For some time now, I own my own company in Estonia. 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 freelance developer, digital nomad, designer or solopreneur.
Why Starting A Company In Estonia
Some time ago, my partner and I decided to break the chains of our steady life 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 impossible for me.
The Spanish administration is not ready for modern types of professional like digital nomads, micropreneurs or startups.
Managing a business there is next to impossible for a developer or a designer who just wants to work, earn money and live a normal life with what he or she earns.
I needed an accountant because I was not able to understand what were my obligations 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 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 fixed “freelancer fee“, called the “Cuota de autónomo”.
In fact, you need to pay this fee 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 “micro-company” or “solopreneur company” designed to help developers, designers or startups getting started with their businesses.
These company or professional figures 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 all over the world. However, I had to pay a lot of taxes.
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 on 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 absurd rules, and every time I asked my accountant, I ended up even more confused.
Thus, I was feeling unhappy and unfulfilled. 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.
Google wanted to use the space to install their own accelerator. Long-term entrepreneurs and solopreneurs don’t make big success stories and striking headlines, so we were basically out.
As a compensation 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 a 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“.
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 also read about companies such as LeapIn, and how easy it was to open and operate a company there. Additionally, I contacted some digital nomads that 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. As I describe in these posts, 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“.
Starting a Company in Estonia with LeapIn
The e-Residency website offers you some service providers for founding and managing your company in Estonia. After considering the alternatives, I settled down for LeapIn.
For starters, they had a clear “Pricing” section with the prices and what services are included, clearly specified.
When I am considering hiring or subscribing to an online service today, that’s one of the very first things I look for on the website of the company.
Additionally, their website and their services looked not only more modern and professional but aimed at people like me. When you click on “Sign Up”, you get asked about your business or your main activity as a freelancer.
Then, you get asked how you are going to get paid (i.e: bank transfers, a payment gateway, the App Store, etc).
Finally, you have to specify who will be your main customers (i.e: B2C, B2B, App stores…).
This, for me, was a major cultural shock. I come from a country where the official form to register as a freelancer doesn’t even include the concept of “developer”.
Instead, you have to specify something like “telecommunications”, like you were selling modems or routers.
Conversely, I could perfectly relate my activity as a freelance developer with these questions. Everything seemed so targeted towards current freelancers and entrepreneurs, I felt like the Spanish administration was stuck at the XIX century.
All these services take care of not only founding the company for you (registering it and doing all the necessary paperwork) but also managing it after the initial setup, i.e: handling invoices and paying the taxes, so you don’t need to bother about that and can focus on your business.
The Four Steps for Starting your Company in Estonia
I mentioned that you need to be an e-Resident before starting a company in Estonia, but actually you can start the process right away before even applying for e-Residency. Here’s how I did it.
Signing Up and Initial Setup
The first thing to do is Signing Up. Once you do, you are taken to the screens I mentioned earlier where you are asked about your business.
What they are trying to understand is if you are an iOS developer who earns money from App Store sells, or a freelancer doing design jobs, a blogger, or maybe an entrepreneur with a SaaS business.
This will allow them to know the work that’s going to take them managing your invoicing and taxes.
Important to note, at this early stage you can check if your company name is valid. Basically, you just enter the desired name for your company and check if it’s already taken.
This, 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.
Becoming an Estonian e-Resident
I talked about the Process of Becoming an Estonian e-Resident before. Basically, at this stage, you will need to wait until your application gets approved, and you have your ID card in your hands. It usually takes 2-3 weeks, so be patient!
Registering your Company
Once you have your digital ID, the moment of truth has arrived. You can sign into your LeapIn account with it by using the card reader that came alongside the ID card.
The card comes with two PIN numbers. The first one is used for authentication, and the second one is used to sign documents. Hence, you will use the first one to login into LeapIn.
At that very moment, you start to feel the power of e-Residency. Then, you can proceed to register your company. You will be asked some more details about your company, and asked to sign some documents using your second PIN number.
The registration process is really fast. It only takes about 2-5 days to register your company. Then, you just need to open your bank account.
Opening your Bank Account
This is not a mandatory step. In fact, you have two options:
- Open a standard business bank account with LHV
- Use a payment service online like Transferwise or Holvi.
Edit: Recently, LHV decided to add absurd fees to e-Residents that are non-residents (physically) in Estonia. Concretely, 20€/m for business bank accounts and 10€/m for personal bank accounts. In my view, that’s a huge step back for the e-Residency program. I won’t recommend you to open an LHV bank account currently, especially when there are so many good alternatives such as Holvi, Revolut Business, Transferwise or LeoPay.
In our case, as we were staying in Riga, which is only 4 hours away from Tallinn, and LHV had no fees 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.
Thus, 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 ordered a Taxify. Taxify is a great startup similar to Uber or Cabify that operates in the Baltic countries. I can certainly recommend you to use their services, as they are really cheap, and the service is top-notch.
Finally, at the LHV headquarters, we meet with Marje. LeapIn staff had prepared everything for our meeting, and Marje was really nice with us, making the whole experience a pleasure.
I have found more problems opening bank accounts in my home town in Spain.
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 LeapIn dashboard. I could issue invoices with just some clicks and get paid. Also, I could register expenses, business trips, and control every other 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 20% of what you get out of your account (i.e: your salary) in taxes.
That’s all you need to know.
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.
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 LeapIn headquarters, and then LeapIn sends it to your location of choice.
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.
Since I wrote this post, I have become an affiliate for LeapIn. I want these things to be as transparent as possible. If you use the “DigitalLeaves” code, both you and I will get a 100€ discount.
Thus, if you found this post useful, I would be really grateful if you showed me your appreciation by using my referral code when signing up.
You can enter this code in the “Referral Code” field of the Personal Details section during the Sign Up process. Thanks a lot in advance! 😍
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.
Years ago, I quit my 9 to 5 job and became a freelancer first, then a solopreneur, and finally a digital nomad. Managing my company back in Spain was a nightmare until I discovered the e-Residency program and opened my company in Estonia. That changed my life.
After some years managing my business, I know the tricks of the trade. I can offer you advice on how to become location independent, found an European company you can manage online while traveling, and avoid unnecessary costs. If you are ready to take the leap, but have some doubts or don't know where to start, let's get in touch.
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