[HN Gopher] Ask HN: What is the best jurisdiction for internatio...
___________________________________________________________________
Ask HN: What is the best jurisdiction for internationally
distributed teams?
This question is inspired by: "How I would start my next startup in
Germany without a GmbH (2020)"
(https://news.ycombinator.com/item?id=31601638) Say you want to
set up a startup and the founders live in Germany, the US,
Australia and Singapore. Your team will be fully remote from day
one. You are looking for a solution where - the company is fully
operational within days or weeks and can be set up without all
founders having to come together in person - day to day business
can managed remotely (e.g. together with local tax advisor /
lawyer) - the jurisdiction has a solid good reputation - the
legal frameworks are understood and accepted by US / EU investors
and VCs - complying with all requirements around hiring employees
is not too much of a burden - official language of documents is
English - you have a good framework for rewarding employees with
equity Where would you incorporate and why? I've looked into the
US (obviously..), UK, Cayman (I know YC allows Cayman legal
entities), Hong Kong, Cyprus etc. and see at lot of pros and cons
for each option. If you've gone through the process, can you share
some insights and whether you'd do it again this way?
Author : SkyAndSand
Score : 110 points
Date : 2022-06-04 14:27 UTC (8 hours ago)
| giaour wrote:
| With a fully remote setup like you describe, what are the
| mechanics of hiring a foreign team member?
|
| Do you need a subsidiary or some legal entity in the foreign
| country in order to pay employment taxes? If they're direct
| employees of the US entity, what's their legal status in the US?
| Can you avoid all these questions by using foreign contractors
| rather than hiring foreign employees?
| SkyAndSand wrote:
| These are all really good questions. I am not sure. I _think_
| that you could work around these issues by either "hiring"
| people as contractors or using something like
| https://remote.com/ or https://www.letsdeel.com/. But I'd
| definitely be interested in hearing how other companies solved
| this problem (which is partially why I created the post).
| lbotos wrote:
| 1. I'm not a lawyer.
|
| 2. If you want to hire someone abroad (outside of the
| business' country) then contractor.
|
| 3. If you hire enough contractors, you may be forced to set
| up an entity or use a PEO. Local governments see that as
| skirting employment law.
|
| (I work at an all-remote company that is pretty transparent,
| and people lambast us all the time because they are upset we
| don't hire in $a_country_they_think_we_should and it's almost
| always "tax and labor law is complex, we can't hire there
| until we understand the implications better.")
| hodgesrm wrote:
| We are US incorporated with staff in 14 countries. We use
| contracts for non-US staff and recently implemented letsdeel.
| So it looks good. You do not need a legal entity in most
| countries and in fact there can be significant disadvantages.
| The accounting management alone is a nightmare if you do it
| yourself.
|
| Ps most people set up their own company and we contract with
| that.
|
| Edit: add ps
| SkyAndSand wrote:
| Thanks for the feedback. Did you generally encounter any
| bigger issues with this setup or would you do it again for
| the next company?
|
| Also, where in the US did you incorporate? Delaware?
| hodgesrm wrote:
| Delaware, though we originally incorporated in the UK and
| then flipped as a condition of receiving investment.
| (Thanks Accel people!) The flip was the most complicated
| thing we've done--accounting, lawyers on both sides to
| avoid the dreaded taxable event, etc.
|
| I would absolutely do the same in future. The contract to
| individual or individual's company is a standard model
| for remote companies like us that work on open source
| software. Some of our staff just have email & github
| access and that's it.
|
| My email is in my profile. Send me email if you want to
| discuss. I'm happy to share details directly.
| donohoe wrote:
| Depends on the country :)
|
| I've used Velocity Global to handle local laws, compensation
| (401K in USA but Pension Plan in UK/Ireland etc.), currency,
| and hiring requirements. There are others recommended elsewhere
| in the comments.
|
| We are US based and used them for almost 8 countries so far
| (UK, Mexico, Hong Kong, Germany...)
|
| https://velocityglobal.com
| jokull wrote:
| Just went through this. I ended up setting up as a contractor
| sending invoices quoted in the contract USD monthly number. I
| had to be careful to ensure I was covering all fees, including
| my coworking space rent and book keeper. They agreed to cover
| any future travel expenses though, which makes sense but better
| clarify it up front.
| raverbashing wrote:
| There are plenty of good suggestions about jurisdictions, but I'd
| say that's not the only thing you should pay attention to
|
| What you should check is what's the best way for each person to
| own their share in the company. Straight ownership might have
| some issues. Having each one have a company that then owns the
| parent company might be a way. Or having a company own your
| company then the founders own the parent company.
