Ask HN: Where should I incoporate my business | Hacker News Reader

Ask HN: Where should I incoporate my business

48 pointsnevodavid1093 comments

I am an Israeli living in Thailand - I recently removed my tax residency from Israel.

I have an old C-CORP (Delaware) in the US that I created a few years back as I thought of building a big company to get investors and other founders - the more time passed, I bootstrapped stuff and made it very profitable as a single-person company.

C-CORP for my scale and intention makes no sense. I am considering incorporating a new LLC in the US because it has some benefits of not being a citizen/resident and having customers from abroad.

I am mainly trying to save money on taxes and still be a legitimate business and use things like Stripe (in the future)

But is my best option?

I know you don't have all the context, but I hope to hear your stories.

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Taxes pay for society: education, healthcare, infrastructure, defence, culture.

You benefit from these, and expect to benefit in the future from them (e.g. expecting to employ someone with a good education). You should pay your share.

While I agree in spirit, there are only a few countries in the world where I'd be comfortable paying taxes and trust that the money won't be embezzled: Basically the Nordics and Switzerland. Maybe also Germany.

Why do you need to be comfortable that it won't be embezzled? All systems have inefficiencies. Is 10% of money wasted due to duplicated bureaucracy different impact than embezzlement?

Do you hold charities to the same standard?

I'd rather pay tax and have 50% of it be used inefficiently and have theoretical influence in how it's spent

How do you like 50% used for war expenses, torturing political prisoners, purchasing palaces?

>Maybe also Germany.

Ah Germany, world famous for low company taxes, high government efficiency, great use of your taxes, low bureaucracy and start-up friendliness.

???

It's world famous for a lot of other things like good public transportation, good parental leaves, good social security, good unemployment benefits, good health care system, &c.

Of course to use tax money you need to collect tax money...

Most countries have lower taxes than Germany but most countries have worse living conditions. All the people like OP are quick to go back to their tax heavy hell homecountries as soon as they need anything other than sun and cheap cocktails

If Germany was so bad it wouldn't be in the top 5 countries with the most immigrants per capita

>Most countries have lower taxes than Germany but most countries have worse living conditions.

The famously worse Scandinavian, BeNeLuxian and Swiss living conditions, that's why they emigrate out of there to work in Germany's factories.

Good good, you cited five countries, now what about the ~190 others ? You might want to look up the definition of the word "most"

Also: https://files.taxfoundation.org/20210505165000/Top-statutory...

Except OP is not looking at the best place to get a middle class job, but the best place to incorporate a tech company, so obviously you're going to look at the better options, not the 190 worse ones.

> All the people like OP are quick to go back to their tax heavy hell homecountries as soon as they need anything other than sun and cheap cocktails

I'm Greek, but thanks for assuming.

I'm wondering if your opinion in based on facts or rather feelings about much nordics

What relevant metrics do you think the Nordics are behind other countries on?

I would really love the hypothetical world you describe. Unfortunately it doesn't work that way in many parts of the world. Mine included. And no, you can't change it that easily even if you decide to dedicate your life to this.

Despite all of that you can still do your part if you truly believe it.

Nowhere does the OP suggest that a jurisdiction with easy tax evasion possibilities is of interest.

One picks the size of one's share when making a choice like the OP.

(Love the username in the context of your pay-yer-share non sequitor).

OP literally said "I am mainly trying to save money on taxes"...

My 2 cent: Pay your taxes to support the infrastructure, services and development in the region you actually use most in your life activities.

So if you were choosing a town to live in and one has a 2% tax rate and the other a 30% tax rate, you'd surely choose the 30% tax rate because you want to support your regional community?

More likely when you get past the virtue signaling, you'd choose the one that fits your needs with taxes as one of many variables. It comes down to taxes as a form of price discovery, tax rates vary greatly and at least at the federal level don't translate at all into your day to day life unless you work in the military or politics.

> So if you were choosing a town to live in and one has a 2% tax rate and the other a 30% tax rate

Well I live in Denmark, so you can draw your own conclusion.

OP is living in Thailand, and not a hypothetical town in the US or the EU, so the taxes being paid on this LLC won't be going to their regional community. Due to geopolitics, forming an LLC in Thailand isn't conducive to their business (which was not discussed, but lets assume they make a SaaS product), so it's easy to see taxes as much more of a cost than anything else because while yes, I think a town halfway across the world should have good roads and good schools and feed the hungry, OP isn't running a charity, and paying extra so town A can have better roads vs paying less so town B can have better roads becomes kind of academic and the concern becomes more about money to OP than anything else.

