One of Estonia's first "e-residents" explains what it means
work.qz.com
work.qz.com
If you plan to incorporate in Estonia, make sure you hire a local accountant because you really can’t decipher their accounting requirements yourself, put the lowest amount of capital required in (2500€) and mentally prepare for overall frustrating experience.
I applaud Estonia for all the efforts they have put into rising from the ashes of russian control but if I knew back then what I know now and had to make a choice now where to incorporate, I would skip Estonia.
> you need to have half of your capital available always
What does this mean, in a bank account?
Think of it as a warning flag to potential lenders. The default assumption in society is that limited liability corporations have enough assets that it’s safe to sell them something on credit, i.e. invoicing rather than cash. Forcing companies to register the fact that their equity is negative provides an easy way for vendors to look up this warning flag.
I’m not directly familiar with Estonian law, but I’ve run a couple of Finnish companies. If the law is similar, it’s not that the government registry would be actively filing for bankruptcy if you have negative equity, but it does create potential liability for board members if the company goes bankrupt and the board failed to register negative equity when the information was available to them.
That way the company is only required to own at least 2500 eur in assets, which should not be a problem for any serious business.
You can have 2.5k€ share capital and 97.5k€ free capital. This is usually a better arrangement than having it all in the share capital which is "bound" equity. (Bound is probably not the right English word for this — I only know the terminology in Finnish.)
The logic is identical to for example founding a company in the UK: https://www.gov.uk/limited-company-formation/shareholders
You pick a "name value" and number of shares when founding, for example £1 x 500 shares. This is the "share capital", and official maximum liability of the founders for the company's debts. It also defines the smallest unit of ownership that can be assigned to a person. But of course the actual starting investment, assets, and the market value of the shares can be much higher.
Estonia doesn't use the concept of "number of shares out of total shares", but instead "euros of ownership out of total share capital". For a typical small business you would set it to 2500 EUR and can split ownership at 1/2500 granularity.
In practice the difference between 10% and 50% is only 1000 euros though, assuming your company is registered with the minimum required share capital of 2500 €.
I can start a company and declare a really expensive couch as it's assets in the balance and it would be ok.
But I'm wondering, do you use any of the government certificated services who should help you to do all of this? Like LeapIn and similar? Or do you manage everything by yourself?
Also, anyone else has a similar experience?
That capital requirement sounds like a way to give the local banks capital from rich foreigners to make loans and get tax revenue.
I know India restricts how much Indians can spend abroad and Mexico has complained about capital flight.
(1) The implementation of measures as a result of which the net assets would form at least half of the share capital and minimum capital requirement Or (2) Dissolution, merger, division, transformation of the company Or (3) Submission of a bankruptcy petition"
http://www.ey.com/Publication/vwLUAssets/Doing_business_in_E...
Put in 100000€ and you will need to have 50000€, not 2500€. You will need quite many laptops and phones for 50k€ ;)
My bank account I have opened by traveling to Estonia, in Swedbank, was closed "due to inactivity" after two years, despite I was paying 5 or 10 EUR a month for the account. Yes, my account was inactive, waiting for a chance to receive money when suitable, so what???
Is this similar to US "registered agent" requirements [1], or is it somehow more involved/restricted?
Could anyone shed some light: What can we do with it that we can't do now? Let's say that I'm a solo entrepreneur or small SaaS owner from a developing country (e.g from Asia, Africa or LatAm) -- basically, typical HNer who's not from Europe/US.
For example, I run a small B2B company in the UK - would there be any benefits to incorporating in Estonia?
Isn't it relatively easy to open a Euro denominated account in most countries?
Here're a few of my experiences.
1. Setup is not as straightforward as they claim, but it's still quite easy. It compares well to what I've seen in France (LegalStart, CCIs, etc.) and the USA (Clerky/C-corp, Delaware, etc.). Actually there's no (printed) paper work because all is digitally signed with your e-residency card—only that is a big plus.
