Hacker News Reader

Hacker News

Comment by Grimburger | Hacker News Reader

Parent Full thread

Grimburger

This was incredibly well-written and an enjoyable story. Congratulations on pushing through and getting traction.

Something that resonated:

> We had to put 5 million JPY (~$45k at the time) in our business bank account and leave it there. For... some reason.

Living in Asia I've come across this bizarre government obsession with "money in the bank" when dealing with them:

"You need $15k in a bank account to apply"

"Ok well I have 20x that in an index ETF and it's been sitting there for a decade is that fine?"

"No you need to put that much in a bank account and leave it there for 6 months to qualify"

"What happens after the six months? I can simply take it out again?"

"Yes, that is acceptable"

[Confused Face]

No one seems to know why the rules exist, but everyone is certain there's a good reason for it.

View on HN

IF you try to understand it from the regulators perspective, it totally makes sense. You see, the law is written for legibility, not for variation, and rightly so. $15k cash in the bank is easier to understand than $300k in ETFs. Your $300k ETF might be stable or it might fall below the value of $15k over 6 months (not likely but government officials are not in the business of investigating the stability of individual ETFs). An old HN comment about makes this point about “legibility” well:

“To the state, one of the most important goals is legibility. The state has an enormous burden of regulation in its various enterprises, and the less variance the easier the job. This certainly isn’t ideal in many, many cases, but in this case a person who likely didn’t make the standards quite rationally trusts a vetted standard over one small trivial test given to them by a company they’re evaluating. FIPs standards are probably much more exhaustive than just a hashing performance test on one piece of hardware.”

https://news.ycombinator.com/item?id=25543818

This is exactly why we aim for consistent and standard code, even if n specific implementations or different patterns might be a better local fit.

I understand why some governments do such things for businesses but my situation was for an entrepreneur visa application, the cash had to be there for six months to simply begin the process, what happened to it afterwards was irrelevant, I could invest in Dutch tulips for all they cared.

Amusingly I was not even required to incorporate there to get the visa unless going into certain industries, was clear with them that domiciling in Singapore makes far more sense for a saas startup and they had no problem with that.

FIPs?

In Germany there is a similar thing where you need to deposit at least 25,000 € as collateral to be able to create a GmbH (similar to an LLC). This is meant to pay for debts in case the GmbH goes bankrupt.

But the government recognized that this was a problem so the "UG (haftungsbeschränkt)" was made possible where you are only required to deposit 1 € initially and than can deposit more each year until you can convert to a GmbH. The UG obviously has to pay more interest on loans if it gets any at all but you are not required to be wealthy to be able to protect yourself from bankruptcy.

> This is meant to pay for debts in case the GmbH goes bankrupt.

This is only partially correct. It is to ensure that you can pay your first bills without going bankrupt after the first week or so. You can actually use the money right away to pay for bills. Also, if you pay in cash, you only have to deposit 12,500€.

That's really interesting. Here in the UK you can set up a limited company (i.e. if the company goes out of business, you are not personally liable for any debts) in about a day and there's no collateral requirement at all.

If you’re interested in doing this, here’s the step by step guide:

https://www.gov.uk/set-up-limited-company

and here’s the registration form:

https://www.gov.uk/limited-company-formation/register-your-c...

(“It costs £12 and can be paid by debit or credit card. Your company is usually registered within 24 hours.”)

a lot of people overlook the UK - in terms of the simplicity of doing business. from favourable taxes etc. however the biggest con in the uk, is unmotivated people.

*chronically underpaid people

In what sense? I've worked with people around the world from a base in the UK and to be honest, don't find staff in other countries are much different. Certainly the quality of output doesn't seem any better.

Unmotivated people are the easiest to motivate with money. Motivated people don't want to stop what they're doing to do your thing.

Why do you think people in the UK are unmotivated?

You need to only deposit 12,500 € in the bank account of the GmbH you want to create as capital (Stammkapital). The founder (Gesellschafter) have then an obligation to pay the GmbH the other 12,500 € at a later date. The CEO (Geschäftsführer) can request that the Gesellschafter pay the rest of the capital.

The CEO can use the capital to establish the business. It can be used to pay wages, buy hardware etc.

Of course there are obligations for the CEO to not let the GmbH go bancrupt.

And: In order to keep the spirit of protecting the creditors of GmbH/UG - while having only to deposit 1 EUR to the UG (haftungsbeschränkt), the UG has to "warn" all potential business partners by carrying the "(haftungsbeschränkt)" (limited liability) suffix as part part of the company name in all written communication (roughly).

Is that meaningfully different from the LLC suffix in the US?

Yes, because Germany already has a “LLC”, its GmbH. but if you have less than 25k you have to call yourself “UG (haftungsbeschränkt)”, which, in the end, has the same meaning, only spelled out…

it’s like a warning message or something

UG also stands for unlautere Geschäfte, dishonest dealings ;)

Exactly, it's like the government decided to mark all low-/entry-level entrepreneurship as potentially fraudulent - or urge towards that 25K deposit.

In practice it becomes an invisible glass ceiling, you just work/pay your way through it when it's time, otherwise keep playing in the shallow end for as long as you want.

Win-win, surely, but patronizing nevertheless.

it's more like a glass bottom, and for good reason because corporations in Germany (also in the Nordics) have a stabilizing social function. Firms exist to consolidate towards higher productivity. The idea is to avoid an army of one-man businesses without healthcare or insurance or any significant output.

