Why sole proprietorship is not a great basis for a residence permit

Quite often we get asked if someone can apply for a residence permit based on sole proprietorship (FIE in Estonian). The attraction there is the fact that the minimum investment requirement is 16k instead of 64k.

In reality this basis cannot easily be used.

Although it would be possible to register for FIE for example using the e-residency card, then the other complications would overweigh any benefit. If you are not a tax resident of Estonia then there would be a clear risk of double taxation (as you would still be a tax resident of wherever you actually live as well). Not to mention the tax rules for FIE-s can be complex and require the services of an accountant.

Sole proprietors are liable for their business with all their personal assets as well. This means the business form is only suitable for small scale and low risk businesses. Getting a bank account would also be almost impossible in this scenario.

So the theoretical option of using sole proprietorship as a residence permit basis is in practice not usable.