| lordnacho wrote:
| I don't see Malta mentioned. They speak English, are in the EU,
| use Euros, and have low tax.
|
| Nice weather too.
| kzrdude wrote:
| Malta ranks high on a corruption index like
| https://www.transparency.org/en/blog/cpi-2020-malta-lost-in-...
| KyeRussell wrote:
| Even better!
| SkyAndSand wrote:
| Similarly to Estonia I've heard lots of people _recommending_
| Malta but can 't really name any international remote-first
| startup that became successful and raised money with an Maltese
| entity..
| popcalc wrote:
| If you look into the egaming and adult sectors you'll find a
| lot of success stories. But these guys actively try to stay
| out of the media.
|
| >raised money
|
| If you want to raise VC funds with no revenue there really is
| no better option than Delaware. Malta/Isle of Man/Jersey are
| meant for businesses that generate so much cash you don't
| know what to do with it.
| FooBarWidget wrote:
| One thing to note if, as a Dutch person (and possibly even if
| you're another European), you incorporate in the US:
|
| Many Dutch financial institutions _hate_ people who have the "US
| person" status. If you own a US-incorporated company then I
| believe you will gain that status. Banks, lenders, stock brokers,
| etc will either refuse to do business with you, or will give you
| a lot of paperwork headache and/or charge you more tax. I think
| this has to do with the fact that US persons have to comply with
| FACTA.
|
| For example I have 3 stock brokerage accounts (1 for personal, 1
| for pension, 1 for business). They all ask me whether I have the
| US person status, and 2 of them just flat out tell me that they
| won't do business with me if I answer yes.
|
| Not sure whether financial institutions in other European
| companies also come with this caveat. But since it's related to
| FACTA, I believe they do.
| SkyAndSand wrote:
| I am indeed another European and I do know about the issues
| with being a "US person". Many banks and brokers will simply
| immediately close your existing account or not allow you to
| open one.
|
| However, are you sure that simply by owning a US company you
| become a US person? Because according to my understanding if
| you don't live in the US (and don't spend more than 4 months /
| year there) you wouldn't actually be tax resident in the US and
| therefore also not be a "US person".
| glenngillen wrote:
| Wow you're getting some bad takes here. Having a phone number
| does not make you a US Person. Having a bank account there
| does not make you a US Person. I can only assume people are
| confusing this with the domiciled test that can exist in
| other tax jurisdictions. It's mostly the same criteria as the
| usual tax resident status (so all citizens + those with work
| visas + if you're in the country for 183 days).
|
| HSBC had the most succinct summary I've seen:
| https://www.fatca.hsbc.com/-/media/fatca/pdfs/global---
| commo...
|
| The Australian Tax Office has a reasonable guide on the
| overall scheme and how it applies:
| https://www.ato.gov.au/General/International-tax-
| agreements/...
| FooBarWidget wrote:
| I recall that some of the questions mention that having US
| income is problematic, and that even having a US phone number
| is problematic.
|
| But I'm not 100% sure.
| smcf wrote:
| Having certain ties to the US (such as a US phone number or
| regular transfers to or from a US account) are considered
| "US indicia". Having them triggers a requirement (thanks to
| FATCA) for the bank to verify your status as a non-US
| person. Usually this means furnishing a W-8BEN to the bank.
| This applies even if you're not a US citizen and never set
| foot in the US.
| astrange wrote:
| The US doesn't care if you live there or not (unlike every
| other country except China); you still have reporting
| requirements and technically have to file returns saying you
| don't owe taxes.
| csomar wrote:
| Even having a US phone number can signal that you are a
| potential "US person".
| isoos wrote:
| On top of that, even after you lose your "US person" status,
| some financial institutions may just claim that "you have been
| found in a US registry" without any specification which
| registry, and now either you prove that you are no longer in
| the unspecified US registry, or they just deny business with
| you. Not fun, and a fight that you cannot win.
| jll29 wrote:
| Reading this thread (and remembering past pains) I posit that
| things are too complex almost everywhere.
|
| Some innovation-minded billionaire should buy an island - a white
| spot on the map ( _not_ this one:
| https://en.wikipedia.org/wiki/Principality_of_Sealand) - and
| create a new jurisdiction optimized for incubating remote
| startups.
| notyourday wrote:
| One of the "tax heavens".
|
| This is the actual reason why multinationals move headquarters
| there.
| yakak wrote:
| Ireland seems like an obvious one to look into. English language.
| Simplified relationship with the EU as a market and source of
| employees. Used to dealing with US paperwork but not going to
| cause anyone to get the viral US person disease.
| digianarchist wrote:
| Pretty low corporate rates too (12.5%) but dividend withholding
| taxes are high.
