital nomad, or solopreneur, I can definitely suggest you to, at least, consider it.
We live in a completely different world now. This new world is all about getting rid of frontiers and being able to work and live anywhere.
This nomad lifestyle is slowly but steadily spreading and being adopted by more and more people every day.
Hence, we need the tools to be able to work without worrying about borders, paperwork, different tax regulations, etc. I think Estonia was one of the very first countries to realize that.
Certainly for me, starting a company in Estonia has been a game changer in my life.
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