Ask HN: Is forming a company in UK a good option for a non-US resident

Hey - I just recently wrote a series of blog posts of creating a startup in the US and UK for developers. It's based on my experiences. If you're based in Europe being a UK based limited company is a great option. As others have said you'll need a good accountant and lawyer, the posts cover my experiences with various companies. Personally I'd recommend Crunch.co.uk for helping with the company formation and accounts. Then Lawbite for the legal side of things. They've answered a bunch of my questions.

One big thing to beware of is VAT and VAT MOSS scheme - it's a bit of a nightmare to figure out your way around that. After discussing with accounts and lawyers your best option is to not be VAT registered until you know you're going to exceed the £82k threshold. Again - speak with your own lawyer and accountants on this as everyone's situation is different.

Hope that helps!

TL;DR - https://news.ycombinator.com/item?id=11360598 - Covers company formation (and recommends a couple of accountancy options for the UK)

- https://news.ycombinator.com/item?id=11360651 - Covers Legal advice for US and UK startups.

I have to give credit where due. It's unfortunately rare for someone with a brand new HN account to immediately contribute so much relevant and substantive information. Very Nicely Done!

Your articles are well written, easy to read, and seemingly accurate (n.b. without me doing any due diligence to check facts), but the meme images are too distracting, even a bit annoying (this is most likely due to me being a curmudgeon ;). Of course, opinions will vary, and I'm sure others might say the memes break up the reading and help hold attention.

For notes, it's generally a poor idea to submit a bunch of good stories at (roughly) the same time, particularly if they're from the same site. Your submissions will be competing for attention with all other stories, including your own. Though your "101" article is currently sitting on the front page of HN, your second article "Dev Guide" suffers from the others' success. Spacing out your submissions, like one a day, will give you better results. Also, the HN Guidelines (link at bottom of most pages) ask for users to avoid submitting so many links that the new page is dominated by your posts.

Thanks for your feedback- I will space them out in the future!

You're perhaps better asking an accountant in the UK, rather than a lawyer.

It costs ~£15 to start a limited company in England and Wales (a separate jurisdiction to Scotland and Northern Ireland). So long as you keep accurate records and file your annual accounts correctly, that's all there is. An accountant would normally do the filing for you. For a small business this can often be done for £500-£1000. If you do your own bookkeeping and keep accurate records, that will keep costs down.

As your business will be domiciled in the UK, it will be subject to the UK's tax regime. But if you're outside the UK, your salary from the business shouldn't be subject to UK taxation (do check that, though - double-taxation isn't something I know much about).

TL;DR - Find an accountant in the UK who'll be willing to give you a free consultation (most of them). You'll probably find one on ukbusinessforums.co.uk (it's where I found mine).

The law is different for non residents.

So a lawyer which specialized in this is defiantly recomended.

Obviously IANAL etc, but I'm really not convinced about that. I'm genuinely interested to know why you say the law is different for non-residents. Even if that was the case, I'd be very surprised if an accountant could not advise on that aspect, given that dealing with company records and accounts is what they do. It's OP's time and money, though - if he wants to see a legal advisor of some kind, that's entirely his prerogative.

You can go to firms that specialize in incorporating shelf companies which are commonly known as formation agents. To register a company in the UK you need a local director address and a local company address (which are usually setup with an international mail forwarding service) as well as some other requirements most importantly a business bank account which under UK/EU money laundering regulations isn't trivial to open (And with a thin credit file almost impossible to open in the UK without a large deposit and a good formation agent).

Depending on the type of company you are registering for the prices can range from a few 100's pounds (plus fees/deposits) for a regular limited company to considerably larger sums if you are buying/forming a shell corporation.

Another good reason to get a lawyer (in both jurisdictions) is that some countries also have regulations regarding owning foreign companies. If your business is in a regulated field, health care, finance etc. this usually tends to complicate things even further.

If I was setting up a SaaS company outside of the US, I'd be concerned with tax rates, acquiring a bank account and processing credit cards.

It is worth noting that you don't necessarily have to have your bank account in the same jurisdiction that the company is incorporated.

There are many zero tax offshore jurisdictions (like BVI and Cayman Islands) and at a large scale you can get bank accounts and process credit cards anywhere. But, starting from zero I think it's a lot easier to use Stripe or Braintree.

I've listed several jurisdictions that are compatible with Stripe and Braintree by corporate tax rates. You may be able to achieve a lower rate by paying yourself a salary.

Stripe & Braintree

  Ireland (12.5%)
  Singapore (17%)
  United States (~35%)
  United Kingdom (~20%)

Braintree

  Lichtenstein (12.5%)
  Isle of Man (0%)
  Jersey (0%)
  Guernsey (0%)

So, I would consider Ireland and the above Crown dependencies.