| jpgvm wrote:
| If you want VCs then it's always the US and should always be a
| Delaware corp.
|
| For non-VC funded companies HK is great, allows for tax
| minimization, minimal headaches, access to international banks
| and potential access to Chinese market if that is important for
| your business.
| digianarchist wrote:
| It's virtual impossible to operate a HK or Singapore LTD these
| days as a "US person".
| yayr wrote:
| Be careful regarding taxes and "Betriebsstatten". If you are
| living in Germany and your company management is mainly operating
| in Germany you are liable still for local taxes
| ("Hinzurechnungsbesteuerung"). There are also special rules
| depending on how much of the company stock you own. Also you may
| have to register a "Gewerbe" in certain cases if you are doing
| business in Germany (e.g. selling something) from a foreign
| entity.
|
| So in a bad case as majority owner you will then have to do the
| taxes and other admin topics in the country of your company AND
| in Germany and you'll always have a special relationship with a
| curious tax office.
|
| So the only way to have really a startup in a non-German
| jurisdiction is to make sure that your management decisions (and
| usually also some infrastructure) is set up there.
| thruflo wrote:
| I've founded companies in the UK, US and EU. I'd recommend the
| UK.
|
| The cost of a limited company is PS12. It's formed in a day. Use
| https://www.ukpostbox.com if you need an address.
|
| The legal system is well known and entrepreneur friendly.
| Accountancy and company admin are simple and relaxed. HMRC is
| supportive. You can pay dividends on a flexible schedule.
|
| There's a very large ecosystem of financial support, innovation
| grants, incubators, accelerators, angel networks and VC firms.
|
| Flip to the US for later stage funding. Nice problem to have.
|
| Needless to say, IANAL, this is not financial advice, crayons,
| etc.
| jll29 wrote:
| I would have seconded that up to the botched implementation of
| Brexit, now there are many areas of increased risk because (a)
| certain things are not yet sorted out (increased uncertainty)
| and (b) the process is antagonistic and politicized instead of
| cooperative, so the issues are unlikely to be resolved anytime
| soon.
|
| The UK is still a relative good countries for starting up, just
| not as good as it used to be.
| ushakov wrote:
| also you get into double trouble with VAT-MOSS system
| blibble wrote:
| if you're selling services it's been sorted since Jan 2020:
| there is no deal
|
| (if you're selling beef, cars or washing machines then yes
| there's potential uncertainty)
| SkyAndSand wrote:
| I've looked into the UK multiple times and it definitely sounds
| very attractive. It seems that OnlyFans and Hopin
| (https://hopin.com/) were both started as UK LTDs. Downsides
| (as you mention) are probably access to US investors and
| potentially issues with VAT because of Brexit.
|
| Just out of curiosity - did you experience any issues selling
| to EU customers because of Brexit?
| vruiz wrote:
| As someone who tried UK, opening a bank account not being a UK
| resident and without proof of existing UK customers was
| extremely challenging.
| [deleted]
| bombcar wrote:
| You're likely going to have to establish "business entities" in
| each county - but if you're working with VC/other firms I'd say
| defaulting to US - California would be the most known.
| SkyAndSand wrote:
| Really, you'd think VCs would prefer California over Delaware?
| At least YC specifically prefers Delaware:
|
| > Why is it that we try to advise all companies, no matter who
| or where, that Delaware C Corp is the right thing to do?
|
| src: https://www.ycombinator.com/library/5C-tips-on-company-
| forma...
| _jal wrote:
| You'd only think that if you haven't compared the burdens
| associated with each.
|
| Delaware has long-specialized in making themselves an
| attractive place to incorporate. California... has a
| different mix of priorities, let's say.
| TedDoesntTalk wrote:
| This is terrible advice. All of it, not just the California
| part.
| xupybd wrote:
| I'd say New Zealand. Purely because the labour is cheap. But if
| you're remote first that doesn't really matter.
| p3nm8 wrote:
| From a litigation standpoint, if you stay in Europe, consider
| Switzerland as a neutral jurisdiction (Rechtswahl). This is
| independent from where your company will be registered. Else the
| US, as mentioned already, is a good place. Generally to keep in
| mind is, that apart from the tax standpoint consider also
| questions regarding labor regulations and civil damages
| (Schadensersatz).
| thrill wrote:
| There's a reason the Cayman Islands have two-thirds of the
| world's hedge funds incorporated there. It has a long and stable
| financial history and has stated that any structural financial
| changes will be grandfathered where legally possible. That sort
| of stability is worth the $100/month it takes to keep an
| international business there.
