Comment by hodgesrm
2 years ago
Delaware, though we originally incorporated in the UK and then flipped as a condition of receiving investment. (Thanks Accel people!) The flip was the most complicated thing we've done--accounting, lawyers on both sides to avoid the dreaded taxable event, etc.
I would absolutely do the same in future. The contract to individual or individual's company is a standard model for remote companies like us that work on open source software. Some of our staff just have email & github access and that's it.
My email is in my profile. Send me email if you want to discuss. I'm happy to share details directly.
Thanks for the offer. Will get in touch later but I think that public replies could hopefully be helpful for others.
The setup sounds great! I assume that you flipped to a C-Corp? Are most of the founders in the US or are you living abroad? How long did it take to flip the UK LTD? Do you force your contractors to set up companies or is it up to them?
At least if the contractors are in Germany and are working full-time for you then I think they would get issues with “Scheinselbständigkeit” if they don’t have a company, that’s why I am asking.
(Sorry for the delay, on the road.)
We're a US C-Corp. Our founders are spread out over the US and Europe. I'm not one of them myself, but rather joined later.
The flip from UK to US took 2 months end-to-end and cost close to $100K all-in. This might seem like a lot, but we had a working company with contracts and needed to be careful to avoid creating a taxable event. We also had to arrange transfer payments as we kept the UK company as a subsidiary to avoid the aforesaid event. (A real headache--it's better to keep just the US company if you can, post-flip.) If anybody is coming out of the UK I strongly recommend Ashfords LLP on the UK side and Wilson, Marshall, Taylor on the US side. They are both super and guided us well.
As far as staff--we don't force them to do anything in countries where we don't have a legal presence. We leave it up to them to make whatever arrangements they find reasonable and route payments accordingly. In general having your own company seems to be the best route across many companies. I used that myself in the US before we flipped, because I was being paid from the UK.
I can't speculate on German labor law as I've not had experience with it. Our approach is to take things a day at a time and work things out as they arise. It has worked well so far.
To be honest we've probably had more issues with US jurisdictions than non-US. The state and local tax regime in the US is very complicated and requires accounting and tax advice on a regular basis. I was surprised how much attention it needs.
Happy to answer more questions if it helps people.
Second this: I worked for years as a contractor for US-based companies from US, DE, and AU. No issues tax-wise -- it's just a service agreement between the two companies/legal entities.
Similarly, I often had just a Google (email, calendar, docs, etc) and GitHub account. Legal agreements were like 3 pages total (mostly an NDA).
Right. We put a lot more effort into ensuring people get on-boarded and properly integrated. That's the hard part (on both sides) to making the distributed company model work. I don't think you can ever do enough on that. We owe a debt to other companies like MySQL AB who provided models for remote organization.