Look, for many people using a 401k is saving money on taxes. Does that imply 401k users are generally societal moochers?

There's nothing ethically wrong with optimizing inclusive of taxes. It's stupid not to. The OP is not stupid.

"You should pay your share."

That doesn't mean you shouldn't find the most efficient vehicle to do so. Saving on taxes probably shouldn't be the sole reason to adopt a certain corporate structure but it certainly is part of the equation.

Marilynne Robinson has an excellent essay where she talks about how taxes pay for amenities for citizens, but in the US we have been conditioned to not be citizens, we are tax payers.

The poster is presumably paying tax in Thailand and the United States.

This moralistic, low effort truism is the top comment? Come on.

I am in a similar situation. IANAL either, but this is what I learned so far:

- Corporate tax and personal taxes interact in non-trivial ways. US LLCs with a single owner/partner are generally considered pass-through entities, which makes them somewhat special compared to the other options. That is bad if you live in a high-tax country, but can be great if you live in a low-tax country

- If things go well, "source of funds" can become an issue. Let's say you made $2m and want to buy a house somewhere. You might have to provide proof of where that money came from. This is where it might be useful to clearly have live somewhere (as opposed to claiming "I'm a nomad and I lived nowhere"). Apparently, there's a market for Dubai "residences" (utilities bills) because of that... So it can be helpful to have paid some low taxes rather than no taxes at all. I don't fully understand yet how corporate taxes might help in this one.

- If you can't provide proof that you lived in country X or ideally paid some taxes, there is a risk that either your home country or the country you want to buy property in start claiming taxes.

- Beware of some countries, e.g. Germany, who might retroactively claim taxes if you have ever lived there during the time the business existed. They might want to tax you based on unrealized gains...

- I also looked into Malta, but it sounds rather complex unless you actually live there

An additional benefit of US LLCs is that they are somewhat anonymous, especially in New Mexico and partially in Wyoming.

I have previously founded companies in Germany, definitely not recommended. In particular, un-registering companies is a very slow and expensive process, easily taking 18 months. US LLCs via e.g. startglobal cost only around USD 1,300 to start, supposedly.

I'm surprised no-one's mentioned Estonia so far. I looked into it a while back, and it all seemed very easy to set up. You just needed to get an e-Resident ID (which was pretty simple) and there were cheap local companies to handle all the paperwork for you. Corporation tax was low, and importantly was only charged if you paid dividends: profits retained for future investment were not taxed. Perhaps I misunderstood things (I wound up not going ahead with it) or things have changed, but it looked like a great option, and they were marketing it for people exactly in your situation.

Stupid question that probably depends where you live, but if I register a company in Estonia and do all my work through them, do I have to pay taxes in my country too?

IANAL, but generally, yes.

In most setups, the company is a separate tax entity, so corporate taxes are one thing, mostly determined by the country where the company is incorporated, usually paid on profits.

Then you move the money from the company to yourself, either as a salary or as a dividend. This is generally taxed by the country that you live in as personal income tax or a dividend tax. This varies greatly.

Things can get more complicated, e.g. if you stay in a country for over 60 days, one can argue that the company now has a dependency in that country (because you as the sole owner / employee are living there), so you might be forced to incorporate in that country as well / pay (corporate) taxes there.

Couple of years old, but some reasons not to incorporate in Estonia: https://news.ycombinator.com/item?id=16752054

Thanks! Looks like that was just after they got started, though, so perhaps things have changed? It all seemed pretty simple and will organised later on that year, do could have been teething troubles.

> Couple of years old . . .

Almost six years old.

I'd recommend not incorporating in Estonia if you're going to need a bank account. They're not easy to get.

Thailand didn't used to have CFC laws, but now they do, so you need to talk to a local Thai accountant. Most countries will tax foreign companies that are owned by tax residents in some form -- that's why you can't just run a Belize company when you live in the UK as a run around UK corporation tax. In short: MOST PEOPLE CAN'T (LEGALLY) SAVE MONEY BY INCORPORATING IN A COUNTRY OTHER THAN THE ONE THEY'RE TAX RESIDENT IN.

OTOH, Thailand has a pretty good determination of it you're tax resident, looking at purely the number of days resident, so if you're there less than 183(?) days, you might well have some options. However, everyone is still scrambling to work out what the Sep 2023 tax decrees mean.

If it's a tech company, and if a local accountant thinks you'll be hit by those, do you qualify to start a Thailand BOI company? There are significant local tax breaks offered by that.