2. Running the company is similar to a C-corp but it's 10x easier than an SAS in France—where you've to register for, know about, and manage nearly 10 different tax agenda. It's also 2x to 5x cheaper to run than in USA and France.
3. However, it's true that banks are lagging a little behind but to their defence they face AML/KYC requirements, and e-residency is a lot of randomness for them—needless to say (?) that banks are risk averse.
For comparison, note that Clerky was launched in 2013 to streamline the legal paperwork for C-corps when e-residency started in 2014. And see how long it took before Stripe partners with Silicon Valley Bank (SVB) for its Alpha program.
- So I feel like banks do a good job although there's room for improvement.
4. Internationalisation of some institution's websites has bugs—basically your preference for english is reset to Estonian once in a while, but most of it is translated in English (and Russian and Finish?).
5. Some institution's websites are old looking but it's not worst than in Delaware or in France. So far, institution's websites are quite clear. For comparison: when paperwork in e-Estonia is done with digital signing, in 2017 I still had to (surface) mail or fax documents to France's and Delaware's institutions, sometimes with credit card number written in clear, or with a check enclosed—this is prehistory.
6. For the legal setup and accounting, I use LeapIN. So far they're very professional, their website has an extensive Q&A and knowledge-based section—that I read. Their pricing segments are clear. And they seem to have a growth mindset—reach out for more advice on how to onboard and their price.
7. Money-wise I was unaware of the 50% social capital requirement left on your account at the end of the fiscal year (note that it also exists in France and, by inference, probably in some other European countries)—maybe they could communicate more on that, it's not nice to figure that out later.
- Still, so far I feel I've got value for my money and I can pull out if needed—no commitment which isn't the case of many B2B SaaS solutions with long term contracts (if we compare).
According eesti.ee, it will take around six months to close limited liability company in Estonia. So yes, technically you can pull out but if it's anything like other more obscure legal procedures in Estonia, good luck. Conveniently this is not mentioned anywhere in the nice looking promo sites either ;)
Generally:
- on boarding is easy and relatively cheap,
- off boarding is more difficult.
And if you want to close then:
1) you better do it right—it's a process with rules that can take weeks if not months;
2) you gotta pay unless you declare the business bankrupt;
3) it takes a lot of off-the-path back-and-forth exchanges with people that have limited incentive to help you.
Anyone picking their ID up in Vienna have a different experience?
"On Thursday, Prime Minister Roivas will present Merkel with an e-residency card - allowing the chancellor to become a digital resident and try out Estonia's digital solutions firsthand."
http://www.dw.com/en/in-estonia-merkel-and-roivas-talk-russi...
There's an Estonian story with photos about that here:
http://estonianworld.com/technology/angela-merkel-becomes-es...
https://news.err.ee/115597/japanese-prime-minister-becomes-e...
"Abe's e-residency card was presented to him by Taavi Kotka, the Deputy Secretary General at Estonia's Ministry of Economic Affairs, currently on a visit to Japan.
Kotka told ERR that e-residency was Estonia's gift to Abe, which he accepted."
- Is your startup governed by specific laws for data privacy etc.
- What about legal disputes, arbitration. How does that work for startups based out of Estonia ?
2. All the EU data laws apply.
3. I guess it depends on how you specify it in your contracts, you could do the disputes/arbitration wherever you want. There is an overview of dispute options here: https://www.eesti.ee/en/entrepreneur/legal-aid/resolution-of... . For example, if you have a customer not paying their invoices that are below 6400 euro you could file an a request in E-toimik/E-file (a paperless court system) and the collection is automatic. You could also sue people "online" there. (disclaimer again, I lead the software architecture/development work on the E-file project.)
Their price structure is not fully pay as you go:
- there're no setup fees; but
- there's a fixed monthly fee—a so called terminal fee of 20EUR; and
- then there're the transaction fees—about 2.2% which is much less (!) competitive than Stripe's fees in the EU—1.4%.
