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Ask HN: Should a German founder with a green card set up a holding company?

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Ask HN: Should a German founder with a green card set up a holding company?

#1

Post by ck_one »

In Germany, founders usually hold their shares in a holding company. This has the benefit that at an exit event you only get taxed 5% if you keep the exit money in the holding company. You can make investments (angel, real estate etc) from your holding company. Only when you withdraw money from the holding company you have to pay personal tax.

I am curious do US founders do something similar? Does my situation change because I own a Greencard and will incorporate in the US? Most importantly has anybody recommendations for good German/US lawyers?

Re: Ask HN: Should a German founder with a green card set up a holding company?

#3

Post by moonlighter »

TekMol wrote: post #2

Can you put your business into a holding company later on, or does it have to be done before you launch?

In the US you can start an LLC "a" and later on a Holding LLC "b" and make "b" the owner of "a", so that "b" is the parent (and holding company) of "a". It's really just about how ownership is structured, and it can be done later on.

Re: Ask HN: Should a German founder with a green card set up a holding company?

#4

Post by noodlesUK »

In which jurisdiction would you be starting the main company and the holding company? You mentioned you’d incorporate in the us, but for which entity? Both? I strongly recommend against a US person including non-resident citizens owning a foreign company, especially as a holding company or similar because the compliance is effectively impossible to manage without thousands of dollars in accountancy (see IRS form 5471).

Does Germany tax non resident citizens (almost certainly not only the US does)? If so, ignore Germany if you’re planning on staying in the US for the next 10ish years. Germany and the US will almost certainly have a variety of tax treaties, and once you’ve paid US tax on the income it’ll be yours free and clear if you want to later return to Germany.

If you’re planning on returning to Germany before the company is likely to have exited, you will definitely need strong legal advice and this may cost $$$.

I am not a lawyer or financial professional this doesn’t constitute advice

Re: Ask HN: Should a German founder with a green card set up a holding company?

#5

Post by jsty »

Unsure if it works exactly the same in the US, but in the UK there are ways to set up a holding structure via a share-for-share exchange and get pre-clearance of tax neutrality from HMRC (the tax authority).

If so, you can defer the decision on structuring to nearer the liquidity event when you should be able to get professional advice to implement the optimal structuring for you at the time.

Re: Ask HN: Should a German founder with a green card set up a holding company?

#6

Post by splix »

Slightly offtopic, but in US how you should go if you want to do small investments in other companies or just assets? Like angel investing.

Should I set up an independent LLC just to simplify account on my personal taxes? Would be it be easier or more complex in this case? How it's taxed? How it's usually done?

Re: Ask HN: Should a German founder with a green card set up a holding company?

#7

Post by Nashooo »

noodlesUK wrote: post #4

In which jurisdiction would you be starting the main company and the holding company? You mentioned you’d incorporate in the us, but for which entity? Both? I strongly recommend against a US person including non-resident citizens owning a foreign company, especially as a holding company or similar because the compliance is effectively impossible to manage without thousands of dollars in accountancy (see IRS form 5471…

>Does Germany tax non resident citizens (almost certainly not only the US does)?

I think only on income or assets generated in Germany whilst abroad. I do believe the US is one of the only (if not the only) countries that taxes non residents on their income generated abroad.

Re: Ask HN: Should a German founder with a green card set up a holding company?

#8

Post by mrunkel »

Nashooo wrote: post #7
noodlesUK wrote: post #4

In which jurisdiction would you be starting the main company and the holding company? You mentioned you’d incorporate in the us, but for which entity? Both? I strongly recommend against a US person including non-resident citizens owning a foreign company, especially as a holding company or similar because the compliance is effectively impossible to manage without thousands of dollars in accountancy (see IRS form 5471…

>Does Germany tax non resident citizens (almost certainly not only the US does)? I think only on income or assets generated in Germany whilst abroad. I do believe the US is one of the only (if not the only) countries that taxes non residents on their income generated abroad.

No, I’d you don’t have tax residency in Germany, you don’t pay income taxes in Germany. Independent of citizenship.

Only the US and Somalia levy income tax on non-resident citizens.

Re: Ask HN: Should a German founder with a green card set up a holding company?

#9

Post by Wronnay »

TekMol wrote: post #2

Can you put your business into a holding company later on, or does it have to be done before you launch?

You can also do it later on.

If you are the sole owner, then you can also do all of that in one business. I have my operational side and investments (like stocks) in the same company.

My plan is, to spin operational businesses off as soon as the legal risk gets too high or as soon as I seek for other 3rd party investors.

Re: Ask HN: Should a German founder with a green card set up a holding company?

#10

Post by davchana »

Nashooo wrote: post #7
noodlesUK wrote: post #4

In which jurisdiction would you be starting the main company and the holding company? You mentioned you’d incorporate in the us, but for which entity? Both? I strongly recommend against a US person including non-resident citizens owning a foreign company, especially as a holding company or similar because the compliance is effectively impossible to manage without thousands of dollars in accountancy (see IRS form 5471…

>Does Germany tax non resident citizens (almost certainly not only the US does)? I think only on income or assets generated in Germany whilst abroad. I do believe the US is one of the only (if not the only) countries that taxes non residents on their income generated abroad.

& the only other country is Eritrea.
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