Where do you see Thailand has CFC laws? I dont think this is true.

Guess I’m thinking of the 2018 rules, and how the new Arms Length provisions might affect a closely held company. Looking further though, you’re right, technically no CFC laws at this point

I strongly advise against incorporating in the US, if you never plan to live in the US.

Given you're in Thailand, both Thailand and Singapore are fine; the difference is that a Singaporean company would be seen favorably by pretty much any other company or investors in the world; a Thai company is simply less seen by others, and therefore it might raise eyebrows.

You can check out Sleek.sg [0], they help you incorporate online. Very similar to Stripe Atlas in the US. No affiliation, just a happy customer.

If you don't care about external investors, then a company in Thailand is going to be much less expensive, and just as fine.

[0]: https://sleek.com/sg/incorporation/foreigner/

> I strongly advise against incorporating in the US, if you never plan to live in the US.

Why?

I've managed corps in a lot of different jurisdictions. Delaware is good because: a) it's well understood by almost everyone, b) there's very light regulation and accounting standards are loose, c) cost is reasonable for what you get. Where Delaware sucks is that a) you have to deal with the IRS (much better if you're not a US citizen, but not zero), b) you have to deal with the rusty dinosaur that is the US banking system, esp. when it comes to international transactions, c) if at any time you need proper accounting or legal help your costs will be basically 10x of wherever else in the world.

Other jurisdictions (Cyprus, UAE) will get you much better banking systems, much cheaper professional services (which also goes to cost of doing business, dont just get stuck on taxes) but maybe weirder regulations and tougher treatment from investors/partners.

My advice: focus on where your customers and partners are. If that's the US, keep using Delaware, the extra risk is worth it. If they are all over the place, find what the 'good' jurisdictions are for larger businesses near where you live and spend your time/money. Eventually you will need to use your money; piggy back off the research of others.

Would you consider Cyprus?

A member of European Union, EUR currency, 12.5% corporate tax (for most software businesses could go as low as 2.5%). You collect and pay VAT only for European customers, otherwise no VAT. Supported by Stripe.

Foreigners pay 0% dividend tax. Rather low setup and maintenance costs, can effectively have no physical presence in the country. Most documents are in English.

Good climate, too, if you get to visit (visit not required for company setup). Hit me up if interested, I am very happy myself with it.

What about bank account + transfer fees + how like are you to trigger terrorism enforcement?

They do try to gouge you a bit on the bank accounts, but nothing too bad (I think a few tens of euros per month). Things have tightened down in recent years, so the "foreigners pay 0% tax" bit doesn't easily apply, you need to be a permanent resident of Cyprus to get the 0% bracket and it's hard for them to consider you a permanent resident, and it's more like 2% in the end.

You could get a bank account in Revolut Business, where for a small monthly subscription you get zero or very low transfer fees, good currency conversion rates, very nice web/mobile apps, and pretty reasonable KYC with responsive support (especially compared to average European banking experience).

If you don’t do any shady stuff, you should be fine.

Thanks, this sounds real nice,

>Rather low setup and maintenance costs

Can you give an estimate on that?

I’d estimate around $2k for set up and around $2k yearly — if you’re willing to outsource absolutely everything (registration, legal, accounting, audit) and never visit or do anything personally.

Likely could go cheaper in exchange for more personal time spent.

Hong Kong is another option, incorporation fees are quite low + ongoing cost is relatively low.

Corporate fees capped at 16.5%, with the first 2 million HKD only 8.25%.

Can all be done online and remotely as well.

Additional benefit that you can apply for an APEC visa to make traveling around easier.

Last time I set up there it was a headache to get a bank account though; that might have changed (but I can hardly believe it got easier).

I think you need to have some business in Hong Kong to open a bank account there. But that's ok, you can open a bank account in a different country.

Definitely was easy for me, I first used Neat (now Rapyd), and currently using AirWallex. Both applications took about 2 days or so.

I know people suffer a bit from Rapyd after the acquisition

I only used my account for about 2 months, because it caused a lot of confusion. Your account name was prefixed with “NEAT”, so few of my clients just ignored that and money never arrived. Switched to AirWallex and never looked back.

As far as I understand, Hong Kong has this Offshore Tax Exemption, where your earnings will be tax-exempt as long as you can demonstrate that your earnings are from foreign sources (i.e., offshore sources outside of Hong Kong).

I believe that in the example you’ve given, you also need to demonstrate that the person who provided the services was also outside of Hong Kong.