Although I like what I've seen so far, as an app-developer, the fixed monthly fee wasn't acceptable. Plus, interaction with LHV was kind of painful (in this particular case, english was an issue).
And back to LHV, I've seen the PayPal account verification deposit (two payments of a few cents made to one's account) appear extremely fast on the account—I think it was less than one hour.
A bit of back and forth for the KYC process, but the onboarding process and the team are quite good and to the point.
Meritocratic seems highly promoted in many circles (seems like on first glace a good idea as opposed to say, despotic), but in a meritocratic world, what happens to the dumb and/or lazy (unmeritable?) people.
Kind of like an athlete in the olympics who ends up losing by a fraction of a second? Idk, they don’t get the gold right?
Except first prize was granted by your parents and upbringing. Second prize was partially because of parents and upbringing, but with a bit more luck.
And bronze? Yeah, well they're just lazy and bad and they deserve what little they have - cause the Gold and Silver earned what they have.
Don't we then all have the same ancestors and therefore all equal opportunity?
3. It is evident that even being born, not all babies are equal. And that's before we consider socioeconomic status.
Should humans be considered as equal? Of course. However its quite easily demonstrated that people aren't.
This is reductio ad absurdio.
Just about every study done on the subject shows that the family you're born into has a HUGE effect on how successful you'll be in life.
Is this irrelevant? Why is it not acceptable for someone that had better parents to do better?
Yet, we have little issue,society speaking, condemning a baby and their family to a life of poverty to continue that cycle.
Or should we say that the newborn/baby deserves lack of medical care, substandard food or hunger,substandard housing, less/lacking education? If you believe they deserve that, can you explain what actions a baby can do differently?
"Why is it not acceptable for someone that had better parents to do better?"
If your whole schtick is about "meritocracy", then having people start out better by default defeats that entire thing.
Why do they deserve that power? What checks and balances exist to prevent them from entreanching themselves and family/friends?
Follow the money and power.
Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize.
Also, "zero effort" is subjective - is playing video games all day zero effort? I would say so, but some Twitch streamers would disagree.
I'm guessing whoever wrote this hasn't grown up poor/discriminated against, didn't beat their peers and find themselves never-the-less judged/ousted because they "weren't of the right background/proper means/cultural fit".
And remember, all it takes is a few key leaders. And that includes those who may have been part of the system but were unjustly ousted...(or those who just think they are getting a wiff of the winds of change and want to be on the right side)
/I'm not making any actual prediction of revolution the US incidentally. I'd be inclined against any theories of imminent revolution. Just pointing out that simple theories of "it wouldn't happen here because of our fake-meritocracy" are pretty off the mark.
Why are you making assumptions about me?
What if leadership isn't about beating your peers, but about using influence to bring people together?
American firms actually hire leaders.
More fundamentally the problem is that in America there is a very distorted sense of self. A total of 4% of Americans think they are less intelligent than the average American. [1] And so the vast majority of people in this nation who are not particularly meritorious think they absolutely are, or at the worst no less meritorious than average. Yet that, no matter how you measure it, is simply not the case.
[1] - https://today.yougov.com/news/2014/05/11/intelligence/
I used to be more aligned with what you're saying. An eye opening paper for me was this [2]. I ran into that when actually searching information on the chiseling out of the middle class. And that paper does describe that. In 1979 the middle class controlled 46% of all income, and the upper/rich classes controlled 30%. Today (well at least today as of 2014) the rich and upper class control 63% with the middle class left with 26%. There's even been a chiseling out of the middle class as a whole declining from 38.8% of society to 32% of society.
