From FIE (Sole Trader) to OÜ — When and How to Incorporate in Estonia
A FIE (füüsilisest isikust ettevõtja) is the simplest way to start trading in Estonia — one EMTA registration, cash-basis accounting, and personal income-tax filing. It stops being simple once turnover, liability, or retained profit enters the picture. Below we walk through when to convert to an OÜ, the tax-cost delta, how to move assets and contracts, and the LV saimnieciskā darbība → SIA and LT individuali veikla → UAB analogues.
When should a FIE switch to an OÜ?
Three signals typically indicate it is time. First, turnover that sits consistently above the point where the FIE social-tax minimum floor is no longer punishing — once you are paying social tax on real earnings, the simpler regime loses its price advantage. Second, the need for limited liability: a FIE is personally liable for business debts, which becomes untenable the moment you take on paid employees, equipment on credit, or client SLAs with real damages.
Third, a plan to retain profits rather than draw everything to personal income. OÜ's distributed-profits regime (0% on retained, 22% on distributions) makes reinvestment cheap; FIE does not have a retained-profit bucket — everything is taxed as personal income in the year earned. We model both regimes on your next-12-month forecast before recommending the switch.
How much tax does a FIE pay vs an OÜ?
A FIE pays 22% personal income tax on net business profit plus 33% social tax — with a monthly minimum base that applies whether or not you actually earned it. The social-tax floor is the punishing part: loss-making or low-turnover FIEs still owe it. Business expenses deduct against profit, cash-basis, and FIEs can optionally register for VAT.
An OÜ pays 0% on retained profits — tax triggers only on distribution, at 22%. Social tax is owed only on salaries actually paid to the owner-employee and is proportional to that payment. The crossover depends on how much profit you keep inside the business; we run the numbers on your real forecast.
Transferring assets, contracts, and the VAT number
Contracts do not transfer automatically. Each client contract needs either novation (signed assignment to the new OÜ) or renewal. Plan a 2-4 week window where both entities are operational: the FIE winds down invoicing while the OÜ starts issuing new contracts. Client communication matters — surprise invoices from a different legal name are a payment-delay trigger.
Assets (laptops, vehicles, domain names, IP) can be sold from FIE to OÜ at market value or contributed as a non-cash share capital contribution, which needs an auditor valuation above €2 500 per item. VAT numbers do not carry over — the FIE's KMKR number is personal to the natural person; the OÜ applies for its own once it crosses the €40 000 annual threshold (or voluntarily earlier). Cash-basis FIE accounting cuts over to accrual-basis in the OÜ, so receivables and payables need careful timing.
LV and LT analogues — Baltic sole-trader conversions
In Latvia the equivalent move is saimnieciskā darbība → SIA. The sole-trader regime caps turnover at €40 000 for the micro-enterprise tax and gets progressively heavier above; a SIA with €2 800 minimum share capital becomes the natural step. In Lithuania individuali veikla offers a flat lower tax rate but carries full personal liability; UAB (or MB for smaller teams) provides limited liability with a lean corporate tax regime. The timing trigger — turnover, liability, or reinvestment — is the same as Estonia; the mechanics differ.
If you operate across the Baltics, the conversion usually lands in the same calendar quarter: close the sole-trader registration in the origin country and open the corporate entity, then migrate contracts. We handle the Estonian leg directly and coordinate with LV/LT counterparts.