Estonian Company Headquarters (ref: Holding Company)
Modern technology companies that operate in multiple countries typically have a corporate structure whereby the firm will have its headquarters in a core location that offers flexibility for operations, efficiency for taxes, and other related benefits. Furthermore, the parent company may open local entities as subsidiaries in each of the countries which it operates. This parent company maintains control and ownership of those subsidiaries.
I am moving forward with an early stage technology venture and recently secured my status as an Estonian e-Resident. I am looking to model my corporate structure in accordance with the above example. While I am a US citizen, I have an interest in setting up my headquarters in Estonia as well as utilizing the Estonian entity as a the parent company for each subsidiary that I open. To start, I expect my first subsidiary will be in Brazil. As the business grows there could very well be follow-on entities in Colombia, Argentina and others. (Note that my expectation is that all revenues will be earned abroad outside of Estonia as well as the United States)
Can anyone in the E-residency Network share any relevant information that should be considered when taking these steps? Or if this structure has been executed by others in network, can you share your overall experience?
My main areas of focus include:
- Tax implications
- Considerations when raising early stage investment (e.g. Venture Capital)
- General Risks
- Required legal documentation and frameworks
- Recommended entity (ref: https://www.eesti.ee/eng/topics/business/ettevotte_loomine/ettevotlusvormi_valik/ettevotlusvormide_vordlus)
Many thanks for your consideration,
James Samuel York
This is a fascinating topic and has an endless number of "rabbit holes" you could potentially venture down in pursuit of the right answer that's specifically tailored to your exact situation.
I have some experience with this having built up the infrastructure for a company (albeit on behalf of others) that was headquartered here in Tallinn but was designed to sell to the US market without any significant tax nexus implications there. It was imperative to me that I made sure all was above board, and in that I was successful; but it was definitely a steep learning curve to have been able to structure it like that as I needed to very quickly become well versed (enough) with multiple legislative landscapes in order to best be able to navigate the path forward.
The best piece of advice I can offer is to find competent legal and accounting counsel and heed their advice as you build out such a structure. As a US citizen you have to be particularly dutiful in your actions as we are subject to a significant number of reporting requirements in return for the privilege of holding our particular passports.
And of course it's worth adding that while figuring out the optimal structure is both a fun and important task, the most important thing that's needed, ultimately, is to make sure the venture that the infrastructure would ultimately support can hold water.
Good luck and if I can be of any further help, feel free to PM me!
You are asking the right questions which cannot be answered in only one way. We would love to discuss the possible scenarios with you in a meeting to determine the best corporate structure for your business. If that is something you would be interested in, please let us know (firstname.lastname@example.org).
You ask about the overall experience of a corporate structure and the risks involved. We can say that the best way to put a corporate structure together is by consulting with an accountant and a tax adviser/lawyer who has experience with cross-border business. This is something we can help you with.
There are several risks you need to be aware of. One important matter is the permanent establishment risk. You can read more about it from here: https://1office.co/estonia/managing-permanent-establishment-risk/. The other one has to do with taxation and tax treaties between Estonia and Brazil, for example. If the Estonian HQ is not earning any revenue and all revenue is earned in other countries, the taxation gets complicated.
@James-Samuel-York Hi James, it sounds like you have great experience and perspective here. I would certainly appreciate touching base offline to learn more. I will reach out to you directly.
@1OfficeEesti Thanks for the insight and offer to assist. I would like to collect some more information so that we can have a more constructive conversation. I plan to reach out to your firm in the next couple weeks.
Lynwood Sewell Bell
Hi Marcus, It sounds like you are getting all the guidance you need but in case it is helpful, you are welcome to look at my old sites which reflect 35 years of international structuring in all of your areas of interest including public or crowdfinancing of them.
If you time permits, go to the techcampus site below ... pick the "Start Today" button and browse around until you realize how much there really is to consider if you are going international or ... that it is easier to just stay at home and operate locally.
James is absolutely right that as a US person you face more hurdles than those from other jurisdiction. the 1Office people are also very helpful and I have my company offices with them.
Good luck, Lyn Bell
Marcus Chad Arroyo
@Lynwood-Sewell-Bell Hi Lyn, Thank you for the additional resources. As noted already, there is a lot of material to cover. I will review the links you have provided. Operating locally as a standard "sociedad limitada" in Brazil would be a good short term solution to getting the business going, but the materials I have covered thus far indicate that it is not preferable long term with operations in multiple countries. More homework on my side for sure.
In case you haven't had a chance to do so already, you may find a number of topics covered in this subsection of the forum: https://community.eresnetwork.eu/category/12/legal
In addition to the issues already covered, I would suggest you to also look into the protection of IP rights, which could be one of the most important factors in a tech venture like yours.
Lastly, as deciding the seat and structure of your company is indeed a nuanced matter, it would be helpful if you could offer some additional details, here or in private (e.g. through the chat function here). Should you need more detailed advice, please do not hesitate to contact me directly at email@example.com - for corporate planning, securing funding, etc we have in place a team with extensive experience, as well as a wide network of connections from all over the world.last edited by
Information posted above is intended as a general guide and does not constitute legal advice.
Marcus Chad Arroyo
@DERLING-Attorneys-at-law Edgar, the link and offer to assist are much appreciated. I will read over what you have sent in detail and reach out with more detailed information next week.