FIE (sole trader / füüsilisest isikust ettevõtja) and OÜ (private limited company) are the two main ways to run a business in Estonia. The choice is not “which is cheaper”, but: how large is the risk, how much profit stays in the business, and how much admin you can handle. Here is the 2026 comparison.
Liability
A FIE is liable for obligations with all personal assets. An OÜ's liability is generally limited to share capital and company assets — your personal assets are protected if you meet board duties of care and do not mix personal and business money.
If you sell a low-risk service and turnover is modest, a FIE can be simpler. If you take loans, hire people or sign larger contracts, an OÜ is usually safer.
Taxation in brief
- FIE — income is taxed as personal income; social tax follows FIE rules. You cannot “leave profit in the company” the way an OÜ can
- OÜ — retained earnings are not taxed at company level; tax arises on profit distribution (dividend 22/78) or labour payouts
The OÜ advantage grows when you want to reinvest profit or plan dividends later. A FIE is often simpler for starters with small costs and risk.
VAT and declarations
Both forms can be VAT-liable. The threshold is €40,000 of taxable turnover per calendar year — see VAT registration. As a VAT person you file the KMD every month by the 20th.
An OÜ often also has TSD (salaries, board fees, dividends — by the 10th) and an annual report. A FIE has its own filing rhythm; as the business grows, accounting gets complex quickly.
Bookkeeping and credibility
An OÜ needs proper bookkeeping and an annual report. Partners, banks and public tenders often prefer an OÜ. A FIE fits freelancers and small local services well.
When to move from FIE to OÜ?
- Turnover approaches or leaves the comfort zone (e.g. above ~€30–40,000 and growing)
- You want limited liability
- You plan employees or investors
- You want to leave profit in the company
The switch = transfer / wind down FIE activity + forming an OÜ. Plan taxes and contracts before, not after.
GPCONSULT OÜ
We help choose the form, launch the OÜ and set up bookkeeping — without unnecessary steps and double costs.
Choosing between FIE and OÜ?
We walk through your turnover, costs and risks — and say plainly which form fits now.
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