As a freelancer or solopreneur, there are many advantages to basing your business in the European Union (EU.) The EU provides a world-respected and solid trading environment with a high degree of flexibility and freedom for businesses in every industry. And by taking advantage of Estonian e-Residency, you can operate your business remotely from anywhere in the world.
In this article, we'll explore the pros and cons of opening a self-employed business in the EU, the requirements and procedures for setting up a business-of-one in the EU, and the best countries in the EU for solopreneurs.
We'll also cover common steps for starting an EU business-of-one, and one popular way to open a fully remote business in the EU as a solopreneur.
What are the pros and cons of opening a self-employed business in the EU?
There are many advantages to setting up a self-employed business in the EU.
The EU is a large single market with over 500 million consumers, making it an attractive destination for businesses. According to Wikipedia, the EU is a sui generis political entity (without precedent or comparison) combining the characteristics of both a federation and a confederation.
It comprises 27 member states at present, including 19 EU member states that have fully implemented the economic and monetary union and use the euro currency. This makes the trading environment very frictionless and straightforward.
Business advantages of the Eurozone, Customs Union, and an expanding EU
As well as a common currency, business in the Union is made easier thanks to the European Customs Union, which is a trading alliance that allows its members to work as a single unit economically, enabling free movement of goods without tariffs and customs duties. The Customs Union also helps prevent the trade of dangerous goods, plants, and animals, as well as fighting organized crime, terrorism-related activities, and tax fraud — protecting your business, and your customers.
The single currency, in use by most EU countries, is also a boon to money transfers for business. In the SEPA zone (Single Euro Payments Area), there is no distinction between domestic and international payments in euros. Transactions are carried out literally instantly and in most cases without commission, even for commercial banking.
Beyond the 27 members, the EU single market includes Norway, Switzerland, Iceland, and Lichtenstein. And the despite the notable departure of the United Kingdom in recent times, the EU is growing — with negotiations for accession to the union in process with many nations, including fast-developing Western Balkan countries like Albania and Serbia.
The most recent country to be granted EU candidate status was Ukraine in 2022.
What are the barriers and disadvantages to doing business in the EU?
While the shared currency and customs unions create consistency across the membership, there is still a lot of flexibility in how businesses can operate in the EU.
This means that while a lot of trading and commercial law might be common across the bloc, all member states have their own business codes, and their own rules and regulations.
For EU passport holders, it may be beneficial to have a close look at the requirements where they are presently tax resident.
This is because the freedom of moment in the EU means it might actually make sense to relocate and assume tax residency somewhere else, without needing to change citizenship, in order to open a business. For example, the minimum share capital required to open a limited company is €25,000 in Germany (closely followed by 5 figure sums in Switzerland, Luxembourg and Lichtenstein), compared with €200 in Malta. Of course, relocating your home and family life to another country is no small matter, not least as the EU comprises so many different languages and climates and cultures.
This diversity is a beautiful thing to be a part of for life in general, but one of the biggest trading challenges is the existence of language barriers, in different countries. All businesses need to be able to communicate with customers and suppliers in different languages.
There are also differences in taxation between member states, which can make it difficult to comply with all the relevant rules and regulations, or to work out the best place to operate from in the first place.
Estonian e-Residency is a great solution for anyone who wants to open an EU-based business, in an environment where English is widely used and understood, and without having to physically migrate.
Best legal forms for solopreneurs in the EU
While many solopreneurs and freelancers operate without difficulty as self-employed sole traders in their local region, for many people the formation of a company brings many advantages.
These include:
- Consistency of location for your business, even if you want to move around more
- Limited liability, in our increasingly litigious culture
- A separate presence/entity, which can make you appear established and substantial (and even hide the fact that it’s only you, or at least not make it obvious!)
- More flexible ways to pay yourself and/or reinvest in your business, via a blend of professional fees, dividends and/or salary
- Income smoothing, by separating your personal and business resources and assets
The most common structures for businesses in the EU are sole proprietorships, limited liability companies (LLCs), and partnerships.
Each type of company has its own advantages and disadvantages, and different costs — but a private limited company like the Osauhing (OÜ) in Estonia is usually an affordable option, and usually the quickest, as well.
This varies greatly depending on location, however, as indicated above, and also your longer-term plans for your business activity. If you want to hire people in the future, or partner with other shareholders, it’s good to factor this into your plans.
Above all, this is one area where you should take specialist advice with an expert in your country of residence, to make the best decision for you. Even in Estonia, the possibilities and options may be more complex than you’d think!
What are the requirements and procedures to set up a a self-employed business in the EU?
Before any person, even an EU citizen, can set up a solopreneur business in the EU, there are a number of steps to take and decisions to consider.
