At Xolo, we believe starting and running a business should be simple.
Since we started in 2015, we've helped over 2,000 people from over 100 different countries to become founders of their own Estonian companies and run their businesses from anywhere in the world. Fun fact: some of them haven't even stepped foot in Estonia yet!
1. Is Xolo for you?
Xolo isn't for everyone. We'd love to be, but for now we only support freelancers, solopreneurs, or one-person, single shareholder businesses.Examples of these are:
- Freelancers & contractors acting as professional service providers e.g. software developers, IT experts, business consultants, marketing & sales gurus, designers, translators or similar
- Packaged software and SaaS providers
- Subscription based online services
- Mobile app and game developers
- E-commerce businesses that buy and sell physical goods (including Drop Shipping and Amazon FBA)
- Businesses that require a licence in Estonia, such as financial services (including crypto-currency), travel agencies, energetics, the sale of alcohol, gambling etc
- Multiple shareholder businesses
If you're on that first list and you haven't got Xolo yet, what are you waiting for? Get Xolo today!
If you're not sure of anything, just ask! We're here to help you. If we can't support your business, we'll happily suggest an alternative way forward, and even another provider if we know of one.
2. What does your business do?
A major part of our signup and onboarding process involves finding out what your business does. We really want to know as much about your business as possible. This means that we will ask you for your business description and everything else about it:
- What your business does specifically
- What services you'll offer
- How are you planning to deliver your services
It's important to be transparent. When it comes to Xolo Leap, the whole concept of e-Residency is about transparency and ease of doing business, so your company data will be publicly available. There are also strict money laundering regulations for everyone running a business and you can't be hidden or detached from your company in any way.
Your business description also helps us to figure out if Xolo is a good fit for you, and if your business can be supported by us. It's also submitted to the Estonian business registry, and the Estonian tax board. And we can even send it to our partner bank LHV if you need an account there. Everyone involved will assess it diligently, so you need to consider this as well when completing your description.
3. It's time to name your new "baby"
When you sign up with Xolo Leap, you get to choose a name for your brand new company!
This is one of the first things we ask you when you sign up. If you already know exactly what you want your company to be called, that's great. If you don't, then you would want to have a bit of a think so that it is both impactful and memorable.
You could of course just stick with your own name, something like 'John Smith OÜ', if you'll be acting as a freelancer, as this will be trustworthy for your clients and easier for you.
However if you're looking to create a brand which isn't just your own name, it's great to try and pick a name which represents what your business does in some way, or something which will stick in people's heads.
And don't forget to do research around what other names are out there already. There may not be a company with exactly the same name, but if there's a company in Europe with a similar name it could cause confusion.
4. Apply for e-Residency and be part of an exclusive 'club'
When you get Xolo Leap, you'll also need Estonian e-Residency. You can start applying for e-Residency before, or after you've signed up for Xolo Leap, it's totally up to you.
You can sign up on the e-Residency website. It'll cost you a one-off state fee of €100. This will give you access to all the necessary online services the Estonian government provides for running your brand new business, along with easy ways to access banking services and Xolo Leap.
5. Using your ID card and Smart-ID
One of the main features of your e-Residency is the digital ID card that you'll receive when you sign up. Once you've collected this, you'll need to put it to good use, when you sign your company registration application for Xolo Leap.
To make digital signatures, you'll need to use your ID card with the card reader that you'll also receive in your e-Residency starter pack. Your ID card can also be used to sign into your Estonian banking services once you've set them up, along with your Xolo Leap dashboard. You'll also need to download the ID card software here and you can always consult our FAQs about ID cards, or the FAQs on the ID card website.
We also highly recommend downloading the excellent app Smart-ID. You use your ID card and reader to sign up with Smart-ID, and from then on you can use Smart-ID to log in to your services, as well as authorise payments from your Estonian bank accounts. This means that you can manage everyday things with Smart-ID and only use your ID card for signing your annual report once a year.
6. Company setup costs
You won't be surprised to hear that starting a company doesn't come for free.
There are a few one-off costs to content with. These are:
- €100 - The one-off state fee for e-Residency
- €190 - The one-off state fee for company registration in Estonia
- €25 - The one-off state fee for online company registration in the Estonian business registry
- €49 + VAT (€58.80) - The fee for your first month of Xolo Leap
And once you're up and running with Xolo Leap, you'll pay that same €49 + VAT per month as part of our starter plan offer. Once you hit €1000 in revenue, this increases to €79 + VAT. However, it's important to know that if your company becomes a VAT payer, you can claim the VAT back at the end of the tax year.
