Osauhing OU
Stands for: Osauhing
The Estonian private limited company, the workhorse entity for Estonian SMEs and remote founders using the e-Residency program.
Definition
An **Osauhing (OU)** is an Estonian private limited company regulated by the Commercial Code (Ariseadustik). Members hold shares in EUR cents, with minimum issued capital of 0.01 EUR per share since the 2023 capital reform (previously 2,500 EUR minimum, often deferred). Liability is limited to the company's assets, with directors owing duties of care and loyalty.\n\nThe Estonian e-Business Register supports fully online incorporation, often within hours, available to e-Residents and Estonian residents holding a digital ID card. Articles, share register, and management board decisions are signed digitally. The company must have a registered office in Estonia and a contact person if no management board member is an EEA resident.\n\nAn OU operates under the unique Estonian corporate tax regime: corporate income tax is paid only on distributed profits, currently at 22/78 effective rate (28 percent gross-up from 2025) on dividends, and reinvested profits are tax-free. There is no annual corporate income tax on retained earnings. VAT, Social Security, and payroll follow standard EU rules. Annual reports are filed digitally with the e-Business Register.
When you'll encounter it
You will encounter the OU constantly in the e-Residency ecosystem: digital nomads, agency owners, and remote freelancers form Estonian OU companies to invoice global clients with EU VAT compliance and minimal administration. Bootstrapped European founders often use OU as an operating company because retained earnings are not taxed. The form is less suitable for venture-backed startups raising USD-denominated rounds, who usually move the holding to Delaware or the UK.
Used in our guides
FAQ
How does Estonian corporate tax work?
Estonia taxes only distributed profits, not retained earnings. When the OU pays a dividend, it pays tax at 22/78 of the net distribution (a 28.2 percent effective rate from 2025). Profits left inside the company are not taxed at corporate level, which uniquely incentivises reinvestment. Personal tax on Estonian dividends depends on the recipient's tax residency and applicable double-tax treaty.
Do I need to be an e-Resident to form an OU?
Not strictly, but it is the easiest path. Anyone can form an OU through a notarial process or, with e-Residency, online via the e-Business Register. e-Residents receive a digital ID card that signs documents and authenticates with Estonian e-services. The status grants no immigration or tax-residency rights but enables company management entirely from abroad.
Is an Estonian OU good for VC fundraising?
Mixed. Estonian VCs and angel investors invest comfortably in OUs, and the form supports preferred shares and convertible notes through articles amendments. International investors, particularly US funds, often request migration to a Delaware C-corporation or UK Ltd before a priced round. Many Estonian startups maintain the OU as the operating company under a foreign holding structure post-Series A.
References
- Estonian e-Business Register https://www.rik.ee/en/e-business-register
- Estonia e-Residency https://www.e-resident.gov.ee/