Every now and then we receive questions about becoming a sole proprietor in Estonia. It is useful in very limited and it is difficult to see how it could for example benefit any e-residents. If there are any success stories, do let us know.
The facts about registering etc can be found here:
In general, it could be a useful format for very small scale activities such as selling handcraft, farmers, translators etc. It could be an option. For registering, you need an ID-card that permits digital signature and pay the state fee of 13 euros - the process is easy and cheap.
There is no annual report, the accounting rules are very easy - money coming in is income and money going out is expenditure and that is it. You can easily use the money you earn from the activities (in case of a limited liability company, the company money has to be strictly separate from your private finances). Also, the FIE form can be transformed into "osaühing" should it be needed.
The negative aspects include the fact that you are liable personally for everything that happens with the business. In case of a limited liability company the liability is capped to 2500 euros (or more if the share capital is more). You also cannot pay dividends as a FIE.
You also cannot rent your self your apartment for example which is possible to a certain extent in case of OU. FIE would still be liable for VAT with the turnover exceeding 40 000 euros and in case of VAT declarations, the rules for FIE could be more complicated.
To sum up, the form of "osaühing" is still an easy and preferred way of doing business. FIE as a form is reasonable in very limited cases.