Comment by dijit | Hacker News Reader

Comment by dijit | Hacker News Reader

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I'm starting a subsidiary of a start-up in Germany in Sweden.

It's not my experience that Sweden is a great place for startups, the bureaucracy is extremely hit/miss. Setting up tax information for example is really difficult as a non-Swedish speaker and even tripped up my Swedish speaking friend (who is a project coordinator on the new Skane hospital: so she's somewhat aware of the tax system). How much of your daily work will be administration, how much will be selling services, how much money will you make do you estimate; you must give us an estimation: if it's too far off then we will fine you!

Information in English is... scarce, but gives the illusion of being available.

Hiring is also very complicated, you have to be very explicit in your contracts because anything not spelled out immediately falls in favour of the employed; which is nice, but as a novice employer that's very scary, because I don't know everything obviously.

What in your mind makes you think it's a good place?

We've set up a UK subsidiary so I can relate, but the process in Sweden was approximately 10x simpler: more automated, less bureaucracy, less ongoing admin work when the company is up and running.

As with all countries there are definitely things you need to learn. We relied on our lawyers to draft employment agreements because we were already using them as part of our seed fundraise. There are companies like Pocketlaw (https://pocketlaw.com) that provide solid, standard agreements that you could use.

There is an abundance of experienced engineers who are willing to work for less than an entry-level engineer in the US. Wages are very low even in Stockholm. Great if you want to build a tech startup.

Unfortunately the employment law is written in support of factory workers, not knowledge workers. So many employers are very cautious when hiring because a non-performing employee is very expensive to get rid of, as long as they have been employed for 6 months or more.

What makes you think that setting up a subsidiary is a "DIY" thing anywhere, especially if you don't speak the language?

(Sweden is still probably easier than Germany, though that's a low barrier tbh)

Edit: good to know about the UK

Because I did it in the UK and it was very much a DIY thing.

14GBP to Companies House, extra 10GBP to reserve the right to your name.

File your books every year, expect to be audited randomly for a few years.

But you need a UK bank account, which requires a officer with a registered address in the UK. We were lucky our investors were UK-based otherwise it would have been a nightmare. Then you need to argue HMRC valuation discounts if you want to issue EMI options, which are only valid for 3 months, so you need to do it repeatedly. And then EMI option schemes are 15+ pages long contracts. Sweden has an equivalent stock option scheme that's ~2 pages, in comparison.

> But you need a UK bank account,

Sure, I assumed this because you need that in any country you operate a legal entity.

> which requires a officer with a registered address in the UK.

This is the same in Sweden too

> Then you need to argue HMRC valuation discounts if you want to issue EMI options, which are only valid for 3 months, so you need to do it repeatedly. And then EMI option schemes are 15+ pages long contracts. Sweden has an equivalent stock option scheme that's ~2 pages, in comparison.

You have more experience than me there, I never had this as a problem to solve so you could be right.

AFAIK in Sweden you need a managing directory who is resident in the European Economic Area (EEA), not necessarily in Sweden.

You must have at least one legal representative, usually a director, in Sweden.

You can apply for temporary exemptions, but they are temporary and you are supposed to have good reason.

There’s no explicit requirements that any particular position must be held in Sweden, you can be a VD in the EEA for example, but you still need at least one legal responsible person to be domiciled.

No you don’t, it is very clear. Within EEA, not in Sweden. I work in accounting and we just solved this for a Spanish client without any initial employees in Sweden.

Aren't EMI options basically a scam? I never understood why company cannot just give an employee real shares. I was at a start up a couple of years ago and was promised these. Basically every month CEO had a new excuse that HMRC this or HMRC that. After a year and a half I decided to leave, because I understood I would never get any of that. Now when I see company offering EMI shares it is a clear red flag for me. E.g. if you offer £50k in EMI shares just pay a lump sum instead and I can put this on my ISA tracking fund or just give real shares in the company.

EMI gives both tax advantages and means you owe no tax when being offered the option. 50k as a lump sum would be taxed as income (so, fairly heavily). 50k in shares might attract a similar tax bill to be paid directly by the employee far in advance of any chance of recouping the value of the shares.

EMI itself is not a scam. Whether a company follows through on giving you the options in a reasonable timescale is another thing, and whether the shares are eventually worth anything is another again. As with all things startup option/share related, consider it a lottery ticket with an unknown chance of paying out.

So this is a sort of HMRC sanctioned tax avoidance scheme. Given that they are in a business of enacting retrospective taxes, I wouldn't trust that they are not going to change their mind down the line and ask for an extra tax.

That being said, £50k after all the tax is still better than £0 and if the £50k was paid as a one off bonus, you could pay it into SIPP without paying tax.

I remember when I asked them why I cannot get normal shares? They said that EMI will be better for me because I will save on tax. I said, why if I want to pay tax, it pays for our schools, hospitals, why should I be taking the advantage? So they said that the board don't want to do that, because it will create "a legal issue" when they will be looking for next round of investments.

So if any future employee reads that, if a company insist on EMI shares and don't want to give you real shares or money upfront, then jump the ship!

All of these things are easy if you know how to do them. But if you have never done them, it takes some time to learn. My advice is get an external accountant to do this for you, only takes a few hours and they can teach you everything you want to know.

Do you have resources on the simplest way to establish a startup in Germany?

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