1. Choose your country of registration
The first step is to choose the country in which you want to register your business, bearing in mind all the points discussed above. As well as where you wish to live, other factors that you may want to consider include the cost of setting up and running your business, the availability of skilled workers, and the tax regime.
2. Incorporate your company
Once you have chosen your country of registration, you will need to incorporate your company. This involves completing various administrative tasks such as registering with the local authorities and opening a bank account.
3. Obtain necessary licenses and permits
Depending on the type of business that you are setting up, you may need to obtain certain licenses and permits. For example, if you are setting up a restaurant, you will have to obtain a food license from the local authorities, or you may need a certification that you are qualified to perform a professional service.
Once again this varies greatly, across different EU countries and industries — something to bear in mind when contracting for local services as well, and do not assume things mirror what you are used to where you live.
4. Register for VAT
If your business is registered in an EU member state, you will need to register for value-added tax (VAT). This is a consumption tax that is applied to goods and services sold in the EU. The rate of VAT varies from country to country, so be sure to check with the relevant authorities before registering for VAT.
One good thing is that when you buy goods and services from anywhere within the EU, you will be able to offset the VAT you pay against the VAT you have collected for your nation’s government, or you may be able to invoice from one business to another without handling a VAT payment at all.
This common VAT registration system is another advantage of the Eurozone, and also means you can quickly check the status and legitimacy of any potential trading partner against the EU wide database.
5. Comply with employment law
Not every company-of-one stays that way forever, and if you plan on hiring employees for your business, there will be employment laws that you need to be aware of. These laws vary from country to country, but they typically cover topics such as minimum wage, working hours, and health and safety regulations.
The costs of being an employer also vary a lot too, so if this is your intended business model now or in the future, then it’s worth comparing the on-costs of things like employer’s social security contributions and contributions to retirement savings. Even the costs of letting people go, can make or break a company when times get tough.
Which are the best countries in the EU to open a business for self-employed entrepreneurs?
Bearing in mind that most options for business incorporation require physical relocation for personal tax residency, where should you choose?
Naturally we at Xolo are a teeny bit biased towards Estonia, not least because you can operate from anywhere as an e-resident.
But there are 26 other options to consider!
You could probably ask each of the 500 million EU citizens and get as many different answers. But when it comes to business-friendliness, there are specific factors which might outweigh even your favorite food, climate, language, or football team.
Even for business, your priorities will influence your choices. For example, international business consultant from the Czech Republic Yalin Yuregil proposes that the top choices depend on whether you prefer somewhere:
- Easy for doing Business: Denmark, Sweden and Lithuania.
- Easy for starting a Business: Greece, Estonia and Ireland.
- Easy for paying Taxes: Ireland, Denmark and Finland.
While opinions vary, and business rules and regulations are changing all the time, you will find the same places mentioned over and over — for a range of excellent reasons:
Opening a solopreneur business in Ireland
The Irish economy experienced a boom with the emergence of the tech and life sciences sectors around the turn of the century, attracting the nickname of the Celtic Tiger.
This growth slowed with the global crisis of 2008, requiring bailout assistance from the EU-IMF program. But Ireland has bounced back strongly, pivoting from construction and legacy industries towards strong exports and innovation sectors. It remains a great place to start any business, especially in anything tech related.
The main reason Ireland’s economy rebounded so strongly was its government’s favorable attitude towards business, reflected in fiscal policies like a low corporate tax rate of 12.5%. For this reason, many big-name technology firms like as Google, Twitter, Facebook and LinkedIn have established their European headquarters here, and there is a great skilled workforce to hire from.
The Irish government has also allocated significant public resources to support new businesses, and there is also a movement called Grow Remote, to support remote work from rural areas with networking, infrastructure, and opportunities.
English as the first language is obviously a huge advantage too, and since Brexit, Ireland is the only place that ticks this box — while Estonia and some other nations offer many multilingual services and opportunities, this varies a lot across the EU as a whole.
Opening a solopreneur business in Portugal
Boasting very attractive tech and digital nomad visa schemes, as well as an enviable climate and quality of life, Portugal is an increasingly popular destination for startups and solos.
Although hot-spots like Lisbon are seeing shifts towards gentrification, there are still plenty of places that you can enjoy a great standard of living on a modest income, and the Human Development Index (HDI), which is an average measure of human development, happiness, and standards of living, ranks Portugal among one of the safest and happiest countries in the world.
The two main business structures in Portugal are the LDA and the SA. The equivalent of a Limited Liability Company in Portugal is called a LDA (Limitada), which takes around 3 weeks to establish. There must be at least one shareholder with a capital of at least 2 euros (though you may need a little more than behind you, that to get your minimum viable freelance hustle going!!)
Opening a solopreneur business in Bulgaria
The once-overlooked former Soviet state of Bulgaria is now emerging as a hub for entrepreneurs from around the world. Rich in history and natural resources, from the mountains to the Black Sea coast, there’s the perfect location for every freelancer.
