Company formation: Germany vs. Estonia – A comparison of costs and time

Starting a business in Germany can be arduous, time-consuming, and expensive. Notary fees, tax advisor charges, and complex bureaucracy mean the process can take several months. But there is an alternative: setting up a company in Estonia.

Estonia offers a fully digital, fast, and cost-effective solution that allows entrepreneurs to establish and manage their businesses 100% online.

In this article, we compare the setup costs, time commitment, and administrative requirements in Germany and Estonia.

Starting a business in Germany: Steps, duration & costs

1. Lawyer for the Shareholders’ Agreement
   • First, a shareholders’ agreement must be drawn up. It is advisable, especially for first-time founders, to do this with the help of a lawyer.
   • The costs vary depending on the complexity and the lawyer chosen. For sole founders, it can be a few hundred euros, while for startups involving investors, it can quickly amount to several tens of thousands of euros.
2. Notarization of the Articles of Incorporation
   • Using the shareholders’ agreement, the notary draws up the articles of incorporation.
   • Notary fees are approximately €375 for a single-member limited liability company (GmbH) and increase with multiple founders.
3. Opening a Business Bank Account
   • A business bank account is opened, into which the share capital must be deposited. However, the account can only be used after full registration in the commercial register.
4. Registration in the Commercial Register
   • The bank confirmation of the share capital deposit, as well as other relevant documents, are forwarded by the notary to the commercial register. This process usually takes about a month. However, it can also take several months, especially if the local court raises objections.
   • The fees for registration in the commercial register range from €100 to €200.
5. Engaging a Tax Advisor
   • For limited liability companies (GmbHs), it is legally required to have their annual financial statements audited by a tax advisor. Although preparing the financial statements and bookkeeping can certainly be done independently, due to the complexity of tax law, it is advisable to engage a tax advisor from the outset.
   • The costs vary considerably, depending on the complexity of the service.
6. Tax ID and VAT ID
   • Applying for a tax ID usually takes one month. Obtaining a VAT ID can take between one and six months, depending on the processing time at the tax office.

Important information during the start-up phase

• Once the signatures are affixed at the notary’s office, the limited liability company (GmbH) is considered “in formation” and can theoretically conduct business, albeit with personal liability until registration in the commercial register.
• Many steps can be initiated simultaneously. For example, as soon as the deed is received from the notary, registration with the tax office for a tax ID and VAT ID can also be initiated concurrently.
• If the local court raises objections, for example, regarding the company name, all these changes must be communicated to the various authorities, such as the tax office and the bank, independently. This differs from Estonia, where you only register with the authorities once, and all further communication is handled online and automatically between them.

Starting a business in Estonia with e-Residency

Applying for e-Residency is recommended.

If you haven’t already done so, it is recommended that you first apply for e-Residency. Estonia’s e-Residency program allows entrepreneurs worldwide to obtain a digital identity issued by the Estonian government. With this digital identity, entrepreneurs can remotely access Estonian services, including the ability to register a business, open bank accounts, issue invoices, and pay taxes online.

1. Access to Estonian digital infrastructure: E-residents receive a digital ID card that allows them to sign documents digitally and access secure e-services.
2. Application process: Applications for e-residency can be submitted online via the official e-residency program website. Applicants must enter personal information, scan their passport, and provide a statement outlining their business purpose.
3. Processing time: After submission, the application is reviewed by the Estonian authorities.
4. Cost: The application fee is €150.
5. Collection of the digital ID card: Once the application is approved, the physical e-residency ID card is sent to an Estonian embassy or consulate, from where the applicant can collect it in person. This process (including processing and shipping) typically takes 3-8 weeks.

Start a company in Estonia with Silva Hunt OÜ

1. Establishing an OÜ (Estonian Limited Liability Company)
   • Duration: Establishing a company in Estonia takes 1–2 days (after receiving e-Residency). The fastest company formation was 15 minutes (a registered world record).
   • Costs: €630, including €265 in government fees for company registration.
2. Opening a Business Account
   • Unlike in Germany, Estonian companies can use fintech solutions like Wise, Payoneer, or Revolut from the outset.
   • Duration: 1–2 days
   • Vary depending on the provider. Our clients have had good experiences with providers like Wise and Revolut. These offer user-friendly platforms that are particularly suitable for digital business models. You can find out more about the options here.
3. Tax Registration & Accounting
   • Duration: No further registrations are required. The tax office is automatically notified of the company’s establishment.
   • Accounting costs: From €165/month (€1,990/year).
4. VAT Registration (VAT Number)
   • Duration: Registration is entirely digital and can be valid immediately if required.
   • Costs: No additional costs

Comparison: Company formation in Germany vs. Estonia

Factor	Germany (GmbH)	Estonia (OÜ with Silva Hunt)
Incorporation time	1–3 months	1–2 days or 3–8 weeks if e-Residency needs to be applied for
Minimum share capital at incorporation	€12,500 (out of €25,000)	0,01 € (recommended: 2.500 €)
Notary fees	from 500€	Not required
Business bank account opening	1–2 weeks (in person)	1–2 days (online possible)
Accounting fees	150–500 €/month	from €165/month
Corporate income tax	15% + trade tax	0% on reinvested profits
VAT registration time	1–6 months	Immediately, if desired

Why Estonia is the better choice for digital entrepreneurs

✔ Fast & fully digital company formation in Estonia within days

✔ No notary fees, no high capital requirements

✔ 0% corporate tax on reinvested profits

✔ VAT registration in a few days