The other possible costs you might run into include travel costs for going to the nearest Estonian embassy to collect your e-Residency card, and costs for setting up your bank account. But we'll cover that next.
7. Choosing a bank
Now you need to choose how you manage your company's money.
We strongly suggest opening an account with our partner bank, LHV. They've been around since 1999, and now have more than 100 000 customers using their banking services. We have a close co-operation agreement with them, and using their feature LHV Connect, you'll be able to view your up-to-date business bank account balance on your Xolo Leap dashboard
Setting up an account with them will cost you a one-off setup fee of €100, a €2 fee for your bank card, and €10 per month from then on.
To open your account, and collect your bank card, you'll need to make a trip to Estonia to meet a representative of LHV and sign on the dotted line. And you'll also get to meet the wonderful Xolo team, so what could possibly be better?
Don't fear though, if you're not able to travel to Estonia for any reason, you're not out of luck. You do have another option - a TransferWise borderless business account. You can set this up completely online, and totally free. It comes with multi-currency support, a company MasterCard, and we're also integrated with them so you can see your account balance in your dashboard.
If you're selling services online, you'll likely want a PayPal business account as well, as they're one of the most recognised online payment providers out there. Getting a PayPal business account is easiest once you've got your LHV business account, as PayPal requires that you have an Estonian business bank account to link to your account.
8. Taxes, Salaries and Share capital
It's important to understand that e-Residency doesn't mean tax residency. If you're an e-Resident of Estonia, and you've established a company here, it doesn't mean you'll need to pay personal taxes within Estonia. Your company/business taxes will be paid in Estonia, while your personal taxes will be paid to your country of tax residency.
Xolo currently assumes that your Estonian company will be an Estonian tax resident and provide you with the necessary tax compliance and reporting in Estonia. Estonian policies on company income tax are quite unique. Company income tax (CIT) is charged on distributed profits (dividends) only and not on the company's income. Distributed profits (dividends) are generally subject to a flat 20% CIT at 20/80 of the net amount of profit distribution.
There are two types of salary you can pay yourself, a board member salary and an employee salary. The tax rates on the two salary types are different:
- The board member salary is subject to personal income tax (20%) in Estonia, independent of whether your actual work was performed in Estonia or abroad. Double taxation can be avoided by the relevant agreements between Estonia and your country of residence (see the list of countries here). This salary is also subject to social tax (33%) in Estonia unless you can provide evidence that you are already paying social contributions in another EU country (A1 form, formerly E101). In this case, no social tax applies in Estonia.
- Employee salary - if you perform all your work outside Estonia (and are treated as a non-resident), no personal income tax nor social tax are paid on employee salary in Estonia. In that case, you're responsible for paying taxes in the country where you're a tax resident.
By default, all salary payments you receive from your own company are considered as a board member salary. If you want to register some of the salary as an employee salary, you can. But be aware that if you decide to pay yourself an employee salary, you have to also pay a board member salary.
You can see more information in our FAQs about receiving money from your company.
The minimum share capital for an Estonian limited company is €2,500. Don't worry if you're not ready to pay it when the company is being established. You can choose to defer the payment for as long as you want if the share capital is under €25,000.
However, you'll need to pay your share capital before you make any dividend payments. You're also still personally liable for your company up to the amount of share capital not yet paid in.
Luckily, paying share capital is an easy process in Estonia. When you're ready, simply make the payment directly into your company bank account and name it 'payment of share capital'.
9. Getting paid
You won't need any third party software to deal with, or create, your invoices when you're a Xolo customer. You'll be able to create and send invoices from your self-service dashboard, and there are basic settings so that you can customise the design of them.
Creating a new invoice is simple, you can simply click the button in the top right hand coner - 'New sales invoice'. Fill out all the fields and an invoice will be created. Done.
You can keep an eye on when your invoices have been paid, or are overdue, in the notification section on the right of the page. And you can get an overview of your company finances in the graph at the top of your dashboard.
These are just nine of the things we think are great to know before you get Xolo Leap, but if you still have unanswered questions, don't hesitate to get in touch at email@example.com.
What are you waiting for? Get Xolo today!