Estonia has been in the news a lot lately as a hotbed for tech startups. One of the main reasons for this is its e-Residency program and one of the best tax systems in the world, which makes it easy for entrepreneurs to set up and run a global business from anywhere in the world. Delaware, on the other hand, is often considered the go-to jurisdiction for incorporating a startup in the US. So which is the better place to incorporate your startup? In this article, we’ll compare the two jurisdictions and see which one is better for your business.
The Delaware Advantage
Delaware is well-known as a business-friendly jurisdiction, and for good reason. The state has a long history of favorable court rulings for businesses, which has earned it the nickname “The Corporation State”. This pro-business environment is due in part to the Delaware General Corporation Law, which is widely considered
If you’re incorporating a startup in the US and for the US market, Delaware is probably the best state to do it in. The state has a long history of being business-friendly, and it has a number of advantages for businesses, including:
- The Delaware General Corporation Law, which is widely considered to be the most favorable legal framework for businesses in the US
- A well-established court system that has a history of ruling in favour of businesses. The state has a high court that specializes in business law, which makes it easier to resolve disputes.
- A low-regulation environment that is conducive to business growth
- Attractive tax incentives for businesses: Delaware has no sales tax, and its corporate income tax rate is only 8.7%.
- Delaware’s corporate law is very flexible, and it’s easy to set up a complex corporate structure in the state.
Estonia may not have the same long history as Delaware, but it has a number of advantages that make it an attractive jurisdiction for businesses. These include:
- Possibility of fully remote establishing and management of the company if the owner has an e-Resident card
- Best place to grow fast – 0% corporate income tax on reinvested profits
- A well-developed legal framework that is conducive to business growth and provides strong protections for businesses
- Attractive funding and investment opportunities
- A well-developed infrastructure that supports businesses
Estonia is the only country that has developed a program dedicated to supporting foreigners in all the aspects of establishing a business from abroad. This e-Residency program makes it easy for entrepreneurs to set up and run a global business from anywhere in the world. Plus, the e-Residency programme has managed to build an active and open online community of foreign entrepreneurs. This is largely thanks to its dedicated content and support channels, including its blog, social media and support team.
Running Your Startup in Estonia vs. Delaware
There are a number of factors to consider when deciding whether to incorporate your startup in Estonia or Delaware. These include the regulatory environment, taxation, legal protections, and funding opportunities.
Estonia has a more favorable regulatory environment for businesses, with lower regulation and more favorable business laws than Delaware. The corporate tax regime is also more favorable in Estonia, and there are more attractive funding and investment opportunities.
According to e-Resident.gov, the following section provides a high-level overview of Delaware vs. Estonia company formation:
Delaware LLC Formation:
- A local agent is required to form a Delaware LLC, and there is no need to travel to Delaware.
- An Employer Identification Number (EIN) is required to start your business.
- It takes 5-15 working days to register an LLC in Delaware.
- LLCs can be formed online through delaware.gov.
- A business bank account must be set up in person.
Estonia OÜ Formation:
- Start a company 100% online
- A local contact person and legal address are required (easily done via online services starting at €50 per year)
- 1-2 working days to register a company
- Registering a company can be done online via www.rik.ee/en/e-business-register
- Opening a business bank account with Fintech can be done fully online
Estonia vs. Delaware: Which is the better option for your startup?
Both Delaware and Estonia offer many benefits to businesses, but it really depends on the focus of your business as to which jurisdiction is better. If your main market focus is in the US, Delaware will most likely be the better location for your company. However, if your business plans are mainly in the EU single market, Estonia will be a better choice.
Also, the e-Residency programme has managed to build an active and open online community of foreign entrepreneurs, which could be beneficial for your business. Thanks to its dedicated content and support channels, as well as community-led groups and initiatives, startups should have all the resources they need to succeed in Estonia.
If you’re looking for legal aid to help with company formation in Estonia, our LEGID lawyers can help. Our expert lawyers support businesses of all sizes, from startups to established enterprises. We can help you with all aspects of company formation, including choosing the right business structure, drafting articles of incorporation, and preparing shareholders’ agreements. Contact us today to get started: email@example.com