| Nextgrid wrote:
| Do you have more info about the $100/month to keep a business
| there? Is that a third-party service or is it an official fee
| to keep a company on the register?
| SkyAndSand wrote:
| I see your point, but do you actually know any big,
| international startups that are incorporated there? I only know
| if Brave (the browser).
| deltaci wrote:
| Estonia is also a really good choice within EU. With their
| digital residency card, everything can be managed online with
| digital signatures only.
| SkyAndSand wrote:
| I've heard lots of people talking about Estonia but can you
| name any international remote-first startup that became
| successful and raised money with an Estonian entity? I don't
| and this makes me somewhat suspicious :)
| lukeqsee wrote:
| I don't know of remote-first companies, but I know of many
| Estonian companies that have raised a lot of money and been
| incredibly successful.
|
| To name a few: - Bolt - Wise
| (TransferWise) - Pipedrive
|
| I have a long history with e-Residency and know many
| e-Residents (e-Resident since 2015, 3 companies, member of
| EERICA.ee). Happy to chat about it. Email in bio.
| digianarchist wrote:
| Wise is incorporated in the UK. Founders are Estonian.
| mishaker wrote:
| I second that. There are growing number of startups and
| increasing capital pouring into Estonia (hence the largest
| inflation rate in Europe) Wise and Bolt are good examples.
| mishaker wrote:
| I was e-resident too but had to become resident in Estonia.
| Cause if you are abroad and distribute yourself dividend
| (as a sole entrepreneur) your host country would consider
| your Estonian company local and thus it constitutes a
| permanent establishment and that becomes extremely
| complicated
| lukeqsee wrote:
| Of course--but this is the case for almost all
| jurisdictions of record vs jurisdictions of taxation. Few
| countries want to allow a company to operate 100% in
| their borders without extracting some degree of taxation.
| (In fact, this is basic OECD taxation doctrine.)
|
| My situation is complex, but, generally, the advantages
| of Estonian registration are found in drastically
| simplified and lower-cost business registration and
| processing (vs say a GmbH in Germany or Switzerland with
| high share capital and accounting costs) or ease of
| operation for digital nomads or fully remote companies. A
| OU isn't for everyone in every life situation, but when
| it fits, it tends to work really well.
|
| A LLC or C Corp in the US could work just as well (or
| better), depending on the situation.
| dybber wrote:
| Skype, maybe not remote first, but I think Skype have sort of
| paved the way/accellerated these efforts in Estonia. But it's
| all just a guess...
| lmeyerov wrote:
| What I keep finding non obvious is equity. And especially ideally
| keeping US side a Delaware C. How to issue international options
| and shares?
| jokull wrote:
| Is there something stopping a US company from issuing equity to
| foreign citizens?
| SkyAndSand wrote:
| Good point, added that to the list of requirements in the
| original post. I am asking myself the same question.
| lmeyerov wrote:
| Also: hiring (PEO?) & firing (at-will).
|
| We do global remote contractors for those reasons + unclear
| equity, but would like to do more. Per-state US registrations
| / benefits / payroll are getting easy enough so minor
| overhead, equity is clear, and all states at-will. But
| getting that international is unclear.
| troydavis wrote:
| Based on your description, your goals are predictability and low
| or outsource-able overhead. For those goals, the US is the clear
| choice. By far the largest pool of investors and employees are
| comfortable with US entities as counterparties. Plenty of
| companies will incorporate, prepare tax returns, and handle other
| compliance items (unemployment insurance) for relatively small
| fees.
|
| As far as states, if you don't care, Delaware is probably the
| most common. Nevada and Wyoming have no state corporate income
| taxes, so they are also popular. More on that:
| https://www.forbes.com/sites/forbesnycouncil/2019/03/04/the-... .
| To incorporate, check out Firstbase (https://www.firstbase.io/)
| or Stripe Atlas.
| gardnr wrote:
| Most US companies will hire remote "inside the USA" but not
| outside the USA due to potential foreign tax and legal
| liabilities. While the USA might be good for the reasons you
| listed, hiring remote full-time employees can be a legal
| minefield. If every employee is a contractor then that
| introduces its own legal issues in the USA.
| melony wrote:
| The term you are looking for is PEO.
|
| See my old comment for some service options
|
| https://news.ycombinator.com/item?id=31254615
| mikeryan wrote:
| There's a company called Deel (I'm a customer) that can take
| a lot of the pain out of this including being the employer of
| record in many countries. There are others as well.
|
| http://letsdeel.com
| moneywoes wrote:
| This does come at a cost as well
| donohoe wrote:
| Same, have had a good experience with using Velocity Global
| for employees in other countries (EU and International)
| https://velocityglobal.com
| [deleted]
| PragmaticPulp wrote:
| > Most US companies will hire remote "inside the USA" but not
| outside the USA due to potential foreign tax and legal
| liabilities.
