e-Residency for SMEs: what are the advantages?
From easy administration to hockey stick growth opportunities, here are the benefits of e-Residency for small to medium sized enterprises
Looking for a dynamic and growth-enabling country to base your business? Consider Estonia, the next frontier in business expansion. Estonia is a powerhouse for established or scalable SMEs with growth-oriented goals.
At the heart of Estonia’s digital business ecosystem lies the key to its seamless operations: e-Residency. Our groundbreaking program offers a secure, transparent digital identity to foreign entrepreneurs, enabling 100% online company registration and minimal bureaucracy. Picture a paperless realm without administrative hassles, granting you the freedom to focus on what’s important: your customers, employees, products and services.
When looking for a jurisdiction to grow an SME, the founder's home country, or a competitive third jurisdiction such as US, UK, or Ireland might be considered to register the company, depending on the growth plans.
But what about Estonia?
Comparisons between business jurisdictions reveal that Estonia is one of the best for growth, including for e-resident entrepreneurs. The location-independent advantages of e-Residency cater perfectly to multinational company founders looking to scale. Business acceleration opportunities abound thanks to Estonia’s pro-innovation culture and low regulation. Pair this with a competitive tax system and our growing network of engaged and helpful founders; and it’s all you and your company need to thrive.
Estonia beckons—the gateway for SMEs eyeing expansive cross-border success. And e-Residency is here to make it even easier. This article considers the advantages of the programme for SMEs, supported by the experiences of real-life e-resident founders.
Table of Contents
- What is an SME?
- What types of SMEs do we typically see using e-Residency?
- Why should an SME founder become an e-resident of Estonia?
- Why start an SME in Estonia with e-Residency?
- How does e-Residency help SMEs easily manage business administration?
- How can e-residents shoot for hockey stick growth for your SMEs?
What is an SME?
SMEs are usually defined according to their size - namely employee headcount and/or financial turnover. For example, in the EU, SMEs are defined in the EU Recommendation 2003/361.
Under this recommendation, an 'enterprise' is defined as:
"any entity engaged in an economic activity, irrespective of its legal form. This includes, in particular, self-employed persons and family businesses engaged in craft or other activities, and partnerships or associations regularly engaged in an economic activity."
SMEs are a category of enterprise, which more specifically cover the following three sub-categories:
- micro-enterprises employ fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million,
- small enterprises employ fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million, and
- medium enterprises employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.
For this article, we are mostly focusing on the benefits of e-Residency for small and medium enterprises. Micro-enterprises will be considered in a separate blog post.
What types of SMEs do we typically see using e-Residency?
E-Residency thinks of SMEs as a broad segment capturing companies with two or more experienced founders, who want a simple way to register a company that has the potential to scale. The segment could contain any of the following enterprises: startups, scaleups, mature businesses, cross-border conglomerates, or multinational companies (MNCs). SMEs are active in a wide range of industries and activities, including technology, marketing, consulting, education, and more.
The companies’ e-residents could be international co-founders, experienced entrepreneurs, professional executives, investor board members, or industry/technical specialists. Hear from e-residents why they chose e-Residency of Estonia for their businesses:
Why should an SME founder become an e-resident of Estonia?
Do business easily with multiple e-resident co-founders
The best way to start and run a business in Estonia as a foreigner is to become an e-resident. E-Residency provides individuals with a secure, unique digital identity enabling access into Estonia’s advanced e-services and business environment.
This is fantastic if you are looking to join forces with fellow co-founder(s) around the world. As long as you all have valid e-resident digital IDs, you can establish truly borderless business ventures 100% online together.
E-residents Ian Wagner and Luke Seelenbinder are co-founders of Funktional OÜ, which they manage from different parts of the world:
Ian Wagner“E-Residency is cool because I can make a company that I can take anywhere in the world and it wouldn’t be tied to any location. I now live in Korea and Seelenbinder lives in Switzerland, but it’s incredibly complicated to register companies locally in both places. In contrast, a company set up through e-Residency can be managed anywhere with no paperwork.”
Get ahead in the world’s most digital country. Find out how to apply for e-Residency now.
Join a culture of entrepreneurship
Becoming an e-resident allows you the opportunity to grow and succeed in a country that’s pro-innovation. Estonia has a business-focused legal framework, is built on entrepreneurship and is a magnet for start-ups.
Estonia is the birthplace of globally recognised unicorns like Wise, Bolt, Pipedrive, and Skype. This is an unrivalled amount of globally successful tech companies in such a compact country. Estonia leads Europe as the most entrepreneurial country for tech startups (according to Atomico's State of European Tech 2021). We also have the highest startup density of any European country with 1,107 startups per million inhabitants, ahead of Ireland and Iceland, according to the State of European Tech 2022 report.
More and more foreign founders are confident in testing their moonshot ideas here, like Glia, Estonia’s newest e-resident-founded unicorn.