But the eye opener is this. This is the change in the size of each economic group between 1979 and 2014:
- Rich: 0.1% -> 1.8%
- Upper Middle Class: 12.9% -> 29.4%
- Middle Class: 38.8% -> 32%
- Lower Middle Class: 23.9% -> 17.1%
- Poor or Near-Poor: 24.3% -> 19.8%
If you're concerned that partisan bias may be tilting those numbers (as such figures are certainly subject to a variety of different interpretations), wiki has a section on the political stance of the Urban Institute [3]. Beyond that, that paper is quite readable and their methodology very transparent. It's extremely eye opening.
[1] - https://www.fa-mag.com/news/most-millionaires-self-made--stu...
[2] - https://www.urban.org/research/publication/growing-size-and-...
[3] - https://en.wikipedia.org/wiki/Urban_Institute#Political_stan...
This leaves everyone else without effective organization. Look at all the occupy stuff that was supposed leaderless; did it accomplish anything?
Can you be sure that this assertion is true of both the past and the future?
When the country is split down partisan lines, it ensures that any action taken will also be cast in this light and demonized accordingly. And even better for the status quo, it can also be used to get people to even vote against their own interest. How many people voted for Hillary or Trump because they thought 'yes, this person truly represents my interests and views'? How many voted for them because they thought 'oh dear god the [other person] winning is simply unthinkable!'?
How did the American revolution happen? Aside from having a huge number of competent leaders, it was framed as a unified citizenry 'us' versus the outsider English politicians 'them'. And this is a general theme of revolutions. It is 'us' versus 'them' when 'us' is the people and 'them' is a detached government. Yet in the US 'us' means one half of the population and 'them' means the other half while the government seemingly works to further antagonize this divide.
I do not know whether you intend to, but "this is not a coincidence" sounds like it implies a conspiracy.
I believe it is a coincidence, but in the same way that evolution is based on coincidence. Random mutations create by coincidence an organism that is better adapted to its environment, hence it survives. There is no need for a conspiracy to arrive at a political system like ours (it's just stabler than average and thus survives), just like how evolution does not need an intelligent designer to come up with intelligent designs.
So, our system is already absolutely a product of exactly what I'm describing. Now let's zoom forward to today. Congressional approval in the US ranges from the low teens to the single digits. [2] Think about that for a minute. That means upwards of 90% of people are dissatisfied with the most basic functioning of our government. If we weren't so divided among one another, our government would be replaced in short order by democratic consensus. But with what..? That question even gives politicians a sort of cognitive dissonance to put themselves as the 'good guys.' It's entirely possible we could, in retribution, elect individuals that could cause immense harm to this nation.
So you're a politician. What to do when you want to help ensure you and your fellow party members continue to get elected, even when 90% of people think you're doing a bad job. What do you do? You could do a better job, but that's tough - you need and rely on "donations" to get into and stay in office and the unspoken promises of those "donations" are a large part of the reason people think you're doing such an awful job. Making people despise and distrust the other group so much that they are willing to vote against their own self interest is one very obvious solution. Let's go back to COINTELPRO and look at some of its intended effects:
- 1. Create a negative public image of activists by publicly smearing their character
- 2. Break down organization by spark internal conflicts and exasperating racial tension.
- 3. Restrict the ability to groups to protest by using infiltrated agents who promote violence and lawless behavior at protests.
- 4. Restrict the ability of individuals to participate by engaging in surveillance, false arrests, and character assassination.
[1] - https://en.wikipedia.org/wiki/COINTELPRO
[2] - https://realclearpolitics.com/epolls/other/congressional_job...
As per my other response re: your apparent implicit belief in a labor theory of value, now you're espousing the implicit belief that a labor market must tend towards full employment, and at a wage level that makes revolution unattractive.
If I might make the observation, your positions seem to be littered with false beliefs/understandings.
I'm assuming another one of those false beliefs would be that you'd be in the relative merit camp under any such meritocracy...
- you still can: you are not yet a slave, with the ruling class + machines not yet fully in control
- you have a reason to revolt: your life quality is low, because society does not give a damn about the losers
With those being true, a revolution should happen well before reaching those high unemployment figures.