|
| That's not a unique feature of the USA. It doesn't matter
| what country you're incorporated in. You're still obligated
| to follow the local laws and tax codes of any foreign country
| you hire in. Technically some companies (shady crypto plays
| especially) will try to incorporate in a weird location and
| then flaunt laws and pay people "under the table", but
| they're just breaking those laws, not escaping them.
| jpmoral wrote:
| Sorry, 'flout', not 'flaunt'.
| rozenmd wrote:
| They could always use an employer of record for the foreign
| employees like remote.com
| gumby wrote:
| The Delaware tax is pretty low. Stick to Delaware as it's
| corporate law is well known to everyone. The state of
| incorporation has nothing to do with where you might operate.
|
| Keep it simple.
|
| Note that I _am_ part of an LLP that a group of us use for
| investing and consulting projects and it's a Wyoming
| corporation with company office in Kentucky and no legal
| presence in California. These kinds of specialized entities are
| not worth the hassle except in unusual cases, and almost
| certainly you aren't a specialized case. For example this setup
| doesn't have much of a benefit for me (though it doesn't hurt)
| but it does for a couple of my partners. Also: I don't mind
| paying taxes.
| TedDoesntTalk wrote:
| There's nothing specialized about incorporating in Wyoming.
| And it takes minutes without a lawyer. The amount of
| paperwork is ridiculously low compared to Delaware. Last I
| recall Delaware has a minimum $500/year registration fee,
| more depending on outstanding shares. Not Wyoming.
| runnerup wrote:
| You'll also need to consider "alien entity" fees/taxes if
| you want your "Delaware" corporation to operate in another
| state, e.g. Texas.
| lmeyerov wrote:
| Such fees are basically nothing for a company that makes
| money
|
| High % taxes are where things get way dicier, e.g., some
| US states have high capital gains / transaction taxes
| while others are basically 0, which vastly changes how
| good exits are for employees
|
| "Penny wise, pound foolish" => optimize for low opex
| overhead on growth. Another example: $1K to setup a new
| state registration for an employee sucks, but is fine
| relative to their salary, so not the the # to optimize
| on.
| TedDoesntTalk wrote:
| The annual filing fees and documents required by Delaware
| is arcane. Things like "annual meeting of the
| shareholders" for a single-person S-corp.
| markdown wrote:
| Are you saying that Wyoming doesn't have those
| requirements?
| bonestamp2 wrote:
| On this note, if you're forming a company in the US and some of
| the owners/founders are not American, be sure to get an
| accountant and lawyer in the US to confirm your compliance with
| US foreign ownership laws.
| moneywoes wrote:
| What if you're located outside of the US but a US citizen?
| gtvwill wrote:
| Lol I wouldn't, I'd head for the hills. If choice of where to
| incorporate is being made to align with mitigating tax
| liabilities. I wouldn't work for that company as it doesn't align
| with my ideals.
|
| Gross business is gross.
|
| Other than that probs EU. Gdpr is good, murica has crap like
| HIPAA, straya well we're basically the wild west rife with white
| collar crime. Which I mean is ok if you understand from the get
| go the playing fields aren't even. Dice roll between those three.
| oxff wrote:
| Tax shelters would be my initial guess.
| SkyAndSand wrote:
| I should clarify that the goal is not tax optimization but
| rather being able to focus on getting product market fit
| instead of spending time "managing" the company.
| cjbgkagh wrote:
| Typically low "managing" overheads is an additional perk of
| the tax havens.
| SkyAndSand wrote:
| Yes, but besides Cayman I don't think investors would
| really be happy to invest in tax havens. Also you normally
| run into issues with substance requirements, opening bank
| accounts, bad reputation of the jurisdictions and of course
| tax authorities that will immediately question and
| investigate your setup.
|
| From doing a lot of research I get that the general
| recommendation is to avoid tax havens (at least the
| obvious, shady ones - US, Ireland, Netherlands etc. are of
| course fine).
| cjbgkagh wrote:
| If you want investors then incorporate in the US, as the
| cheapest money by far is in the US and they prefer to
| invest locally. If that's how your funding the company
| then it's probably the dominate concern.
|
| It really depends on how you want to grow. If you're
| bootstrapping on profits then tax implications can become
| very important. You can have a subsidiary in 'non shady'
| jurisdictions for any squeamish customers.
| oxff wrote:
| This is what I had in mind too.
| MichaelRazum wrote:
| Germany obviously has a high overhead. If you own more than 50%,
| CFC rules might apply and will make things very complicated.
