How to Register a Business in the US from Estonia

Step 1: Benefits of starting your US business from Estonia

Starting a US business from Estonia offers a multitude of advantages that can significantly streamline and enhance your entrepreneurial journey. Thanks to Estonia's forward-thinking digital infrastructure and its renowned e-Residency program, you can establish and manage a US-based company entirely online. This program allows non-residents to access EU business environments, enabling seamless company formation, banking, payment processing, and even digital signatures. As an e-Resident of Estonia, you can benefit from a transparent and efficient bureaucracy, which minimizes the time and cost typically associated with business setup. Moreover, Estonia's strong emphasis on cybersecurity ensures that your personal and business information remains well-protected.

Another key benefit of starting a US business from Estonia is the access to a vast network of international markets without the need for physical relocation. Estonia's strategic location in Europe provides an excellent hub for conducting business across both European and American markets. Furthermore, the cost of living and operating a business in Estonia is relatively low compared to many Western countries, which can result in significant savings. Additionally, Estonia offers a highly skilled and multilingual workforce, which can be a tremendous asset for any growing business. By leveraging Estonia's innovative digital ecosystem and favorable business environment, you can capitalize on opportunities in the US market while enjoying the perks of Estonia's efficient and supportive business climate.

Step 2: How to start your US business from Estonia

Starting a US business from Estonia is increasingly feasible, thanks to the digital and administrative facilitation both countries offer to entrepreneurs. A crucial step is deciding on the legal structure of your business. Many non-residents or foreign firms opt for forming a Limited Liability Company (LLC) due to its flexible management structure and beneficial tax arrangement. To form an LLC, you'll need to select a state for registration, with Delaware and Wyoming being popular choices due to their business-friendly regulations.

Once you have chosen the state, the next step involves naming your business and ensuring the name complies with the state's guidelines. After that, you'll need to appoint a registered agent within the state who will handle legal documents on behalf of your business. Typically, this agent could be a specialized service. Then, you must file Articles of Organization with the state's Secretary of State office and might also need to draft an Operating Agreement, which outlines the ownership and operational procedures of the business. Finally, applying for an Employer Identification Number (EIN) from the IRS is essential for tax reporting and opening a US business bank account, providing further operational legitimacy in the US market.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Estonia

Understanding Compliance Requirements for Running a US Business in Estonia

Expanding your US-based business to Estonia can provide numerous opportunities for growth and access to the European market. However, understanding the compliance requirements is crucial to ensure a smooth transition and operation. Below are several key considerations to keep in mind:

1. Business Structure

Selecting an appropriate business structure is the first step. In Estonia, the most common forms of business entities for foreign entrepreneurs include:

• Private Limited Company (OÜ): Suitable for small to medium-sized businesses due to simple setup and limited liability.
• Public Limited Company (AS): Ideal for larger businesses, though it involves more stringent requirements and higher initial capital.

2. E-Residency Program

Estonia offers an e-Residency program, which allows foreign entrepreneurs to establish and manage an EU-based company entirely online. This program provides access to Estonia’s advanced digital infrastructure and ease of doing business.

3. Taxation

Understanding the tax implications is critical. Key aspects include:

• Corporate Income Tax: Estonia has a unique system where corporate income tax is deferred until profits are distributed, taxed at a flat rate of 20% on distributed profits.
• Value Added Tax (VAT): The standard VAT rate is 20%, and businesses must register for VAT if their turnover exceeds €40,000 annually.

4. Employment Laws

Complying with local employment laws is essential to avoid legal issues. Important considerations include:

1. Employment Contracts: Must be in writing and include essential terms such as job description, salary, and working hours.
2. Working Hours: Standard working hours are 8 hours per day and 40 hours per week. Overtime is regulated and must be compensated.
3. Social Security Contributions: Employers must make contributions for employee health insurance, pension, and unemployment insurance.

5. Data Protection

Compliance with data protection regulations is crucial, particularly under the EU’s General Data Protection Regulation (GDPR). Key requirements include:

• Data Processing Consent: Obtain explicit consent from individuals before processing their personal data.
• Data Security Measures: Implement appropriate technical and organizational measures to protect personal data.
• Data Breach Notifications: Notify relevant authorities and affected individuals promptly in case of a data breach.

6. Intellectual Property Protection

Securing intellectual property (IP) rights is essential for safeguarding your business interests. Consider the following:

• Trademarks: Register your trademarks with the Estonian Patent Office to protect your brand.
• Patents: Seek patent protection for any unique inventions or processes.
• Copyrights: Ensure creative works are protected under Estonia’s copyright laws.

7. Licensing and Permits

Depending on your business activities, you may need specific licenses and permits. Common sectors requiring permits include:

• Alcohol and Tobacco Sales: Special licenses are required for retail and wholesale.
• Financial Services: Regulatory approval is necessary for financial institutions and services.
• Construction: Building permits and approvals are required for construction activities.

Understanding and adhering to these compliance requirements will help ensure that your US business operates successfully and legally in Estonia. Consider consulting local legal and accounting experts to navigate the specific regulatory landscape effectively.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Estonia

Understanding Tax Obligations for Running a US Business in Estonia

Running a US business in Estonia can be a lucrative venture, but it comes with its own set of tax obligations that must be clearly understood to ensure compliance. Below are some key considerations to keep in mind.

Residency Status

Your tax obligations will depend heavily on your residency status. Estonia follows a residency-based taxation system:

• Resident Entities: Businesses considered residents in Estonia are taxed on their worldwide income.
• Non-Resident Entities: Non-resident businesses are only taxed on income sourced within Estonia.

Corporate Income Tax

Estonia has a unique corporate income tax system where undistributed profits are not taxed. However, distributed profits such as dividends are subject to a 20% corporate income tax rate. This encourages businesses to reinvest profits rather than distribute them.

Withholding Tax

Estonia imposes withholding tax on certain types of income paid to non-residents:

• Dividends: Generally not subject to withholding tax unless paid to low-tax territories.
• Interest and Royalties: Typically subject to a 20% withholding tax, though treaties can reduce rates.

Value Added Tax (VAT)

If your US business in Estonia sells goods or services, you may need to register for VAT. The standard VAT rate is 20%, but some goods and services may be subject to reduced rates.

Double Taxation Agreements

Estonia has a broad network of double taxation agreements (DTAs) that can prevent the same income from being taxed in both the US and Estonia:

• Avoidance of Double Taxation: Consult the specific DTA between Estonia and the US to understand how it can benefit your business.
• Tax Credits and Exemptions: DTAs often provide for tax credits or exemptions to encourage cross-border trade and investment.

Tax Reporting and Compliance

Compliance with tax obligations involves timely and accurate reporting. It is essential to understand the key deadlines for filing various tax returns:

• Corporate Income Tax Returns: Generally filed annually.
• VAT Returns: Typically filed monthly or quarterly, depending on turnover.

Professional Advice

Given the complexities involved, it is highly recommended to seek professional tax advice. A qualified tax advisor can help navigate the intricacies of both Estonian and US tax legislation, ensuring full compliance while maximizing tax efficiency.

Understanding and adhering to these tax obligations will set the foundation for a successful business operation in Estonia.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country