Forms of business entities
- Sole Proprietorship
- General Partnership
- Limited Partnership
- Private Limited Company
- Public Limited Company
Sole Proprietorship (füüsilisest isikust ettevõtja or FIE)
Any natural person may be a sole proprietor. A sole proprietor may be entered in the Commercial Register at his/her request. A sole proprietor will be entered into the Commercial Register if he or she is registered with the Tax Board as a taxpayer under the Value Added Tax Act. The law may provide other cases in which a sole proprietor will be entered in the Commercial Register.
General Partnership (täisühing or TÜ)
A general partnership is a commercial undertaking in which two or more partners operate under a common business name and are solitarily liable for the obligations of the partnership with all of their assets. A general partnership will operate on the basis of the partnership agreement concluded by the partners. There is no minimum capital requirement and partners shall make monetary or non-monetary contributions in the amount prescribed by the partnership agreement.
The partners shall agree on and enter to the Commercial Register: business name of the partnership, area of activity and the amount of the contributions of the partners. Each partner will receive a portion of the distributed profit corresponding to the partner's contribution (unless the partnership agreement prescribes otherwise). Departing partner of the partnership shall also be solitarily liable with the other partners for obligations of the partnership, which arose before entry of the departure or exclusion of the partner in the commercial register if the due date for performance of the obligation has arrived or arises within five years after departure or exclusion. The partnership shall be dissolved: by resolution of the partners, by court judgement, upon expiry of a term or achievement of an object.
A limited partnership is a company in which two or more persons operate under a common business name, and at least one of the persons (general partner) is liable for the obligations of the limited partnership with all of the general partner's assets, and at least one of the persons (limited partner) is liable for the obligations of the limited partnership to the extent of the limited partner's contribution.
A limited partner shall not have the right to manage or represent the limited partnership unless the partnership agreement prescribes otherwise. A limited partner who has paid a contribution in full shall not be liable for the obligations of the limited partnership and he/she is entitled to the corresponding part of its profits.
Private Limited Company (osaühing or OÜ)
A private limited company is a company that has share capital divided into private limited company shares. A shareholder will not be personally liable for the obligations of the company. A private limited company is liable for the performance of its obligations with all of its assets.
The share capital must be a minimum of 2500 EUR. The minimum nominal value of a share is 6.39 EUR. A shareholder may freely transfer a share to another shareholder. Upon transfer of a share to a third person, the other shareholders have the right of pre-emption.
A share of a private limited company can be pledged or encumbered or divided or transferred to successor if not fixed otherwise in the Articles of Association. The shareholder is required to make a contribution corresponding to the nominal value of the shareholders share. The Management Board organises the accounting of the private limited company. A private limited company must have an auditor if the share capital of the private limited company is greater than 25,000 EUR or if so stated in the Articles of Association.
The management board may have one member (director) or several members. A member of the management board need not be a shareholder. A member of the management board must be a natural person with active legal capacity. The residence of at least one-half of the members of the management board must be in Estonia or in another Member State of the European Economic Area or in Switzerland.
Public Limited Company (aktsiaselts or AS)
Public limited company is a company that has a share capital divided into public limited company shares. A shareholder is not personally liable for the obligations of the public limited company. A public limited company is liable for the performance of its obligations with all of its assets. One or more natural or legal persons without or with share subscription may found a public limited company.
Share capital must be a minimum of 25,000 EUR and the minimum nominal value of a share should be EUR 0,64. Shares shall be registered. Shares shall be entered in the Estonian Central Register of Securities. The rights attached to registered shares belong to the person who is entered as the shareholder in the share register maintained by the company. The management board shall ensure the timely submission of correct information. The number of shares a shareholder can own in a company is unlimited and shares can be freely transferred to third parties. A share cannot be divided. The remuneration of auditors is obligatory and the general meeting, who specifies the procedure for the remuneration of auditors, will also specify the number of auditors. Corporate Governance
The management of a public limited company operates through general meetings of shareholders, the Management Board and the Supervisory Board. A private limited company operates through the Management Board.
The general meeting of the shareholders has the highest authority in the corporation and is to be convened at least once a year. It approves the annual report, distributes profits, elects the Supervisory Board and the auditors of the corporation, amends the Article of Association, increases and decreases the share capital, decides on dissolution the public limited company and etc. according to law. Resolutions are usually passed by a simple majority vote. However, for a change in the Articles of Association or termination of its operations and for a resolution to decrease or increase share capital, a majority of 2/3 is required.
The Management Board is the executive body of the corporation, which represents and manages the corporation. The Management Board must report the corporation's activities and economic situation to the Supervisory Board at least once every four months. The residence of at least one-half of the members of the management board must be in Estonia or in another Member State of the European Economic Area or in Switzerland.
The Supervisory Board plans the strategic activities of the corporation, arranges its management, and controls the Management Board. A member of the Management Board cannot be a member of the Supervisory Board.