I haven’t really looked into this offshore exemption, since I’m living here as well.

Consider UAE freezone. Setup is not cheap, but corp tax 0% (9% after 1M revenue), personal tax 0%. I welcome differing opinions

From a quick search:

As a rule, Free Zone licenses must be renewed every one to three years, and generally range in cost between 2700 to 13000 USD.

I don't know if that's accurate or not though.

this is true, you need to renew it. Example cost for IFZA: 1 year license $4150 2 year license $8165

The setup fee is so high, that it's basically an exchange for the taxes haha! I also understand I need to pay around 90 days there.

> I also understand I need to [stay] around 90 days there.

UAE doesn't seem to care in practice, unless you need them to issue you a tax certificate. Your issue there is more with not attracting tax residency in other jurisdictions, and being able to say "I can't be resident in [Canada/Australia/other country with fuzzy rules] because I live in UAE"

Honestly, I think my biggest problem with the UAE is that I am Israeli, and while the situation with Israel and the UAE us good now, how knows what will happen in a few years from now

Yeah, I get your point. Personally, as a UAE resident (with no other ties to UAE or Israel) I'd see it getting better over time rather than worse, but we're living in interesting times.

License cost is about ~4k per year

Total initial costs could be about 10-15k

Yes I agree those fees are actually a hidden tax, but it totally depends on your revenue, at some point you can save a lot on corporate and personal taxes.

Don't you still have to pay taxes in your country of citizenship?

Typically where you have your tax residence (where you live), but that also depends on the treaties between the two countries.

Tax based on citizenship is a concept unique to the United States and one African country. It is unheard of in the rest of the world’s tax systems.

Free zones are great but last I checked (around Jun) you will need to travel to Dubai every 6 months to keep your PR/Emirates ID active, if you don't intend to live there.

SG is good for many reasons... taxes, treatment of intellectual property, development grants, sound banking system, politically stable, and a legal system based on English common law (usually something people want to see in contracts).

Setting up a company is a quick process HOWEVER getting the business to a state where you can transact legally may take a while if you need special licenses.

Also, EDB in Singapore can provide quite a bit of support for SG companies. EDB can set up meetings in foreign countries for you to help drum up business.

A lot of Brits I met in SG also had BVI companies.

Disclaimer: IANAL

These are all anecdotal information from experience and hearing founder friends. A US LLC is a good choice if your primary/majority of paying customers will be from the USA. An LLC has a lot less compliance and taxation headaches, but it is not well separated from an Individual taxpayer -- it is akin to an extension of you (of sort). This makes perfect sense for a US tax-paying individual (resident with an SSN). However, it comes with its own taxation headaches once you grow bigger as you are not paying individual taxes in the USA. At this stage, you are likely to get an ITIN.

If you have decided that a corporation in US makes sense, then it might also makes sense to stick to the C-Corp.

So, my point is -- talk to a lawyer. You are already succeeding, and you can afford a good one. Plan for the future, and if you have to pay a tad more now for that ease in the future, I suggest you do that option.

Isn't it the opposite, it's better to have an LLC if my clients are not from the US?

Talk to a tax attorney where you live, ideally someone well versed in such constructs. It can get very complicated if you don't live where your company is incorporated. When opening a company in Austria, I read about fun EU edge cases when the seat of the company (where the leadership resides) is abroad in respect to the incorporation country and the company needed to register a branch office where the seat is. This had weird tax implications. The place where the services are rendered and the potential VAT you need to pay can also change due to this. Again, talk to a/multiple tax attorneys.

I'm incorporated in Isle of Man. Stripe isn't available, but others are. 0% tax, it absolutely looks like you're incorporated in the UK for anyone who doesn't know what to look for (UK phone number, VAT number, UK-looking address, UK sort-code, etc). Banking is a PITA, but I've been making it work with Wise. You'll probably shell out at least $5k a year in accountancy and service fees. Also it's small enough that your accountant can ring up his buddy Fred who's the Tax Minister this year to get clarity on any points of law.

This is interesting! Do you know any payment providers that work with them? BlueSnap / Paddle etc? How much did it cost you to incorporate?

I googled it, and it turns out my former accountant (who I'd highly recommend) maintains a list: https://www.katzand.co/isle-of-man-payment-gateway/

Incorporation is cheap (if I remember correctly?), but you basically need a service provider to sign off on your accounts, VAT, and so on, so the cost is more ongoing expenses than setup costs.

Send a WhatsApp or email to Katz & Co from the link above -- they'll be happy to break it down, they're super nice, and they're very on the ball too.

