41–50 of 77 posts
Doesn't Ireland have a 6.5 % tax rate? Isn't that why all the companies like to incorporate there? http://www.forbes.com/sites/timworstall/2015/10/15/ireland-r...
You'll find that most US companies want to deal with US companies. This isn't just preference, but is part practicality. Contracts "Governed by the laws of Panama" isn't going to fly. I've even seen companies argue over the US state specified. This can be true elsewhere, but most places are more used to dealing with US-based companies and contracts than another random country.
Related: As a foreign company you might find you're subject to provisions and laws you weren't aware. Could be privacy or even simple reporting. Knowing your own country's business requirements is hard enough, knowing another could compound that.
It's going to be a similar story if you intend taking investment. To some investors it won't matter. To many it will matter a lot. Either way, a US (esp. Delaware) company is simple for both -- and you'll probably find the investment legals are significantly cheaper.
Eventually you'll want to employ people too. Granted there are ways of doing this without a US entity, but it's not going to be pretty.
About 10 years ago I decided to become a one person tax expert, read a NOLO press book on incorporating, and found what I thought was a clever solution to optimizing taxes in the most favorable manner. About a year later, my accountant told me two things... 1. "I've never actually seen a client choose this tax structure" 2. "You picked the worst possible taxation vehicle for your business, which is hard to do on purpose!"
Consider yourself lucky and incorporate in the US. Do not, under any circumstances, even think about running a SaaS business from Europe. EU has made invoicing hell for small businesses, especially those selling SaaS. You will spend time on things like VAT number checking, verifying customer's country using their IP (yes, I know), several kinds of invoices, prices inclusive or exclusive of VAT, calculating VAT for ea…
Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…
> This mostly puts you in the 25% tax bracket. We'll assume that there's also 5% of state income tax. For FICA, since you're both the employee and the employer, you pay 15.3%. All together, that means you're losing about 45% to tax off the bat. Because tax brackets are progressive, it really does not make any sense to add the percentages up like that. No one making $100k/year is paying $45k/year in taxes. > Your firs…
Earlier quoted context omitted.
What if the team is made of digital nomads working remotely from different areas?
Good question. I'm not a lawyer; I assume edge cases will be decided by the relevant tax authorities. Speculating here, but if there's a single place where management decisions are made, say where the CEO lives, the corporation might be tax resident there. Otherwise, they might decide to tax you in place of incorporation. For such a company, what address would it have? Maybe where you place its headquarters has some…
Earlier quoted context omitted.
> This mostly puts you in the 25% tax bracket. We'll assume that there's also 5% of state income tax. For FICA, since you're both the employee and the employer, you pay 15.3%. All together, that means you're losing about 45% to tax off the bat. Because tax brackets are progressive, it really does not make any sense to add the percentages up like that. No one making $100k/year is paying $45k/year in taxes. > Your firs…
Was going to post this. Only qualified dividends are taxed at the lower capital gains rate, normal dividends/distributions of profits are taxed at ordinary rate...
Let me see if I can push out better numbers. From here:
http://taxfoundation.org/article/2017-tax-brackets
https://www.tax-brackets.org/newmexicotaxtable
$100k income generates $20981.75 federal income tax. FICA is paid on the full amount, so $15300. In my state, the top income tax rate is 4.9%, but with graduation, $4620.50. All together, that's $40902.25, or about 41%. That's not that far off the 45% estimate from above, but it is lower. I still contend that taxes on small businesses are still absurdly high.
You've had all the benefits of the country you're in: roads, schools, research universities that created the software industry, a foreign service that advocated for your right to sell globally. It's time to return part of the favour. (Also what everyone else said: it's premature optimisation)
Answer: "You've had all the benefits of the internet, which you've already overpaid [1] for. Rather than switching to a better internet provider, it's time to return part of the favor."
Spot the flaw in your comment yet? It's a generic non-response that applies to every possible service and ignores the fact that the service has already been paid for.
[1] Most government spending - which he has already financed with his taxes - is merely wealth transfers to non-workers. Only a small fraction consists of the services you mention.
Earlier quoted context omitted.
Was going to post this. Only qualified dividends are taxed at the lower capital gains rate, normal dividends/distributions of profits are taxed at ordinary rate...
Just checked. I think both of you are right on the distributions. My mistake. Let me see if I can push out better numbers. From here: http://taxfoundation.org/article/2017-tax-brackets https://www.tax-brackets.org/newmexicotaxtable $100k income generates $20981.75 federal income tax. FICA is paid on the full amount, so $15300. In my state, the top income tax rate is 4.9%, but with graduation, $4620.50. All together,…
Income: $100,000
Self-employment tax on $100,000: $14,130
Taxable income: $100,000 - $6,300 (standard deduction) - $4,050 (personal exemption) - $7,065 (1/2 SE tax) = $82,585
Federal income tax on $82,585 = $16,418
Total federal income tax and self-employment tax: $30,548