How much effort you put in has, at best, a second order relation to reward.
Far stronger effects are supply, demand, mechanism of action, distribution of initial resources, and social factors.
I get though that those other conditions matter more in terms of the actual price though. Marx distinguished between "value", "use-value", and "exchange-value", the latter being price, the second being required for value or exchange value, and the first being used as the basis of comparison between goods. I took it to mean that exchange value is like temperature while value is like heat.
Can you elaborate? I'd like to know more about how these different theories interact.
If the housing market keeps going up, where's the risk? You'd have to be the dumbest man in NYC real estate to lose money like the president's son-in-law. Small time landlords are a slightly different ballgame, but it's still bizarre that we allow individuals to speculate on where people live and and extract money from the less wealthy in this fashion.
EDIT: Also, what other job requires work up-front, but then nearly none? Landlords are famous for terrible upkeep. Even in communities where problems are generally fixed, most of the time, the landlord just collects a check until a problem pops up. They only have to work for rare serious problems and for managing move-in move-out.
EDIT2: The craziest thing is that we see that they do this and still collect 25%+ of ordinary people's incomes for an invisible service that is merely holding intellectual property. It's as though people pay to live in a castle keep with no services, pay the local lord, and justify giving 25%+ taxes on top of what you give to the actual democratic government (typically less to much less) because the lord is somehow a great symbol of the economic system.
It's a lot of work with a lot of risk.
If the limitations/rewards vary based on who is in power, I can see that becoming quickly challenging. Internet access could be deemed a reward, for example.
They don't get to run things?
Put another way: assuming you're going to have some sort of hierarchy, and you will, how would you want to organize that hierarchy? Merit seems like the least bad way to do so.
It's like you're advocating for correctpersonocracy. Put another way, literally every government that has ever existed would call itself a meritocracy.
The actual word 'meritocracy' comes from a book that warned about the dangers of creating easily-gamed draconian systems that needlessly exclude people from the process of governing. I wish as many people would read the book as use the word.
https://www.bbc.co.uk/programmes/b09tcvp4
Some interesting people interviewed and points raised.
"exhorted", perhaps?
And it may be exactly the fact that you can't measure it accurately that makes it not "harden into a new social class without room in it for others."
It's not? What are SAT scores, school grades, entrance exams for the civil service, election results, income etc.?
I would say that these are all ways for society to quantify merit.
Did you mean perfectly accurately?
> literally every government that has ever existed would call itself a meritocracy.
Nope. Most governments used to call themselves monarchies and would have bristled at the idea that they'd have to somehow demonstrate merit to justify their power. Their power was justified by heredity, and in fact, I'd think that if you suggested that they needed to do demonstrate their merit, you might end up short a head.
> The book
Yep. Have to admit I didn't read it, but I did read what the author wrote:
"It is good sense to appoint individual people to jobs on their merit."
What he objects to is the following:
"It is the opposite [of good] when those who are judged to have merit of a particular kind harden into a new social class without room in it for others."
So merit-based selection: good. Ossified class system: bad. I think Trump, May and Johnson are ample evidence that we leave plenty of room for the incompetent to get a chance at the reins, even if we generally try to organize ourselves by merit.
And so exactly the fact that we can't quantify merit with perfect accuracy, and have multiple domains, helps us avoid the problems Young mentions, though here as elsewhere we aren't at all perfect.
These are incompetent.
As for democracy, however, what we don’t have (yet) is anything demonstrably better. A meritocracy will not be an improvement over a democracy. The critical function of a democracy is affording the governed a guaranteed means to evict bad adminstration.
I'll take town board/administrator form of government, you take "meritocracy."
In my form of government the board members run for office periodically. The ones who get the most votes win. Then they hire a professional bureaucrat to handle the day to day business of keeping a municipality up and running.