Sources: https://www.braintreepayments.com/country-selection https://stripe.com/global

I would think that to be approved for Stripe or Braintree in anything close to a haven, Singapore included, the underwriting bank will require a utility bill with your name on it, which could be a deal-breaker. Source: I am an American who owns a Hong Kong company which was denied by Braintree (at that time we were doing 30k MRR).

Thanks, good to know. What are the options for banking and card processing for a HK company? Why did you choose HK?

When I started my HK company I had been living in Asia for several years already and it just made more sense due to the lower effective taxation.

Card processing: Braintree, 2Checkout, and then some lower tier options like PaymentWall. I'm not including old-school/direct merchant accounts here. Keep in mind that 4%*$0.45+1.5% is totally standard, with that final 1.5% added for non-HK billings. So you will pay 2% more to charge a card in HK compared to US. But your tax rate can be literally zero percent.

A better option may be a US subsidiary or a US company wholly owned by a foreign entity. This is something I am considering, because...

> banking

Absolutely everything is a pain. After four years I still don't have a business charge/debit card. Applications for card processing and debit cards each take dozens of forms and generally longer than a month.

Having said that, I have saved lots and lots of money.

Lastly, a HK company costs about $1,000 to setup and $2,300 yearly to maintain.

Braintree is also available in Cyprus (corporate tax 12.5 %)

In UK are very stricts with all the paper work, if you don't do something right you will receive a fine (and not a small one regardless of what you missed). There are companies with manage this type of things and deal with all the paperwork. Just search for how to open a company in Uk. Some of them also helps with opening the bank account.

For me the worst thing about a Europe company is to deal with taxes when you sell to European countries. By lay you have to charge the tax where your client is, it means you have to be aware of where is your client located and the taxes in that country, plus fill all the paper work related. Keep this in mind as it can be worth for you to open the company in your country just to avoid this kind of things.

I have no problem with them being strict as long as it's not very difficult or expensive to comply. Is this the case?

I don't suppose IRS or any other authority is particularly casual either.

Thank you for mentioning the VAT issues. I've read about that, and as I understand, there's a bunch of services for dealing with VAT collection. Some payment solutions presumably even handle it for you.

(Experience: I have been a director for a tiny UK "company limited by guarantee", which is a funny-shaped nonprofit organisation.)

It's not at all difficult or expensive to comply if you're a small business; the whole thing is pretty streamlined. You need to file accounts, but for a small turnover you can file "simplified" accounts which are just two tables. There is one subtlety - you can't be a limited company by yourself. The minimum is one director and one "secretary", but you can get company-secretary-as-a-service.

VAT is a separate issue - you have to deal with it regardless of whether you're a company or sole trader, if your turnover is high enough or you're selling digital goods (VATMOSS disaster).

Background info: https://www.gov.uk/topic/company-registration-filing/startin...

e.g. These people offer a full package for £70, which if your time is at all valuable is a good deal: https://www.rapidformations.co.uk/package/all-inclusive-pack...

- what UK taxes do you owe as a non-EU resident member of a UK company on salary (besides the obvious 20% of company income)

http://www.hmrc.gov.uk/manuals/rdrmmanual/rdrm10425.htm : implies you don't have to pay UK income tax, which makes sense. You'd have to pay your local income tax instead. I'm not sure how this applies to national insurance (what Americans call "social security").

- can you deduct your salary from company's taxable income?

Yes, companies are taxed on profit not turnover.

The company secretary and director can be the same person. It used to be the case they had to be separate, however they changed it several years back.

Now 1 person can run a company.

Ah, you're right - it changed in 2009 as a result of the 2006 act (which otherwise made a whole bunch of things more complicated).

The IRS is actually fairly forgiving about honest mistakes, in my experience. Fraud is another matter of course.

Why not the Cayman Islands? I was involved years ago in a 'distributed company' (US, Colombia, Brazil) that was offering a service to the Portuguese-speaking world (Brazil, Portugal) and we were registered in the Caymans.

Things worked out pretty well and the only trouble I had relative to the administration was that my name was on some paperwork that went to vendors and I'd sometimes get calls from vendors who would ask "Is this some kind of scam?" and then I would rattle off a list of well-known names that have important subsidiaries in the Caymans.

Luxembourg seems to be the flag of convenience for the EU, just as Delaware is here in the US, although Delaware puts you smack dab in the middle of FATCA land.

