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Comment by troydavis | Hacker News Reader

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.

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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.

They could always use an employer of record for the foreign employees like remote.com

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

Same, have had a good experience with using Velocity Global for employees in other countries (EU and International) https://velocityglobal.com

This does come at a cost as well

> 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.

Sorry, 'flout', not 'flaunt'.

Given the number of founders I've seen running into this problem, I think it's worth calling it explicitely out: the problem with US incorporation as a foreign person isn't just your local tax code, but: US LLCs/partnerships (a very common structure for incorporating) require witholding (ie taxes) for foreign holders 30% (which is one of the highest rates) (keywords for googling: Federal Withholding Tax for Foreign Nationals ). You can write this off from your local taxes, but generally you'll still end up paying more, than if incorporated locally.

This means, that eg as a pass-through partnership incorporated as an llc, getting money out from the company will incur a 30% tax plus state plus local taxes.

There's additionally a problem (more for small corps), that the paperwork on the above will involve at least 2 accontants -one from US, one locally, meaning non-trivial startup costs.

None of this is to disencourage you to go with US; just do so with open eyes, and it's worth sitting down with an accountant in potential target country _before_ incorporation.

30% if there’s no tax treaty. Treaties trump laws (if ratified). So you’ll have to read through each treaty with your employees’ country to see what needs to be withheld.

So for OP, for operational simplificity, a domicile with the least number of treaties would be best (but possibly horrendous for tax efficiency).

> witholding (ie taxes)

The witholding rate is not the tax rate... if your actual tax burden is less than 30%, you file a tax return in April and Uncle Sam writes you a check for the difference. There's a time-value-of-money cost, but not an actual cost.

The term you are looking for is PEO.

See my old comment for some service options

https://news.ycombinator.com/item?id=31254615

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.

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.

You'll also need to consider "alien entity" fees/taxes if you want your "Delaware" corporation to operate in another state, e.g. Texas.

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.

The annual filing fees and documents required by Delaware is arcane. Things like “annual meeting of the shareholders” for a single-person S-corp.

Are you saying that Wyoming doesn't have those requirements?

Not if you mark your corporation as a “close” corporation (limited to 35 employees). The entity type does not matter (C, S, LLC).

“Abbreviated governance - shareholders may agree in writing to treat the corporation as a partnership, operate without a board of directors, dispense with annual meetings, and make a shareholder agreement.

Advantages

• Limited liability - the law says shareholders don’t have personal liability even though they relax corporate formalities in operations.

• Ease of operation - operates without pomp and circumstance required in regular corporations where hundreds of shareholders must receive information and vote.

• Cost of operation - relaxed corporate governance means lower legal, accounting and administrative fees for lower total costs of operation.

• Deadlock prevention - provides access to court when shareholders are deadlocked and harm could befall the corporation through lack of action.

• Buy-out provisions - shareholders may buy out a deceased shareholder’s interest according to shareholder agreements”

https://sos.wyo.gov/Forms/Publications/ChoiceIsYours.pdf

Many of the disadvantages listed are no different than for other corporate entities.

Hey thanks. That's very helpful.

I can’t agree they are arcane. Back when the tax form was filed on paper it was a postcard-sized form: calculate one way on one side, the other way on the other side, and pay the lower amount.

And the point is that once you are established the laws are well known and understood by corporate lawyers (in other words the opposite of arcane, at least for lawyers) and so will be easier to deal with for all parties.

If you’re starting a small business just incorporate in the state you live in. If you’re starting a startup, don’t go for a false economy.

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.

What if you're located outside of the US but a US citizen?

Then you're in for a treat: Look up FATCA. If you have intellectual property involved in low-tax jurisdictions, you'll also want to look up GILTI.

Wow I already file and pay US taxes despite living there so was familiar with FATCa but dam might have to go Wyoming

Note: Delaware charges LLCs an annual fee of $300. Just something to keep in mind. Wyoming charges $60/year, and Nevada $350/year.

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