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Comment by troydavis

2 years ago

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.

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.

  • > 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.

    • 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.

      2 replies →

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

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.

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.

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