Why start an SME in Estonia with e-Residency?
A stable base in the EU
Estonia is an EU member state, meaning your company will not only be registered in Estonia, but the EU too. For EU founders, this means you can trade in the EU with much less bureaucracy than in your own country. For non-EU founders, Estonia thus provides a gateway for your economic enterprise to enter the EU. It's also great if your company has co-founders inside and outside the EU. Having an EU-based company also makes you eligible for EU grants and funding.
E-residents tell us regularly that they take a lot of confidence from operating in Estonia, due to it being an EU-based, transparent business environment. Diana Derval, CEO and founder of DervalResearch says:
Diana Derval“In Estonia everything is transparent by definition, and allows us to have a stable company structure, while working globally.”
Simple and fast company set up
With e-Residency, you get full, simple, secure access to Estonia's online business services. The first time you will really understand how easy and fast our e-services are, is when you register a company. You can do it fully online in as little as 15 minutes and 33 seconds, like e-resident Dominic Panosch of sign.online. Although, we typically see e-residents take between 2 hours and 1 day to register their business.
James Varga, CEO and founder of DirectID, is enthusiastic about the fast set-up:
James Varga"The process – signing up, the 100 euros, going down to the Estonian consulate, was all faultless, I couldn’t complain at all about that. Just the ability to set up, get the business configured.”
How quick will you register your company? Prepare yourself by reading our checklist.
How does e-Residency help SMEs easily manage business administration?
Focus on your core business, not administration or security
Your e-resident digital ID allows you to digitally access all business services, whilst ensuring safe and secure storage of your data. So, you can own and control access to your personal data all while having confidence in Estonia's world-class security infrastructure.
In addition to security, the seamless nature of Estonia's digital services saves you time, paperwork and hassle. This will enable you to focus on your core business, and what's really important for growth: customers, employees, products and services. Imagine having more time to engage with clients, improve your products and services, and test new ideas.
Jan Lagast, CEO and founder of ImpactBuilders is complimentary about the lack of bureaucracy in Estonia:
Jan Lagast“E-Residency enabled me to very quickly start operating a little kernel of my international business, and then gradually grow it without being overstretched by paperwork and structure.”
Easy and efficient business administration tailored to the needs of today’s entrepreneurs
Today’s entrepreneurs lead globally distributed teams, and care about sustainable business practices.
E-Residency makes it easy to run a globally-distributed team for your business. The e-Residency Marketplace is your first port of call to find service providers like Deel and Payhawk to support your remote-first companies.
Argentine e-resident Cristian Larrosa, who manages nine employees distributed around the world puts it simply:
Cristian Larrosa, larrosa music group"Our company is based in Estonia because it just makes everything easier."
These days, most entrepreneurs are not just thinking about the bottom line. Concerns about the environment are also front of mind. Running an enterprise out of Estonia is both efficient and paperless, offering a sustainable way of doing business, by design.
How can e-residents shoot for hockey stick growth for your SMEs?
Build up your business presence in Estonia
Estonia’s tax system is the most competitive in the world. There is no mandatory tax residency, but if you do decide to establish tax residency in Estonia, you might do that by holding key management meetings, renting office space, hiring staff, or registering assets here. This will build your business substance in Estonia, and lower the risk of a permanent establishment in other countries.
Building up your business presence in Estonia might allow you to take advantage of its tax benefits to further expand/grow your company. A transparent, simple tax system encourages entrepreneurship, and makes a company’s path to market more straightforward. For 10 years in a row, Estonia has ranked number one in the International Tax Competitiveness Index, meaning it’s the most competitive and neutral tax code of all OECD countries, ahead of the likes of the UK, Ireland, USA and Germany.
Grow and succeed with the help of our engaged, growing business network of founders
Join our active and growing community of entrepreneurs. Estonia itself is full of problem-solving people and businesses, looking to create, innovate, and collaborate. Add to this e-residents, who comprise a crucial group of our digital society, and it's clear that there are opportunities to network, find clients and business partners.
Dr Priya E. Abraham, CEO and co-founder of VAELIOU has benefited from the e-Residency community:
Dr Priya E. Abraham, CEO and co-founder of VAELIOU, part of Cyberconnecting OÜ“Residency is a door opener to an international network presenting high-calibre experts from various fields. The input and feedback from entrepreneurs and business leaders were invaluable for our solution.”
Being a small country, Estonia’s public and private sectors work closely together. The country’s entrepreneurship-friendly government regularly consults business stakeholders, holds events, and engages in dialogue to better the business environment. E-resident founders can also participate in these discussions and events and access the country’s policy making community.
Furthermore, if you're looking for investment and growth opportunities, you can find funding opportunities in the e-Residency business network.
Read more about how e-Residency offers growth opportunities to e-residents:
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