I find there's too little open information on how for a software company to do things properly in classic off-shore jurisdictions. Everything on the web related to this seems shady so I don't know what to believe. Things like: are there online payment processors that work with Cayman Islands? Where will I be able to open a bank account? and more - are not clear. I'm sure there are use cases for tax havens, but for me it looks like a more expensive and complicated option. Maybe i'm wrong. I just a simple and sure way to do small business, I don't mind paying some taxes and sending a report a year.

I've tried both UK and Cayman. UK is very very cheap to set up, you can get online services sending you the paperwork you need for a nominal fee and the HMRC is very friendly. The company costs $20 a year or something to file the return, the accountant costs a couple of hundred pounds, and that's it.

With the Cayman islands, you're looking at $2500 per year, and if you need the lawyers to so much as look at you you have to pay a few hundred dollars. A bank account will also run you $1500 to open and $600/yr. The big draw is that there is no tax, no books to file (but you should keep them), and they generally don't really care what you do.

So, it depends on how much you'll be making. If your earnings will be such that the UK tax is going to be around $3000, go with Cayman, because you don't have the hassle with dealing with a tax authority.

No experience with UK specifically, but being in the same position as you are (Eastern Europe, problems working with payment providers because of both their unwillingness and stupid local laws) I want to give you a warning. Do check your domestic laws on corporate tax residence. A lot of countries (e.g. Russia as of lately) will want to tax your company simply based on the residency of the physical person(s) managing the company (you in this case). So make sure you don't end up owing taxes in both jurisdictions. And even if your country has a treaty on double taxation with e.g. the UK the procedure to apply for an exemption may be really gruesome.

This is true. Care is required so that the company is not considered a tax resident here. There are some specific things to avoid.

One thing to bear in mind is that the UK is having a referendum on continuing its EU membership on Thursday 23 June. While I sincerely hope we stay in the EU, it's not 100 % clear that we will (although it seems likely). I know hardly anything about doing business outside the UK but within the EU, but it might be worth looking into what the change in situation would be if the UK did leave (such as changes in the need to charge the client's country's tax rate, rather than the company's country's tax rate).

If you're looking to do business outside the EU as well (and not have to handle VAT-MOSS), you might want to read the Ghost blog on why they decided to move their foundation from UK to Singapore: https://blog.ghost.org/moving-to-singapore/

(The HN discussion of the above link: https://news.ycombinator.com/item?id=11103274)

What's wrong with having a local company (hence subject to laws in your jurisdiction) and then having a bank account in another country with friendlier banking facilities?

If this is a new business it's not usually worth the administrative overhead unless incorporating in the UK or US solves a specific issue (like stripe support, or some other critical services you made need).

The problem is not banking, it's compliance with local regulations. There are some requirements that make global online sales like not practical.

So I would say the main purpose of this whole thing is payment processing in a sane jurisdiction.

Singapore and Estonia both seem to be doing things right. Singapore (unlike Estonia) also has a fairly long tradition of being a great place for foreigners to incorporate, a well established and stable legal regime, sane taxation, etc. Estonia also looks pretty good, but they haven't been around as long so the odds of them making trouble for you in the future are probably higher than Singapore.

A Singapore corp will require you to pay taxes once on corporate income. After that it's simple - make distributions to yourself and pay only local taxes. It's as if Singapore asked economists what the most efficient way to run a society is and then actually did that.

A US business entity is probably a very bad idea due to things like taxation on global income and just general US insanity.

Are you familiar with Stripe Atlas?

It was built for this usecase, and allows non-US companies to:

- Get US Bank Account at SVB

- Incorporate as Delaware C corp

- Accept Payments immeadiately using stripe

- have access to PWC consultants about tax and accounting info

- AWS credit

It is in beta, but they are accepting applications. You should give it a go if it makes sense

I've got a Delaware LLC and the tax is pretty simple - you just fill in a form (w8-ben) to say you are non US resident and that's it for US tax. Whatever income and gains are regarded as being yours personally and you are supposed to declare them where you live.

For the UK there's some info here on getting bank accounts (2013) https://www.rapidformations.co.uk/blog/business-bank-account... I'd recommend phoning them / the banks for the current situation.

From my point of view, you should consider first where are your customers, and then -assuming you'd like to- where you'd like to look for fundings.

If you plan to market US companies and potentially raise money in the US, then you should incorporate in the US. You don't need to live there, although I'd recommend for alignment with your customers' time and build connections to raise. After initial expenses (i.e. the company is alive and running) it's relatively easy to get a visa.

If you're serious about your biz, you should take any decision to maximize its success, not to save a few bucks at the beginning.

Could you please elaborate why you think it's important to be registered in the U S to market to US companies?