A US LLC isn't the worst idea. Benefits include getting easier vetting from US based companies to some degree, some payment systems get the wheels greased if you are a US company and such too.

I think so too, Just trying to see also other alternatives

I would suggest that you probably want to incorporate in a company that doesn't tax worldwide income and not the United States. If you plan on living in Thailand forever, then you might find that incorporating where you live results in the most sane result for most people.

I would not suggest the USA if you don't have any strong ties to the United States. It could just result in your being taxed here unnecessarily or being considered having close ties to the USA if you apply for a visa.

If you're living in Thailand, how about Singapore? Corporate tax at 17%. Personal tax capped at 22%. Incorporation cost seems quite cheap, but you might want to ask them directly.

They're a startup launchpad for a good reason. Plenty of American and Asian investors & acquirers. The latter is more valuable now as American investors struggle with the economy.

Also really good finance infrastructure. Stripe has trouble landing in much of SEA, but does fine in Singapore.

>Personal tax capped at 22%

You generally pay personal taxes where you live, not where your company is incorporated.

I guess he means if the US entity employs you. Then you will probably pay this + the rest in your home country if there is a double taxation treaty (and taxes are higher).

Double taxation agreements are not a way to cut your tax rate. They are usually structured in a way that makes sure you pay the higher of the two tax rates.

Also, companies cannot directly and permanently employ people living and working in other countries without having a legal establishment there acting as the employer. Without a local legal entity to employ you, you'd have to register as self employed and then it doesn't matter for personal income tax where your customers are (It may matter for VAT though).

Some countries offer various temporary exceptions for expats, but the general rule is that you pay personal income tax and social security contributions in your country of residence.

Interesting! Thank you for the answer. But taxes seem quite high. I am aiming to incorporate something more like an LLC without paying corporate taxes - it's not far than what I pay for Delaware (21%)

SG corp tax is 0% if the transaction happens overseas. https://www.iras.gov.sg/taxes/individual-income-tax/basics-o...

Why Singapore and not, say, Wyoming that has no corporate tax.

Personal tax isn't paid if you're not tax resident, and OP seems to be resident in Thailand so will have to follow relevant laws there.

If ASEAN free trade's of benefit, perhaps. Or if going for a Singapore ID card then having a profitable business might be worth it. Or access to SE Asia finance. Outside these, Wyoming!

I have head quite much about Wyoming! What's the difference between Wyoming and Delaware for LLCs?

I can't run blow for blow what'll work for you.

https://taxfoundation.org/location/wyoming/

https://taxfoundation.org/location/delaware/

For example.

But it's not just about tax. For privacy and having a Delaware-like specific business litigation process should you ever need it, Nevada's advantageous over Wyoming without needing much more in tax. Then for access to finance, a location that'll let you open a bank account for the business can be important (this might depend on US state). So there's a bit of YMMV, but nothing an Ask HN can't fix!

Not needing to pay any taxes seems too good to be true. What's the catch?

In Singapore you need at least one director who is locally resident, a qualified company secretary, and a local business address. Companies exist that will file the paperwork and supply all that for you, but if you aren’t locally resident, you’ll pay extra for the local director. The local banks also tend to require your physical presence to open an account, although neobanks like Wise don’t.

I’m not saying it’s a terrible choice – I‘ve incorporated in Singapore and there are lots of advantages. But if you aren’t locally resident, there might be better options.

Sincerely, your ONLY option is to figure out how to make your life easier.

Building is hard. Building something incorporated in a different country could be harder.

You can always incorporate where you can easily raise your money and that newXo can own your current company.

But unless you have a product ready to ship, customers, and a need to.raime money right now... just try to make your like easier.

Maybe a Ltd in Cyprus is a good option. Corporate tax rate is 12,5% with exceptions for income from outside the country. And it is near Israel and in the EU.

I was thinking about that. I had a friend who had done it.

Also Bulgaria, Romania for the same reasons: low corporate tax rates, not that far away from Israel.

try llp(same as llc in usa) but in uk. it would have same benefits as us based llc. It is relatively quick and cheaper to maintain. Moreover until u reach certain threshold , you are lightly regulated. It has good reputation as well and stripe etc. are available for uk biz.

Also note that in USA, you will not be able to deduct software salary or for that mtter any R&D expense as revenue in same year so consider it as well.

You can sell a C-Corp tax free in the U.S. using QSPS. Let me know if you need more info about this.

Delaware is still the standard answer if you're serious about it.

Where you live.

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