US LLC vs Estonian company (OÜ)
A US LLC and an Estonian private limited company (OÜ) are the two companies location-independent founders most often form online. A single-owner LLC is disregarded for US federal tax, so profits are usually taxed where the owner lives; an Estonian OÜ pays no tax on retained profits and 22% when it distributes them.
Updated
e-Residency is a digital identity for running an Estonian company, not a right to live in Estonia. The table compares tax, dividends, the remote setup and annual filings.
| Criterion |  United States |  Estonia |
|---|---|---|
| Company type | Limited liability company formed under state law | Private limited company (osaühing, OÜ); share capital from €0.01, paid in before registration |
| Tax on company profits | Single owner: disregarded entity by default, so no federal tax at company level unless it elects corporate treatment | 0% on retained and reinvested profits; 22% on distributions (22/78 of the net amount) |
| Dividends to non-resident owners | 30% US withholding unless a treaty reduces it, once the LLC is taxed as a corporation | 0% Estonian withholding to non-resident individuals once the company has paid 22/78 |
| Remote setup | State filing through a registered agent; EIN from the IRS, online only with an SSN or ITIN | e-Residency decision within 30 days, card at the pickup point 2–5 weeks later; registration reviewed by the next working day (expedited) or within 5 working days |
| Annual filings | Form 5472 with a pro forma Form 1120, by fax or mail; state annual report | Annual report within 6 months after year end; TSD return by the 10th of the following month when paying salaries or dividends |
| Penalty for not filing Form 5472 | USD 25,000 per failure | Not applicable |
| VAT | No federal VAT; sales tax is set by each state | 24% standard rate since 2025-07-01; registration above €40,000 taxable turnover in a calendar year |
| Banking partners in our network | 9 | 0 |
- Company type: IRS, LLC classifications (United States); Riigi Teataja, Commercial Code (Estonia). As of 2026-10-25.
- Tax on company profits: IRS, LLC classifications (United States); Estonian Tax and Customs Board, tax rates (Estonia). As of 2026-10-25.
- Dividends to non-resident owners: IRS, NRA withholding (United States); Estonian Tax and Customs Board, companies of non-residents and e-residents (Estonia). As of 2026-10-25.
- Remote setup: IRS, Get an employer identification number (United States); Police and Border Guard Board and Commercial Register Act (Estonia). As of 2026-10-25.
- Annual filings: IRS, Instructions for Form 5472 (United States); Centre of Registers and Information Systems and Estonian Tax and Customs Board (Estonia). As of 2026-10-25.
- Penalty for not filing Form 5472: IRS, Instructions for Form 5472. As of 2026-10-25.
- VAT: Estonian Tax and Customs Board (Estonia); the United States levies no federal VAT, and sales tax is a state matter. As of 2026-10-25.
General information, not legal or tax advice. Approval always rests with the institution or authority.
Our take
A US LLC suits founders who sell to US customers or platforms, want the profits taxed only where they live and are comfortable with a strict federal information return.
An Estonian OÜ suits founders who invoice EU clients, want an EU VAT number and plan to reinvest profits, since tax arises only on distribution. With both, the main risk is the same: if you run the company from a higher-tax country, that country may treat it as resident or as having a permanent establishment there and tax the profits.
Questions
Does e-Residency let me live in Estonia?
No. e-Residency is a digital identity that lets non-residents found and run an Estonian company online. It gives no right to live in Estonia or elsewhere in the EU and does not make you tax resident there.
Which pays less tax, a US LLC or an Estonian OÜ?
It depends on where you live. A single-owner LLC is usually taxed in the owner's country. An OÜ pays 22% only when it distributes profits, and Estonia withholds nothing further on dividends to non-resident individuals, but your own country may tax the dividend or the company.
How quickly can I set up each company?
The e-Residency decision takes up to 30 days and the card follows 2–5 weeks later; after that an OÜ can be registered by the next working day. A US LLC is a quick state filing, but the EIN takes longer for owners without an SSN or ITIN.
The jurisdictions in this comparison
- US LLC formation for international foundersA US limited liability company (LLC) is a state-registered company that non-US founders use to invoice clients, hold assets and access US payment rails. A single foreign owner's LLC is disregarded for federal income tax by default, but as of October 2026 it must still file Form 5472 every year.Learn more
- Estonian OÜ company formation with e-ResidencyAn Estonian osaühing (OÜ) is a private limited company that e-residents can register online through the Company Registration Portal. As of October 2026 the minimum share capital is one cent, and profits are taxed at 22% only when they are distributed.Learn more
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