| gtirloni wrote:
| Delaware seems to be a common choice.
| t312227 wrote:
| imho this decicions also heavily depends on the topic of your
| startup.
|
| afaik for example for blockchain related stuff switzerland,
| especially the canton/city of zug is a very good choice - for
| legal reasons etc.
|
| br, v
| gumby wrote:
| I recently had to consider this and was quite surprised to
| discover that the US was the best place. Compared to most
| countries the US has been a tax haven for a long time, but the
| 2017 tax change meant that in most cases the US would be a
| significantly cheaper place to recognize revenue.* Also the
| mechanics of getting the boring things done is significantly
| easier, as noted by the Germany post cited in your question.
|
| Because of the US FATCA law you may have trouble opening a bank
| account in some countries (smaller entities simply can't be
| bothered with the paperwork the US demands on accounts for "US
| Persons", a term which has specific meaning). In practice this
| just means you have to deal with larger banks.
|
| Note I've been a US resident for decades, and started several
| companies here, but am not a US citizen and have lived and worked
| on three other continents as well so had no prior bias.
|
| * Note 2: this business is intended to be quite profitable
| relatively soon, rather than a "focus on user growth and toggle
| the profit switch later business.
| Svip wrote:
| > smaller entities simply can't be bothered with the paperwork
| the US demands on accounts for "US Persons"
|
| That only counts for companies with operations in the US. My
| wife is a US citizen, and my bank - a medium-sized Danish bank
| - did not care, because they don't operate any business in the
| US, so they do not need to provide any paperwork for her to US
| authorities.
| rdl wrote:
| Not an attorney, not a tax attorney, not your attorney, but
| US persons are required to report bank accounts they hold
| globally under both FBAR and FATCA, and signatory authority
| on business accounts is also a thing. Additionally,
| controlled foreign corporations are a thing for US people.
| SkyAndSand wrote:
| > Because of the US FATCA law you may have trouble opening a
| bank account in some countries (smaller entities simply can't
| be bothered with the paperwork the US demands on accounts for
| "US Persons", a term which has specific meaning). In practice
| this just means you have to deal with larger banks.
|
| You mean opening a bank account personally or for the company?
| Because for the company I'd simply use Wise or Mercury and be
| done with it.
| kube-system wrote:
| I believe they are referring to the concept of corporate
| personhood. FACTA applying to "US persons" means it applies
| to corporate accounts too.
| gumby wrote:
| Last time I looked it's hard to use something like Wise as
| your bank for your payroll.
|
| Wise has been great for managing my personal payments, but I
| still have personal bank accounts in a couple of countries
| where I hold property because it just makes things easier
| there.
| biztos wrote:
| Commerzbank terminated my contract after 14 years as a loyal
| customer (and plenty of money in the account) -- they refused
| to say why, but my best guess is they were culling Americans.
|
| I think getting a German bank to open a business account for
| a U.S. startup would be a nightmare at best.
| glenngillen wrote:
| Australian here. When I open a commercial bank account (i.e.,
| company) here the FACTA regs mean I have to jump through a
| bunch of hopes to prove I'm not a US person, and neither
| other the other shareholders. And then I have to re-prove it
| every few years after it's opened.
| speakfreely wrote:
| The jurisdiction where banking and accepting payments will be
| easiest for you. Probably the US (Delaware, Nevada, Wyoming, as
| mentioned) or EU. Be careful of common offshore places, accepting
| credit cards will either be difficult or expensive or both.
| gyulai wrote:
| That's a pretty complex question with a lot to unpack. (Except:
| Minimize your contact surface vis-a-vis Germany. That part seems
| easy.)
|
| First off: There is no such thing as a "remote friendly"
| jurisdiction. Estonia is trying to market this, but don't drink
| the Kool Aid. Someone is going to have to make a trip to the bank
| or the notary every now and then. They'll have to show their
| faces. They'll have to affix their signature to things. With ink
| on paper. You will have to deal with business partners who will
| think this way: "This guy is based where I am based. He knows
| that if he tries to defraud me, the police will come knocking. So
| he's probably not trying to defraud me, so it should be safe to
| do business with them." Versus "This guy is just someone on the
| other side of the planet sending e-mails. He knows that if he
| successfully defrauds me, I won't be able to do anything about
| it. Therefore I don't want to take the risk."
|
| A lot depends on trust and interpersonal dynamics between
| founders.
