William H. Cronenberg
Attorney at Law
I expect to raise some eyebrows among my professional colleagues by comparing the Estonian company form to the legendary Avtomat Kalashnikova (AK) Russian military assault rifle. However some of the paralells are quite notable. Let me explain.
As a military cadet in the United States at the height of the cold war, I was startled to hear my Army instructors say that Russian AK rifles were superior to our M-16´s. As combat veterans of the Vietnam war they certainly knew what they were talking about. While I appreciated their candor, it did not inspire confidence when being prepared for possible future wars involving the same weapons! Naturally we asked why this was so. Below I summarize the five main answers. Let´s consider each in turn:
Economical to make; simple to use; highly reliable; easy to maintain; impressively effective.
Economical to make.
AK´s are made from mostly stamped parts, making it among the least expensive weapons to manufacture. This is a major reason they are the most produced firearm in history, with approximately 100 million made worldwide. More than all other assault rifles combined!
An Estonian company is also economical to make. Not the cheapest on earth, but for approximately €600 for a professionally prepared package, the pricing is reasonable by any standard. I doubt you can have a company registered in another EU/Eurozone country for less.
Simple to use.
Experts estimate it takes 1 week of training for a typical infantry recruit to learn basic proficiency with an M-16. To achieve the same level with an AK rifle: 4 hours.
Thanks to Estonia´s business friendly philosophy and straightforward laws, an Estonian company is similary user friendly. Comparing tax laws for instance, Estonia´s income tax law comprises approximately 75 pages of text. The corresponding U.S. Federal Code (plus IRS rulings) contains well in excess of 70,000 pages! Which would you prefer given a choice?
AK´s were designed to function in the muddy and harsh conditions of the Eastern front in WWII. Relatively large spaces between the moving parts enable the rifle to fire without jamming in spite of snow, dirt, mud, rocks, sand, etc. in the firing mechanism. Rifles recovered in Vietnam which had been buried so long that the wooden parts had rotted away consistently proved capable of firing without even a cleaning.
Thanks to the relative simplicity of Estonian commercial law and a strong pro-business ethic, Estonian companies are also highly reliable. Estonia maintained a stable business and banking environment and a virtually balanced State budget even through the depths of the recent world financial crisis. There is no credible political plan to tamper with such successful policies.
Easy to maintain.
The AK was designed for glove clad soldiers in the harshest conditions imaginable. Its legendary simplicity also makes it easy to clean and service. Vietcong fighters cleaned their AK´s by tying knots in their bootlaces, dipping them in used motor oil, and pulling them through the rifle bore. Clean enough for an AK. Don´t try that with an M-16!
Estonian companies are required to file annual reports, and if they are conducting VAT or other taxable operations also monthly reports. Certainly some offshore jurisdictions promise exemption from such obligations, but they cannot offer the same capabilities. For ease of maintaining an onshore, EU compliant, fully capable business entity inside the Eurozone, in a country with a rock stable banking system, the Estonian company is top of its class.
The Vietnam veterans who admired the AK faced it in jungle combat, far from the arctic tundras General Mikhail Kalashnikov had in mind when designing it. Yet the rifle functioned equally well and was especially suited to short range, close combat in dense vegetation. Some American soldiers lost their lives when their rifles jammed and failed them in a critical moment. This hardly ever happened to soldiers carrying an AK.
An Estonian company can engage in virtually any legal business one might create a company for. It can be owned by virtually anyone, anywhere in the world. Of course it is designed first and foremost for doing business in Estonia and the European Union, and in this environment it excels with important advantages over non-EU companies as well as competitors from other EU jurisdictions. Still every situation is different, and a full analysis of the many possible advantages would exceed the scope of this article.
Now dear readers, as fun and interesting as it has been to compare the Estonian company to one of the most famous military weapons in history, at some point we have to take a step back and concede that I am slightly humorously „comparing apples with oranges“. Deciding what kind of company to use for your business is quite different from picking a battle rifle, even though business may resemble war at times. If you are not in Estonia but are considering establishing an Estonian company, it means that unlike a soldier, you probably have many options. This is good, but also requires you to exercise sound judgment and choose wisely.
Back to my military analogy, we should note that when the next big war came a few years later, the cold war was over and it broke out in the deserts of Arabia. Updated versions of the AK and M-16 were again on opposite sides of the battle line. While the AK surely performed solidly for the Iraqis carrying it, the longer range and better accuracy of the M-16 gave it the advantage in this conflict. And ironically, U.S. soldiers given the choice preferred the much older M-14 rifle, with a more powerful cartridge and accurate out to even greater distances.
Every business and every business situation is different. Estonian companies are quietly growing in popularity with non-Estonian businesspeople for many reasons. Despite its many admirable qualities, an Estonian company may not be the best choice for your situation. This is why it is smart to consult an experienced professional who can confidentially evaluate your plans and bring you a clear understanding of the relevant advantages and disadvantages. This is the best way to ensure that you will in fact be able to „hit your target“.