Here's what I've got:
* a discrete (and anonymous!) method to determine who will become the board members
* local community members who campaign and are subject to citizens by virtue of elections
* at least one professionally-trained bureaucrat who more likely than not is competent in the job and given the power by the board to make day-to-day decisions like hiring and firing people
So... How does your meritocracy function?
What's the way you measure and get consensus on community leaders' merit?
How are those leaders held accountable?
How do you ensure at least one of those leaders is trained in a relevant field as opposed to being trained only in the art of rhetoric (shout out to Socrates for this question)?
Edit: clarification
Dunno, elections, maybe? Seems like a common way to get community consensus on personell decisions. For things like public office. So people get to vote for who they think is best suited, who has the most merit. And for lower level positions, you could have entrance exams and a mechanism for promotion that takes into account job performance.
And for the economic sphere, we could let people vote with their wallets...
I find the model of liquid democracy enticing: Every decision is voted on by the people of the community and because that would be overwhelming you can delegate your vote (in general, for a certain topic or just for a single vote) to someone you trust, like an expert in that area. Maybe people might get a little money for voting so experts who vote with many votes can do this professionally in full time.
So now you have people competing for the expert status for certain topics (like health care or foreign affairs) and everyone in the community can have direct influence on the outcome of every decision. Every bit of power is earned and most decisions are effectively made by trusted experts.
You could have a system where winner-takes-all, and the second best on down starves. You could also have a system where the upper half is rewarded with 10% more than the lower half. Both of these could be described as meritocratic.
Beware of those who use the label of meritocracy to advocate for winner-take-all, as well as those who denounce the concept by equating it to winner-takes-all.
Does anyone know how well this works in practice for US citizens?
I've been led to believe that FBAR requirements are so onerous that most non-US banks would rather turn away US citizens than take their business.
I mean I'd assume that incorporated businesses in Germany (e.g. GmbH which roughly translates to LLC) would count as a German person and the same for Estonia. You as the owner would still have to do your taxes and FBARs on the income you receive and what you have in your accounts. But I wouldn't expect to file FBARs for the business.
My original question was more along the lines of the individual with e-residency opening a personal bank account.
If so, I could see this becoming very popular over the next few years...
err...
>My e-Residency is not a passport. It’s more than a tourist visa, and far less than citizenship.
what? Slip that into the last paragraph? What is it exactly?
Let's assume you have a startup and you want it to be registered in Estonia, paying taxes and using the Estonian banks for financial purposes.
1. With e-Residency you can't enter Estonia, you need a separate business or travel visa [1]
2. At present, it’s still necessary to travel to Estonia in order to apply in person for an Estonian business bank account. [2]
3. Good, fancy and catchy name "e-Residency" is actually an infinite loop of bureaucracy. You can't remotely open a bank account, you need to travel personally to Estonia, and you have a chance that banks will approve your application. But you can't enter Estonia with this "e-Residency" for this to happen.
[1] https://e-resident.gov.ee/faqs/about-e-residency/#coming-to-...
[2] https://medium.com/e-residency-blog/banking-for-e-residents-...
And this is just a little tip of the iceberg, there are a lot of articles about real experience of e-residents of how unfriendly for "e-residents" the banks in Estonia are. And without a bank you can't make your startup work.
Today it's just better with the same level of bureaucracy to open a company in other, more startup-friendly countries that grant a residency and have decent, more digital-friendly banks.
I hope something will change in near future, the main idea of e-residency is actually really amazing.
Unless you're from US, you can open bank account remotely
http://www.zdnet.com/article/borderless-banking-estonias-e-r...
https://en.wikipedia.org/wiki/E-Residency_of_Estonia
That said, the article also claims "Shinto" Abe was the first person to enter the program, but besides mispelling his name I can't find any other reference to him being involved with it at all.
https://news.err.ee/115597/japanese-prime-minister-becomes-e...
That's surprising.