|
| If there is a lot of trust between the founders, I'd pick one of
| the jurisdictions where a founder is actually based. Say you pick
| the U.S. for ease of access to capital. This means that the
| person who is physically in the U.S. would probably end up having
| to liaise, frequently in person, with banks, accountants,
| government offices, etc. This puts a huge admin burden on that
| person, and also requires a lot of trust from the founders in the
| other jurisdictions that this person won't abuse their privileged
| position. If that founder drops out and there isn't yet any
| physical presences in the U.S. except for that founder, the
| others will be in a difficult position, because their own
| jurisdictions might not recognize that this is legitimately a
| U.S.-entity if there is no actual person in the U.S. who is
| connected with this entity. So that's why it requires a lot of
| trust.
|
| An alternative might be: Set up 4 sole traderships and a
| "placeholder entity" in a zero tax jurisdiction that kicks into
| gear when real money starts getting to the table. So:
|
| * Frank Deutschmann registers with German authorities as a German
| sole tradership.
|
| * John Smith registers with U.S. authorities as a U.S. sole
| tradership.
|
| * Aussie Australian registers in Australia as an Australian sole
| tradership.
|
| * Sing Singapore registers in Singapore as a Singapore sole
| tradership.
|
| * Startup Inc registers in Bermuda, with each of the four holding
| a 25% ownership stake.
|
| Startup Inc passes the following resolution, and correspondingly
| makes a contract with each of the other four entities:
|
| Revenues: We intend to sell an API to clients at $1 per 100
| calls. To achieve that, Startup Inc will subcontract Deutschmann
| to run one server, Smith to run one server, Austrialian to run
| one server, Singapore to run one server. When a request hits a
| server, the server should use a random number generator: With a
| 25% probability it will handle the request itself. With a
| probability of 25% for each of the other three servers,
| respectively, it will redirect the client to one of the other
| three servers. Every partner has to pay the costs for their own
| server (AWS bills etc). Every partner gets to keep revenue of up
| to $100k per year for requests their server serves. Revenue in
| excess of that goes to Startup Inc. Intellectual Property: All IP
| belongs to Startup Inc.
|
| The thing about the API was just an example, but you can think of
| analogous ways of e.g. splitting sales of widgets. The load
| balancing algorithm is obviously stupid, this was just for
| simplicity of exposition.
|
| The great thing about this arrangement:
|
| * As long as your api makes below $400k, Startup Inc doesn't
| handle any money. The German authorities only deal with a German
| sole tradership and tax it on its small profits, and don't care
| about the rest. The U.S. authorities only deal with a U.S. sole
| tradership and tax it on its small profits, etc.
|
| * The Bermuda entity is the key to the whole thing and yet no
| jurisdiction would have a reason to scrutinize it or try to poke
| holes in it or attach any real significance to their respective
| citizens holding shares that are legally worthless in a company
| that is legally not really doing anything.
|
| * No founder enjoys a privileged position that requires almost
| unlimited trust. If any founder drops out at this stage, the
| other three continue to operate almost as if nothing had
| happened.
|
| * While it makes a lot of sense for the four to take advantage of
| economies of scale by sharing heavily, there is also potential
| for some autonomy which reduces the potential friction if there's
| something that founders can't agree on (e.g. every one goes to
| their favourite bank and hosting provider, picks an accountant
| they personally trust, etc.)
|
| * If they end up making a loss, everybody gets a loss on their
| personal income tax which they can each offset against future
| earnings.
|
| * In this stage the whole thing legally just looks like four
| people coordinating their efforts on a joint venture of sorts.
| But the main thing is each of the _persons_. Which is the actual
| reality of the thing at this stage.
|
| * For each additional dollar that the API makes beyond the $400k
| per year, the whole thing starts gradually to look more and more
| like a corporation, both legally and in terms of the real life
| circumstance that the legal structure represents. Increasingly,
| what matters is no longer the four people, but the IP and money
| held by the Bermuda Inc with every individual being pretty
| replaceable. And the legal structure actually reflects that,
| automagically turning from joint venture-like to corporate-like.
| jokull wrote:
| Delaware company and then all team members get set up as
| contractors in their country of residence. If they are in the EU
| they can contract from where they are from but live within the EU
| - more flexibility. But putting people on payroll has a huge
| overhead - better compensate employees to pay a local book keeper
| to invoice and process their payroll. Encourage people who have
| not contracted to research what contractor fee covers their
| salary. It will be tricky to compare apples to oranges when it
| comes to salaries, not just because of different rates in
| different places, but because salaries are quoted differently and
| have different insurances. Where I'm from there's a compulsory
| payment from employer to the employees pension fund of choice.
| Salaries are quoted to include this payment. And on and on ...
| very different across countries. Contractor fee "normalizes" this
| and places some burden on employees to research what their USD
| contractor fee is. Ask people to invoice a week ahead of
| international transfer and transfer 1-2 business days before
| month's end. This will result in monthly salaries being paid out
| on time.