One of the newer members of the EU but not yet part of the single currency (this is currently projected for 2024), prices in Bulgaria remain very competitive for rent and daily living. There’s a growing industry of coworking and collaboration centers around the capital Sofia, while digital nomad communities are thriving in beautiful rural spots like the ski resort of Bansko, so you will be in good company as a solopreneur if you base yourself here. Away from main hubs, be careful to check on availability of services like good mobile coverage, however.
According to the World Bank, it only takes 23 days to launch a new business there, and the minimum amount you need in the bank to set up a limited liability company is a symbolic €1 (though there are admin costs of up to €800, and you will need to budget for translators for official business.)
For more information about starting a business, check out Invest Bulgaria.
Opening a solopreneur business in the Nordic nations
Estonia’s near neighbors of Norway and Sweden, along with the other Nordic and Balkan countries, are popular places to start a business, and share much in common culturally. Some are EU full members, while others are within the European Economic Area (EEA) enjoying many advantages of the trading bloc.
While living costs and taxes are higher than in the Balkans (or indeed the Baltics), in return, you get excellent infrastructure, such as the ability to start a Norwegian business entirely online (and very low insolvency costs, encouraging a healthy entrepreneurial comfort with risk.)
Sweden demonstrates its commitment to innovation by investing more than 3% of the country’s growth domestic product (GDP) in research and development, and also invests heavily in education, which has had a great impact on the country’s transition to a culture of innovation.
World-famous brands like Spotify and Klarna had their inception in Sweden, while the Nordics as a whole are now officially the biggest “unicorn factory” in the world — with a total annual exit value for the Nordic region of $4.1billion.
So, there’s something for your freelance enterprise to aspire to!
This region could be the choice for you if you value political stability, ease of operation, and well-developed transport and communications infrastructure, with abundance of skilled collaborators (meaning a skilled and educated workforce, with cash to spend as customers too.)
While the Nordics (just like the Baltic region) have strong regional ties, they are also significant economic and political players in the wider EU and continent itself, with a great reputation for transparency and minimal corruption.
Opening a solopreneur business in Europe, but not the EU?
The Norway option reminds us to consider the possible advantages of operating within Europe and close to the EU, if not actually a member. So, it’s also worth having on your research radar the possibilities offered in:
- Switzerland: Independent, stable, thriving economically and with a skilled (if expensive) workforce, taxes may be lower than you expect, and the service infrastructure is excellent
- UK: Once post-Brexit economic chaos settles, the intention to reduce regulatory friction may make this ex-EU member a great place to do business in future
- Georgia: Ranked 7th in the world for ease of doing business, Georgia’s EU accession may be delayed, but its drive to attract entrepreneurs and innovation is unabated, and is supported by some very favorable tax breaks
Opening a solopreneur business in Estonia
Of all the diverse European business formation options we have discussed, most include the significant requirement that you would need to personally be a tax resident there, in order to take advantage of the possibility.
You can’t simply decide that the grass looks greener over the border, and incorporate somewhere different than where you live. Otherwise, the differences we have been exploring probably wouldn't exist at all.
If you are an EU citizen, then you have freedom of movement within the bloc — however transferring your home and residency is still a big deal, and not without expense, either. For third country nationals, it’s far more complicated and difficult — and it may, in practical terms, be almost impossible.
The big exception here is of course Estonia, where entrepreneurs can take advantage of the unique e-Residency Programme — and form a business which is resident in Estonia, even if they are not.
This means you don’t need to up-sticks and relocate (although there is a digital nomad visa to check out for those so inclined,) and you don’t even need an EU passport, to open and operate a completely legal European business... While you (and your customers) could be anywhere in the world.
Because you can do everything online, Estonia stacks up well against its neighbors in practical terms too. Costs are low, tax is straightforward and competitive. And if you’re happy to operate through a neobank or fintech, rather than a full clearing bank, you won’t need to visit Estonia even once (although we do recommend it, as a great destination!)
The ability to form a company in less than a day, to file taxes and all other paperwork online, and to work 100% in English, are all major advantages.
Furthermore, with Xolo to guide you through the entire process — from applying for your e-Residency card through to paying taxes on all your lovely EU-business-generated profits — it really could not be simpler.
About Maya
Maya Middlemiss is a freelance journalist and author, excited about the future of work, business, money, and technology. She operates her e-resident business through Xolo Leap, so that she can work frictionlessly with brands and publications all over the world, and she is the host of the Future is Freelance podcast. Exploring the social impact of technology on our changing world, and bringing those stories to life in an accessible and inclusive way, is her passion — because all of this is far too exciting to leave it to the geeks. Maya is a 'digital slowmad', originally from London, presently living with her family in Eastern Spain.