I don't think that there is a difference in terms of liability: Both UG and GmbH are limited liability companies. However, my understanding is that an UG is obligated to retain a quarter of its annual profits as reserves until it has reached the capital requirements of a GmbH, at which point it can be converted.

IMHO, UG are a fudge. They recognised that the barriers to GmbH formation are high but at the same time did not want to drop them so they created something new that allows people to start a company before being able to afford a GmbH.

This contrasts to, for instance, the UK where limited companies (Ltd) are extremely easy and cheap to create and maintain (£1 capital and about £15 cost) so that there is no need for multiple types.

The 25k is not the problem, having to spend 3000€ on setting up the GmbH is.

3k is very steep AND so is 25k.

Aren't the 25k euros only capital requirements? (i.e. you have to bring them into the company as capital but then they don't have to remain in the company's bank account).

It is also not strictly "capital" requirement. You can bring in non-capital value (like buildings, machines, etc.) into the company, but AFAIK this is much harder and hardly worth the extra hassle.

It is capital requirement, but it does not have to be cash. It is not unique and is allowed in many jurisdictions.

isnt it pretty common for people to pay their expenses with their LLC bank # because it doesnt matter what you spend it on if x amount of dollars goes through the account it allows you privilege of credit

Correct.

Funny thing is German even more: You can spend the 25k as soon as the company is established for Hardware.

I always thought it was the case that the UG was riskier from a liability perspective but quickly reading over it, it's not entirely clear that's the case.

For Polish sp. z o.o. - initial capital minimum is 5000 PLN. It used to be 50000 PLN before 2009.

Same in Italy

Probably to prove it's unencumbered, liquid collateral. Which makes sense if you disregard all the other ways to determine that

Yeah line of credit would do the trick though. Then once you have cleared the hoop use it to invest!

When I bought a house I had to prove the 20% down was not via debt like a line of credit. Perhaps they would require something similar.

The problem with that is, once you have a mortgage, everything is in effect a line of credit until it is paid off.

Depends on your mortgage. Five years fixed at 2.99% means that it’s often smarter for me to invest the money in a GIC at 4.60% rather than pay it off.

(The risk of course being when I renew and it’s way higher)

In the US yes because of tax relief and better investment options? Here I pay nearer 4% mortgage (a 3% 5 year fix like your may have been possible with impeccable timing, just got off a 4.39% 5 year fix), in after tax money, get maybe tops 1% in the bank and have to pay tax on that 1% too!

Technically you can pay off some of the mortgage early, split a new loan account, borrow from that new account, and then use that to invest, and claim the interest of that against tax. So basically those with more money pay less tax, of course.

Canada. And indeed there’s lots of clever tricks like that. I’ve opted lately to put the blinders on, stop gaming the system, and just get out of debt so I’m making extra payments and whatnot.

100% this happens.

As an additional cross-cultural observation, 20-something western young men routinely insist on debating the merits of this policy with the impotent clerk processing their business. I've never seen the clerk unilaterally alter government policy, but the mutual exchange of Confused Face continues just the same.

They have a similar rule for "Specified visa: Designated activities (Long Stay for sightseeing and recreation)".

"Documents such as a bankbook to prove that the applicant’s savings is more than 30 million Japanese yen along with the records indicating the current balance as well as deposits and withdrawals for the past 6 months."

https://www.mofa.go.jp/ca/fna/page22e_000738.html

30 million yen is currently 225k USD, but rates can change rapidly so you need significantly more just to be safe as the visa application process is long. In my experience, the "such as a bankbook" is strictly interpreted as a bank account, a stock portfolio isn't acceptable.

Now the Visa is a 1 year visa, but it issued for six months and then renewed for six months. When renewing you must meet all the original requirements. So, you can withdraw the money after getting the visa, but you need to have it back in the account when renewing! The records for six months appear to indicate that you need the money in the account for six months, but I'm not certain if this is the case.

Does that imply that living in Japan for 6 months costs 30 million yen?

Govt want to check balance amount is constantly over(near) 3000 rather than temporary have. This visa is for richer people to stay.

Agreed. I was specifically told there is no obligation to spend the money. The money just needs to be in the bank.

There are also many other visas available, a two year student visa is probably one of the easiest to acquire, but it does require attending a certified school and the visa is invalidated should you stop attending school.

It makes sense - like Apple's $99 / year developer fee - to keep people abusing the system out. If anyone can create a company for free or for a low admin fee, they will.

...who am I kidding, this happens everywhere all the time and 15K is a low amount to put in a bank account if it means someone can dodge taxes and responsibilities, lmao.

That's weird. I've heard of requirements that business need to have a certain amount in cash reserves, just to guarantee that they can pay severance packages and other guarantees, to stop the owners from declaring bankruptcy too late. But asking for that and then letting them remove it from the account is just weird.

Maybe it's a 6 month long test to prove that you can handle your finances without that bit of extra money? That said it sounds like a really stupid test.

Well yeah, its to see who has to dip into their money that is supposed to be locked in. If I was in the business of usury I wouldn't want to lend to people who couldn't keep the collateral locked up for 6 months.

Lots of countries have this in their visa requirements, intentionally to keep poor people away.

I had to do this in order to get an apartment in the US, when I first moved here. Needed either proof of income or a large static amount of money in the bank. Static at time of snapshot, they didn't really care if it went away afterwards.

That sounds like the kind of requirement that patio11 would know more of the rationale for, if rationale exists, and the workaround, if a workaround exists.

Had this same issue in Malaysia. Was planning to relocate my business there but they wanted us to deposit $250k USD in a bank account for the first year of business. At least buy me dinner first.

Reply on news.ycombinator.com