| morpheuskafka wrote:
| This will require research on each countries laws, some
| countries have very rigid definitions of what qualifies as
| employment and will not allow those payments to be classified
| as contract income, dividends, or anything else.
| jokull wrote:
| The way I do it, I set up a limited liability company that is
| just my own name. I then charge for services rendered and
| income goes into a company in my sole ownership. I then pay
| salary to the only employee (me). This is common and
| completely legal.
| logifail wrote:
| > I set up a limited liability company that is just my own
| name. I then charge for services rendered and income goes
| into a company in my sole ownership. I then pay salary to
| the only employee (me). This is common and completely legal
|
| This approach exploded fairly spectacularly in the UK for
| many of those deemed by the tax office (HMRC) to be using
| it purely as a device to attempt to avoid being "on
| payroll"
|
| https://www.gov.uk/guidance/understanding-off-payroll-
| workin...
|
| Even BBC presenters were setting up "personal service
| companies" to try and avoid taxes (allegedly at the urging
| of the BBC) and ended up owing the tax office a bunch of
| back taxes.
| csomar wrote:
| I highly doubt this is completely legal, maybe unless you
| are not expensing the company anything (and transferring
| all of the revenue as salary).
| WanderPanda wrote:
| I'm pretty sure this would be illegal for employees in Germany
| because of the "Scheinselbststandigkeit" (False self-
| employment?)
| codethief wrote:
| Does this also hold if your employer (i.e. your client) is
| outside Germany?
| tdullien wrote:
| Yes
| renewiltord wrote:
| My friends and I have a seed-investment fund that we needed to be
| low overhead since we're all running companies. The Delaware
| process was fairly low-overhead. Some things needed to be
| notarized and it was a pretty easy process to get a virtual
| mailbox and everything (notarize.com was in the loop and they're
| neat!)
|
| Sorry it isn't directly against your constraints but we are
| foreigners in the US so I thought I'd mention it. More
| information is always better :)
|
| Good luck! Eager to hear how it goes.
| bitL wrote:
| Delaware or Dubai.
| candiddevmike wrote:
| Wherever the CEO/founder lives. You can always move the company,
| better to just get something formed and worry about optimizing
| for taxes later. Pay folks as contractors and you don't have to
| worry about having a presence in their country.
| SkyAndSand wrote:
| I am actually not trying to optimize for taxes but rather for
| low overhead and not spending too much time managing the
| company but rather building a great product.
| ageitgey wrote:
| In my experience, things aren't that simple. For example, if
| you start a company in Country A but you are the main
| decision maker and live in Country B, then Country B may try
| to claim primary taxation of the company based on the fact
| that they consider the company being 'effectively run' from
| inside their borders despite your incorporation. And you
| aren't going to read about this kind of stuff on forums
| because it is very situation specific.
|
| Multi-country taxation is very complicated. You can get a
| general idea from asking online, but then you REALLY need to
| talk to an expert in those specific countries unless your
| business is just so small that the governments involved would
| never care.
|
| If you don't want to do that, the best/simplest situation is
| almost certainly incorporating in the place where the
| founders actually live permanently.
| nine_k wrote:
| As the post states, the idea is to hire / contract a number
| of people around the world. I don't think it would be easy
| to argue that that the company effectively operates from
| country A if most of the work is done by people in
| countries B..Z.
|
| IANAL, of course.
| bzxcvbn wrote:
| Needing to argue about that, possibly in a lawsuit, with
| the tax office, would certainly negate any benefit of
| incorporating abroad to avoid some unspecified overhead.
| SkyAndSand wrote:
| Well, wouldn't a company like GitLab run into the same
| issues if most of their employees are not in the US?
| candiddevmike wrote:
| Gitlab is a publicly traded company and has a department
| of people working on solving that issue (continuously, as
| laws are constantly changing). You don't. Go create your
| local LLC equivalent and move on for now.
| [deleted]
| xcambar wrote:
| unfortunately, this is bad maths.
|
| Open the company anywhere the founder(s) is/are. Just pick a
| reasonable location if you have many options.
|
| The reasons being that you should never run a business
| without accounting and legal advice, so you will have someone
| take care of it for you, and the cost will always cover the
| risk of doing it yourself poorly.
|
| And when you're successful, you can always hire more
| legal/accounting or relocate.
|
| I'll conclude a bit more harshly: If you're somehow relying
| on the costs of operations to balance the success of your
| company, you might as well just reconsider.
___________________________________________________________________
(page generated 2022-06-04 23:00 UTC)