What are the types of markets/customers sensitive to the place of incorporation of their software/SaaS vendor?

I will not try to save money at the expense of the business, but I don't want to spend without understanding why it's necessary.

"If you're serious about your biz, you should take any decision to maximize its success, not to save a few bucks at the beginning."

Being serious and looking for ways to maximize (i.e. capitalize on) the existing success appears to make more sense when you already have a working business model. When you're in the phase of experimenting ideas and there is a high chance of failing it sounds better to fail as cheap as you can.

Running a company in the UK is super easy compared to some eastern european countries - far less bureaucracy, regulations (maybe apart from VAT-MOSS, but that's an EU thing) are easy to follow and most things can be done online. An accountant can do a lot of this for you and they cost between £60-120 a month. You will have to show up in person for an appointment to open a bank account though, and UK banks, generally - suck.

In terms of taxation, CIT/VAT are similar to everywhere else in Europe, PIT depends on where you live, so you need to talk to an accountant in your home country.

I've read that it's next to impossible to open a UK bank account as a non-resident (even for a company) unless you can deposit a large amount of cash. The are afraid of fraud or something.

Is this true?

Would be nice to have a bank account in the same country.

Check out Stripe Atlas. http://www.wired.com/2016/02/stripe-gets-business-making-bus...

You could consider http://stripe.com/atlas

Thank you. Atlas could help one incorporate, but I don't see much value for me in what they offer. I just want to know if I should bother with a US company just to process payments.

Take a loot at Atlas, by Stripe: https://stripe.com/atlas

People really need to stop recommending Atlas without having a first-hand experience. They are currently in wait list phase. They said they would be in that mode for many months (not even an ETA), and apparently, they are picking unicorns for now.

- deleted comment about US company... - Regarding UK limited... there are special service companies which assist you in creating one, also helping you with taxes etc. But I don't know how this works for non EU residents.

No offence, but this is contradicting everything I've learned about US incorporation so far :) Do you have any sources I can look into?

From what I know you can easily form and operate a company in the US without ever being present there.

You would have to come in person to get a bank account though.

I know there are always companies who will take money for assisting with any kind of crazy stuff. Here I just wonder if anyone who's not selling such services could share some real-world experience.

The post from "therealmarv" is wrong on just about everything.

Incorporation laws vary from state to state in the US, but they tend to be fairly similar. Many states do not have state income taxes for companies, and have business-friendly laws, hence the reason why so many humongous companies are registered in the tiny state of Delaware. A lot of publicly traded companies (and I think most YC-funded startups) are registered in Delaware. In Delaware, all you need in your incorporation filings is an "Agent of Record" and there are many "create your own Delaware company" type sites that provide "Agent of Record" services, including postal mail forwarding and similar.

BTW, you might want to dig on the main YC site. I recall seeing something about incorporation paperwork and such.

Once you have a US corporation, you can get an EIN number from the IRS which is basically your tax ID for filing Federal Income taxes with the IRS. Your EIN number and incorporation papers is enough to get a US bank account for your business. From there, everything else you might want to do becomes even easier.

None of the above is difficult or particularly expensive. It might cost you about $1K total, plus yearly recurring fees for Agent of Record services.

Delaware is somewhat of a specialist in corporation organization, and a huge portion of the state's legislative and judicial resources are invested in being the venue of choice for incorporating a business. That's why the taxes on individuals living in the state are so low, they get a lot of income from corporate taxes and filing fees.

If you are incorporating somewhere solely for the purpose of doing business elsewhere, a Delaware C corporation will definitely do the job, in the same way that a rocket propelled grenade can technically fulfill the same role as a flyswatter.

If you have a functional business, and don't need investor money, an LLC will work just fine. Delaware, Nevada, and Wyoming are the most popular states to register an LLC, but by now, all states offer their own flavor of a limited liability partnership-based company.

A New Mexico LLC does not require annual reports or fees, does not require naming your principals or filing much more than just the articles of organization. The filing does not have to be done by a member of the LLC. You just need to maintain a registered agent somewhere in the state, and that is pretty much the only requirement for staying in good standing as far as the state is concerned. You literally just need to hire a registered agent, fill in a very simple form, and pay $50. No lawyers are required (unless you hire one as your registered agent). If you are not doing any business in the US, and none of your LLC members are US persons, I don't think you need to concern yourself with US taxes. You register your foreign corporation wherever you are doing business, and if they call up the New Mexico Secretary of State, they will say, "yep, we do have an LLC registered in that name".

If you want a US bank account, you will need an EIN from the U.S. federal government, which can also be done by a nominee having no other association with your company.